Survey Shows Preference for FTTH

The U.S. FTTH Council has published a survey of U.S. broadband users that shows that there is a strong preference for FTTH over cable modem broadband services. DSL had the least favorable rating for broadband services. FTTH had an even stronger preference for HD TV over FTTH compared to satellite and cable services.

The survey is well worth reading. The results are no surprised but do underscore the technical superiority of FTTH technologies.

Verizon Adds 303K IPTV Subscribers in 4Q08

Verizon added 303,000 IPTV subscribers in 4Q08 leaving it with a total 1.918 million at the end of the year. This compared to the 282,000 FiOS Internet subscribers it added in the quarter, ending the year with 2.481 FiOS Internet subscribers. Its FiOS ARPU was more than $133 per month in the quarter.

Verizon had a good year, adding nearly 1 million IPTV subscribers in 2008. This shows the strength of its FTTH strategy.

DOCSIS 3.0 is Cheap

An article on Light Reading cited a statement by Charter Communications that it will cost about $8 to $10 per subscriber to bring DOCSIS 3.0 services to a home, including the new cable modem termination system (CMTS) equipment and the routing systems. It does not include the cost of the new DOCSIS 3.0 cable modem or the cost of provisioning the service.

Verizon has said that it costs them $800 to $1,000 per home to make its FiOS fiber service available with a maximum 50 Mbps data service today. The cable companies can accomplish the same thing for one percent the cost. DOCSIS 3.0 will provide the cable companies a strong defense against FiOS and be a very strong offensive weapon against ATT's VDSL U-verse service.

France Telecom Adds 211K IPTV Subscribers

France Telecom added 211,000 IPTV subscribers across all of its operations in Europe giving it a total of 1.748 million at the end of the quarter. Its increases by operation are:

• Orange in France added 144,000 IPTV and satellite subscribers giving it a total of 1.533 million.
• France Telecom added 3,000 IPTV subscribers in Poland, giving it a total of 57,000.
• The company lost 6,000 subscribers in Spain, giving it a total of 86,000.

France added 70,000 subscribers to the satellite service that it introduced in July 2008 in addition to the numbers above.

In France, the company passed and additional 153,648 subscribers with its fiber network and added 2,689 subscribers in 3Q08. This gave the company 498,161 homes passed and 16,975 subscribers at the end of the quarter.

France Telecom is continuing to add subscribers at a steady rate in France. The rate of growth is declining in Poland and France Telecom lost customers in Spain during the quarter.

Verizon Adds 233K IPTV Subscribers in 3Q08

The growth of Verizon's FiOS TV IPTV service resumed its historic rates adding 233,000 in 3Q08 giving the company a total of 1.615 million subscribers. Verizon increased the number of homes that could order FiOS TV by 1.2 million, giving a total of 8.2 million by the end of the quarter. Its FiOS TV sales penetration is at 19.7 percent. Verizon said that it had effective promotions during the quarter.

The number of new FiOS broadband subscribers increased to 225,000 in 3Q08 giving a total of 2.199 million. Its total number of broadband subscribers increased by 129,000 to 8.459 million at the end of 3Q08. The FiOS sales penetration is at 24.2 percent of the 9.1 million homes that it can serve. Its over all FiOS ARPU is $130.

Verizon's FiOS is on a strong growth curve. I expect that this growth will slow down in 4Q08 due to the current financial crisis.

KDDI Adds 51K FTTH Subscribers in 3Q08

KDDI added 51,000 FTTH subscribers in 3Q08 giving it a total of 967,000. It is maintaining its goal of 1.14 million FTTH subscribers by the end of its fiscal year in March 2009. Its FTTH ARPU increased to $47, up slightly from 2Q08.

KDDI has not disclosed its count of IPTV subscribers. It will have to set up the pace in Q3 and Q4 from Q2 to achieve its goal for Fiscal 2009.

BT Working Toward 2010 VDSL Rollout

BT has announced that it will operate two VDSL trials of about 15,000 customers each starting in the summer of 2009. It plans to provide up to 40 Mbps as part of this service. BT expects to announce plans for the initial market VDSL deployment in early 2010.

