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.

This year’s event was held in Portugal’s premier conference centre, the Feira Internacional de Lisboa – the best conference centre in the world according to my taxi driver, who provided the scary moment of the trip by reversing onto a roundabout to get me there (he would no doubt blame my poor Portuguese pronunciation which I tried to supplement with pointing).

The conference itself was the polished production that you will have come to expect if you’ve ever been to an FTTH Council Europe event before: impeccable organisation, slick audio visuals on huge screens, and a cleverly organised layout that minimized walking and made it possible to forget that we were in an aircraft hanger of a venue. The food and Wi-Fi were also free of charge – these items are a sure-fire way to a journalist’s heart (not that I needed winning over).

I spent most of my time in the content and services stream. The conference theme “taking your life to new horizons” reflects the Council’s new emphasis on services and applications, and I wanted to get an insight into the content provider’s perspective. Here’s what I learned:

1. The number of fibre users throughout the world is reaching critical mass, and it’s about time that service providers realised what an opportunity they have to create new applications tailored to this market. There are 25 million fibre subscribers in the Asia Pacific region, nearly 7 million in North America, and 3.5 million in Europe including Russia. Google is one of the few companies to understand the potential of this almost untapped market, and will be using its experimental FTTH network to try to work out how to monetize this consumer group, says Yankee Group analyst Benoit Felten. This will create what he calls a “virtuous circle” – the emergence of new services will help stimulate demand, leading to more subscribers… I’m sure you get the idea.
2. The true rewards of broadband won’t be attained until coverage goes national, according to Taylor Reynolds, an analyst with the OECD. And he illustrated his point with a rather telling example from France. As part of its disaster recovery plan for an H1N1 pandemic, the French government had put together 620 hours of video covering nine subject areas that could be broadcast via TV channels over a period of 90 days. Reynolds was surprised to find out that the programming would not be made available over the internet – which is odd because the internet is the most sophisticated delivery mechanism available. With internet delivery, lessons could be distributed via the highly efficient peer-to-peer file-sharing protocol, and students could get instruction direct from their teacher using a video link. But this wasn’t being done because not all students have access to broadband. Reynolds went on to discuss a recent OECD study that had looked at how much cost saving from “spillover effects” would be needed to justify investment in a national broadband network. The amount required is not huge in the context of national spending – cost savings of just 1.0-1.5% would be needed in the sectors of health, education, electricity and transport. Governments should take these spillover effects into consideration in their budget and strategy because, by definition, these are benefits that the FTTH provider does not get paid for.
3. Healthcare is the world’s largest service industry, and it is looking towards ICT to help it solve massive challenges: an aging population, ongoing shortages of healthcare personnel, and an increase in the prevalence of chronic diseases. Before he was invited to the conference, Ton van den Hoven, senior director of healthcare informatics at Philips Healthcare, had never heard of the FTTH Council Europe or its work, and yet one of the key challenges for the adoption of e-health is infrastructure. (The other challenge is standardisation – so that exchange of patient records and healthcare data can take place regardless of the technical solution.) Philips Medical is very interested in getting good connectivity to patient homes for “compliance monitoring” – keeping an eye on the patient to make sure they are following the treatment regime. Apparently this is big reason that treatments fail. “Home healthcare needs to be integrated into the overall health care cycle,” said van den Hoven. At least now we can say the conversation between these two important industry verticals – telecoms and healthcare – has begun.
4. Digital broadcasters are struggling with bandwidth issues on legacy networks. Today they face a stark choice: offer more channels at low quality, or go for high quality transmission, but be limited in the number of channels they can offer. That kind of trade-off doesn’t make sense for a business that’s competing with cable TV and its hundreds of channels. IPTV providers at the show had the same message: the last mile is the bottleneck for delivery to the consumer, and we want you to help us. The transition from broadcast to on-demand models of content delivery is also causing a certain amount of pain. Remember all the brou-ha-ha with telecoms networks wanting the BBC to pay for iPlayer content delivery in the UK? The same problem will crop up in other countries. Right now RTL’s catch-up TV service in the Netherlands represents only 4% of viewing time; imagine how much bandwidth will be needed to bring that fraction up to 10 or even 20%.
5. As the above examples show, the FTTH ecosystem is really complex, and will involve new relationships and different business models. Benoit Felten (again!) presented the results of a study commissioned by the FTTH Council Europe on the so-called FTTH Benefit Compendium. One of the key results is a graphic showing the ecosystem as a kind of segmented onion. This takes the simple, four-layer model of the FTTH world – passive, active, services, end-user – to a whole new level. Benoit only had 15 minutes to explain the key points of his research, so I’m planning to interview him as soon as time allows so I can understand the bigger picture.
6. Overall, the FTTH world has made steady progress, but for an audience keen for revolution and disruptive innovation, that wasn’t enough. The number of fibre subscribers grew at about the same clip this year as it did last – about 20% – and as FTTH operators get up to speed on their marketing and messaging that growth should continue and even accelerate. Today just about every country in Europe has a digital strategy that recognises the importance of broadband to the national economy. FTTH equipment is getting faster and cheaper, operators and vendors are getting clever with deployment techniques, and services and applications are becoming an important part of the equation. But there is no silver bullet – at least not yet.
7. [off topic] It is warmer outdoors in Lisbon in February than it is in my house. The boiler repair man dropped by last week and applied a “Birmingham screwdriver” (gave boiler a thwack), but to no avail. Been a week without central heating now…

What did you learn in Lisbon? Share your experience using the message boards below.

Disclosure: I do project work and copywriting for the FTTH Council Europe, who paid me to be in Lisbon to report on the event.