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Incumbents threatened by cable players but fibre offers hope
|22 октября 2009|
National incumbent operators such as BT and Deutsche Telekom have been caught on the back foot by cable carriers and their bundled offerings, with analysts expecting a mass deployment of fibre in a bid to avoid large scale subscriber loss.
In a research note published Wednesday, analysts at investment firm Execution Ltd said that 2010 will see a step change in European fibre optic cable rollout as incumbent telecom operators seek to limit subscriber migration to cable operators.
The analysts believe that for home media and telephony, cable is the clear winner versus wireless and non-cable, resulting in a mass deployment of fibre to the street cabinet (FTTC) and fibre to the home (FTTH), starting imminently.
“Cable has emerged as the winning technology for data to the home and we expect to see the mass deployment of fibre to start imminently as current providers such as BT seek to avoid large scale subscriber loss,” said Execution analyst Nick Paton.
“The interest for telco investors is our stance on fibre. We believe the incumbents will be forced – dragging their heels all the way – to deploy both FTTC and FTTH as they lose markets share in triple plays to the cable operators.”
For the past eight years, fibre sales have been lacklustre as existing technology (copper) has been sufficient to provide bandwidth requirements. But 2009 is set to be a turning point as technologies have settled and the increasing penetration of triple play data content (internet, telephone and TV) has driven a major shift to fibre optic-based technologies.
The step up in the deployment of millions of kilometres of fibre will have a huge incremental capex impact on incumbent suppliers, Paton said, and will be a very big deal for fibre optic manufacturers such as Prysmian. Prysmian has a 15 per cent share of the global optical fibre market and the top three players - Prysmian, Corning, and Draka - control 50 per cent of the global market.
In related news, Orange UK on Wednesday announced plans to upgrade its fixed line broadband offering, introducing 20Mbps download speeds as standard. To complement the upgrade, Orange has introduce d a number of new pricing schemes topping out at £6.50 a month for Orange mobile contract customers, with line rental of just £10.50, compared to the standard £11.25 line rental charge from BT.
While Execution notes that Orange’s move is “helpful,” the analyst warns that no customer is likely to get that speed over a DSL line no matter how close they live to their local exchange. The average local loop in the UK is thought to be around two kilometres, and signal attenuation over DSL is such that a 20Mbps connection would fall to below half this speed at two kilometres. Furthermore, 20Mbps will be insufficient to compete with cable operators using DOCSIS 3.0 technology capable of delivering reliable download speeds to the home in excess of 100Mbps.
“Orange has been losing market share in the fixed-line broadband market in UK and its customer base has declined to below one million. Orange’s strategy is to use broadband as a tool to reduce mobile phone churn offering its cheapest plans to its mobile phone customers on a contract,” Paton said.