Benoît on the FTTH Benefit Compendium

Why fibre? It’s a fundamental question for proponents of fibre-to-the-home, but it’s difficult to answer concisely or even clearly because the answer varies dramatically depending on where you reside in the FTTH ecosystem.

The “FTTH Benefit Compendium” is a new study commissioned by the FTTH Council Europe and carried out by research firms iDATE and Yankee Group, which set out to map the FTTH ecosystem and look at the benefits of FTTH from the different perspectives – including homeowners and building managers, local authorities and utilities, ISPs and over-the-top network service providers.

Despite being present at the FTTH Conference in Lisbon last week when the study was unveiled, I struggled to get the complete picture. Only 15 minutes was allocated to the presentation of this report – an unfortunate necessity in a conference with such a packed timetable.

To put this right I called Benoît Felten, senior analyst with Yankee Group, who presented the study in Lisbon, to ask him about the objectives, the approach, and the key conclusions. What follows is in his own words:

BF: The first objective of the study was to highlight the issues around the perception of benefits: who benefits, who could benefit, who perceives the benefits, who doesn’t? The idea is not to say FTTH is good, or that FTTH brings social or economic benefits – it’s a much more down to earth thing. We need to be able to say, as a telco this is what you can expect in terms of benefits; as a landlord this is what you can expect; as a consumer this is what you can expect; as a whatever… this is what you can expect. We tried to address all of the players in the ecosystem, with the conscious exception of the vendors.

The final output of the report is formed around two questions: who misperceives the benefits and needs to be corrected in order to align them with FTTH deployment, and which inhibitors are out there that need to be countered.

For example, right now in countries like France or Sweden or the Netherlands, we see that landlords are blocking the way. They are absolutely slowing things down because they don’t understand what’s in it for them. There’s a ton of horror stories here in France: there’s a telco in Marseille who was getting so frustrated they actually gave the landlord some cash to get access to the building. The next day they had 50 calls from 50 landlords to say well if you give me the same cash you can get into the building. Suddenly the cost of wiring the building has gone up by 20% because of this one move.

The irony is that landlords have absolutely clear interests in doing FTTH because the value of their property goes up. There are service environments emerging in Sweden around services for the landlord. The crux of the problem is how you address the landlord as a customer rather than as a barrier. If you are in combative relationship, it’s never going to be easy. But if you can say we’ve done this calculation and you could save 20% of your operating costs every year in managing the building because we’re bringing fibre in there, why would the guy refuse?

I only highlighted three of the key messages [in my presentation in Lisbon], but there are probably five of them, and then there’s a ton of smaller things which are worth looking into.

There is a parallel aspect of the study, which deals with services. We keep talking about all of these services that could come on fibre but we’re not really justifying why they require fibre for the most part. So the idea was to have an outlook on what these services could be, when they could emerge, what level of connectivity we think they will require and why.

The report analyses services using a three-point matrix for each service: download, upload and latency. We said, well may be this service doesn’t require a lot of download, but it requires low latency – that would be the case for cloud computing, for example – and actually the level of latency it requires would be hard to deliver without at least FTTC and probably FTTH. For each service – there were eight – we went through that kind of reasoning.

The second part of the service aspect of the study was to highlight some of the revenue streams that might arise from these services. A lot of people assume that any revenues would be for telcos and we wanted to break that perception because it’s not true. In fact, this is actually becoming a core question for telcos. It’s not about which revenues can be derived, it’s about which revenues will be theirs ultimately.

We also tried to distinguish between the revenue streams for some services. In video communication, for example, we have two distinct revenue streams. One says the telco is providing the service, the other says a Google-type company is providing the service.

Looking at it from the telco’s point of view – and I’ve talked to probably 20 of them in Europe about this – the question that comes back again and again is this: if I provide 100Mbps symmetric service, why would the customer use my in-house video if he can just get it over the internet for free? It seems to me if we can’t answer that question, then the frankly slow industry dynamics that we’ve seen over the last two years are going to continue.

The complete report on the FTTH Benefit Compendium is due to be presented to the FTTH Council Europe at its General Meeting in April.