It looks like BT is taking a very orderly process that will lead to a commercial VDSL roll out starting some time in 2010. BT will be experiencing serious bandwidth pressures from the demand for HD content well before this. I would not be surprised to see it accelerate this schedule due to significant competitive pressure.

France Telecom in WDM PON Trial

Light Reading published an article describing a presentation by France Telecom at ECOC about its participation in the Sardana WDM PON trial. The Sardana group is currently testing WDM PON technology in Tellabs facilities in Espoo, Finland, and plans to conduct a trial in the town of Lannion in France in 2010.

France Telecom is concerned that new services will exceed the capapcity of the GPON technology that it is currently deploying. It plans to offer 3D TV services to mobile users by the end of 2008 and to flat screen TV users by 2011. France Telecom expects that 3D TV to a flat screen TVs will require between 50 Mbps and 90 Mbps.

WDM PON, 10G PON, and Hybrid PON will provide important new capabilities to fiber access networks and cause many more carriers to adopt FTTH strategies. The comments about 3D TV are interesting. I saw an NHK 3D HD demo at NAB, and it was quite compelling.

FTTH Council Says 3.8M FTTH Subscribers in North America

The Fiber to the Home Council of North America published a presentation giving its latest FTTH statistics. It has found that there are currently 3.8 million FTTH subscribers and 2.2 million FTTH IPTV subscribers in North America. This is an increase of 848 thousand FTTH subscribers and 550 thousand FTTH IPTV subscribers over the last six month. The current take rate for FTTH services in North America is 30 percent.

Verizon is driving this growth, but there are a number of smaller deployments as well. It is well spending the time to review the entire presentation.

ATT Backs Off in San Francisco

ATT has run into problems bringing IPTV to San Francisco. It withdrew its proposal to place 850 VDSL systems onto San Francisco's streets after a hearing at the Board of Supervisors that concluded that the project did not meet environmental review exemption requirements. The proposal had been previously agreed to by the city's Planning Department.

Each of the VDSL would be placed on city sidewalks and are 4 feet high, 4 feet 2 inches wide, and 2 feet 2 inches deep. Ten neighborhood associations objected and appealed Planning board's ruling to the Supervisors.

I live in San Francisco, so this affects me personally. These are big boxes and would impede pedestrian traffic on many sidewalks. Two years ago ATT sent me and my neighbors letters asking if they could put one of these boxes in my front yard. I thought that would be cool but my wife said, "you have to be kidding!" None of my neighbors agreed either.

San Francisco is always an exception, but I expect that ATT may receive similar objections in other dense cities. This may also be a problem with other VDSL deployments, especially in Europe, if the residents of the cities involved have any say about it.

Since I will not be able to get U-verse any time soon, I will move ahead with my plan to set up an 802.11n network in my home so that I can start using over the top Internet TV content. I really have no interest in subscribing to cable or satellite service.

Nokia Siemens Network Vision

Nokia Siemens held a webinar yesterday discussing its vision for Telco networks. It made a couple of interesting observations. One is that traffic will grow by a factor of 100. Since revenues are not likely to grow significantly, the cost of delivering this bandwidth has to decrease by a factor of 100. It said that somewhere around 60 percent or so of this cost decrease will come from Moore's Law and the increased density and performance of the chips. The rest of the savings will come from the flattening and simplification of these networks.

It also discussed the results of a service provider poll that it held with 900 respondents. Improving service quality is the number one factor over time. However, reducing cost and simplifying networks are expected to become the the number two and number three priorities, respectively, in three years.

Nokia Siemens also explained its decision to deemphasize GPON development. Its first reason is that the prospects for selling significant amounts of GPON over the next few years are not good. The market is sluggish and moving slower than expected. It also believes that VDSL is a very good alternative to GPON in the short run.

What Nokia Siemens does believe is that new technologies such as Hybrid PON and DWDM PON will start to appear in 2012 and will provide major improvements over PON. In addition to increased performance, these technologies will have the capacity to support unicast IPTV and to enable a significant network consolidation by eliminating the need for the current end offices.

There is a lot to what Nokia Siemens had to say. I think its PON strategy will be a good one if it can maintain its focus and be a leader in the introduction of these new technologies and if the GPON market does not heat up in the mean time.

Verizon FiOS TV Growth Slows in 2Q08

The growth in Verizon's FiOS TV IPTV service slowed in 2Q08. It ended the quarter with 1.382 million FiOS TV subscribers, up 176 thousand from 1Q08. This is the first time that the quarterly growth in FiOS TV subscribers was below 200 thousand since 2Q07. FiOS TV penetration was 19.7 percent at the end of the quarter. FiOS is available for sale to 7 million homes and passes 9.6 million homes.

The dip in FiOS TV growth reflected a dip in FiOS broadband subscribers, adding 187 thousand subscribers in 2Q08 giving a total of 1.974 million FiOS broadband subscribers. This is the first time that the quarterly growth in FiOS broadband subscribers was below 200 thousand since 1Q07. Verizon exceeded 2 million FiOS broadband subscribers in July 2008. FiOS penetration was 23.5 percent at the end of the quarter. Its FiOS ARPU is not more than $130. FiOS broadband is available for sail to 8.4 million homes and passes 11 million homes.

Verizon has made the following changes to its FiOS service recently:

• It will launch FiOS in New York City
• It offers a 50 Mbps downstream/20 Mbps upstream service to its entire FiOS footprint
• It offers more than 100 HD channels

In spite of this slow down, Verizon is doing well with FiOS. I expect that its sales will pick up, especially in 4Q08.

KDDI Adds 206K FTTH Subscribers in 2Q08

KDDI announced that it hadd 916 thousand FTTH subscribes at the end of June 2008, an increase of 206 thousand. It is maintaining its estimate that it will have 1.14 million FTTH subscribers by the end of March 2009. Its FTTH ARPU dropped to $43 in U.S. dollars compared to $45 at the end of March 2008.

KDDI is already half way to its goal for the fiscal year at the end of the first quarter. It appears that this goal bill be easy for KDDI to achieve.

Nokia Siemens Gives Up on GPON

Nokia Siemens announced that it will limit its investment in GPON because it does not expect mass market rollout of FTTH in the short term. Instead, Nokia Siemens will focus on ADSL-2+ and VDSL along with the development of next generation PON technology.

These next generation technologies include DWDM PON that can significantly expand the capacity of each fiber along with Hybrid PON that can extend the range of PON loops and facilitate the deployment of non-blocking IPTV aggregation/access networks.

DWDM PON will be enable the deployment of much higher speed PON services to each home and business. This will enable PON to meet future bandwidth requirements and extend PON into a broad set of business and enterprise applications.

Hybrid PON will permit the OLTs to be collocated in IPTV regional video headends, for example and create a network of dedicated connections to each subscriber. This will provide non-blocking access to each subscriber for unicast, on demand content. A 100 percent unicast service, such as this, will be required to support network PVR and interactive advertising applications.

This is a risky bet. If Nokia Siemens can beat it its competition to these new PON technology, it should be a winning bet. On the other hand, it will be hard for the company to maintain a strong focus on PON when it is not actively participating in the market.

BT's FTTH Plans

BT announced a $3B plan to deploy FTTH services to as many as 10 million homes by 2012. Ir plans to offer speeds up to 100 Mbps.

It stated that a supportive regulatory environment is essential for this program to take place. This would include removing current barriers to investment and making sure that any company investing in fiber can earn a fair rate of return.

BT also stated that it is committed to wholesaling its new services. It will press for any other next generation access network in the UK to be open to all companies as well.

This is a necessary move by BT. HD is becoming a major competitive issue for TV services in the UK. It will be interesting to see how much of a problem the regulatory issues become.

Brasil Telecom's FTTH IPTV Strategy

TV Telco Latam published and article describing Brasil Telecom's plans to deploy FTTH to support IPTV services in six cities before the end of 2008. It will focus its FTTP deployment on the most prosperous neighborhoods.

The company currently offers IPTV over ADSL-2+. This service is not profitable today because regulation restricts it to video on demand service. It expects that new legislation will lift this restriction.

Brasil Telecom is following the example of other developing countries and moving directly to FTTH access networks. However, IPTV will not be a financially viable service in Brazil until it can offer broadcast content as well as video on demand.

FastWeb and Telecom Italia to Cooperate on Fiber

Telecom Italia have signed a memorandum of understanding (MOU) to share fiber infrastructure in Italy and to cooperate as follows:

• Joint planning of the civil infrastructure for fiber networks
• The reciprocal exchange of rights to use civil infrastructure
• Joint study and testing of new techniques in civil infrastructure such as latest generation micro-tubing for laying fiber

As part of this MOU the two companies settled a number legal and regulatory issues between the two companies, including:

• Fastweb's claim against Telecom Italia's alleged unfair practices in the business customer segment
• Disputes relating to Fastweb's fixed line tariffs and to those applied by Telecom Italia on the mobile network
• Telecom Italia's contesting Fastweb's adjudication of the tender to supply telephone services to public governments in Italy
• Reconciliation of a number of account items under dispute between the two companies

This agreement shows a path forward that may be followed in other companies with strong telecom competitors. FTTH is a very expensive proposition and both incumbents and competitors will be well served by cooperating in the deployment of fiber infrastructure.

Verizon at 1.2M IPTV Subscribers

Verizon added 263 thousand IPTV subscribers in 1Q08 ending with a total of 1.206 million. It also ended the quarter with 1.803 million FiOS Internet subscribers, adding 262 thousand in the quarter. Verizon can now offer FiOS TV to 82 percent of the 7.9 million homes that the service passes. It believes that it is on track to attain its goal of 25 percent FiOS TV penetration and 35 to 40 percent FiOS Internet penetration.

Verizon's FiOS TV FTTH IPTV service continues to grow strongly. For the first time it added more IPTV subscribers during the quarter than Internet subscribers. This indicates that it is successfully upselling TV to Internet customers as the FiOS TV service becomes available.

SCTE Launches Fiber Standards Project

The Society of Cable Telecommunications Engineers (SCTE) launched a standards effort for its RF over Glass (RFOG) project. RFOG will include a range of interfaces that enable new FTTP networks to interconnect with the cable operator's HFC network. Some of the RFOG project will involve specifications for passive splitters and directional couplers, gateway RF levels, gateway environmental requirements, and fiber-optic passive filters. It will also ensure that traditional digital set-tops and DOCSIS modems can run on FTTP plants managed by cable operators.

This is additional alternative that will improve the ability of cable companies to compete with the telcos. Home developers are showing a preference for fiber broadband rather than cable coax systems. RFOG will give the cable companies the technology to respond to these requests.

Chunghwa Telecom Ends 2007 with 394K IPTV Subscribers

Chunghwa Telecom, the incumbent in Taiwan, ended 2007 with 394 thousand subscribers to its MOD IPTV service. This is up from 249 thousand at the end of 2006.

Chunghwa has 4,500 hours of video on demand content available and updates 400 to 500 hours each week. It also offer more than 60 broadcast channels, which is up from 32 channels in 2006. It will also offer the 2008 Olympic games in HD as well as some baseball games.

Chunghwa is also making significant progress with its fiber deployments. Its fiber subscriptions increased from 185.3 thousand at the end of 2006, to 536.9 thousand at the end 2007 an increase of more than 350 thousand. It currently provides fiber services in 15,383 buildings, which is 90 percent market share among all fiber operators in Taiwan.

Chunghwa is raising the bandwidth of its DSL services as well in order to better serve its IPTV service. At the end of 2007, 28.5 percent of its broadband subscribers had speeds in excess of 8 Mbps., which is up from 20.6 percent at the end of 2006.

Chunghwa is continuing rapid but steady progress with its IPTV service. 2008 should be a good year for it as well.