For an operator planning its fiber deployment roll-out strategy, finding operational efficiencies can make a crucial difference to a project where the ROI is in doubt.
Making the economics of fiber work for telecoms operators
Sponsored by: Enghouse Networks
Watch the related webinar on-demand now: Bridging the digital chasm. The events of the last ten months have confirmed what we already knew: high-speed broadband connectivity is becoming a basic requirement for people to lead their everyday working and personal lives. The global pandemic and ensuing lockdowns have also crystallized the roles, responsibilities and priorities for telecoms operators. Our societies need them to accelerate the deployment of fiber networks to connect more homes and businesses, to serve future 5G networks and to enable billions of future IoT devices. But this does not mean that it is always easy to make the business case for fiber deployment. Fiber networks typically have a lengthy payback period given the high construction costs, perhaps as much as 15-20 years (although the lower maintenance costs of fiber compared with other technologies makes it a lower-cost solution after the end of this payback period). As such, anything that a telecoms operator can do to manage the costs of building and operating a fiber network – or at the very least, help to ensure that costs are predictable and transparent – can be crucial to determining whether deployment in a certain place at a certain time makes financial sense. Our reliance on high-speed broadband networks is increasing rapidly. Many households now have 15 devices or more connected to the internet. There has been an explosion in streaming video subscription services with recent data suggesting that three out of four US households now subscribe to one or more of Netflix, Amazon Prime, Apple + and HBO Plus. The Covid-19 pandemic and lockdown changed working habits in 2020 and the switch to home working – or part-home working will be permanent for many. Video communications using platforms such as Microsoft Teams, Vidyo and Zoom are now the norm and it is not acceptable for home workers to have an unreliable or slow connection. The shift to home working has also resulted in a change in demand for fiber connectivity, away from city centres and into the suburbs and more rural areas.
Demand for fiber-to-the-home services is surging. Turkish telecoms operator Turk Telekom saw a fivefold increase in demand for new fiber connections during March and April this year as the country went into lockdown, parents started working from home and children started doing their lessons online. French operator Orange recorded 360,000 new fiber connections in the quarter ending September 30, 2020, up from 178,000 in the corresponding period in 2019. Global IP traffic was already growing at 25% per year even before the impact of Covid-19.
For people that live in rural areas or wherever it can be difficult for a telecoms operator to deploy fast broadband services properly. There is a risk that they simply cannot get access to those services which are now a part of everyday lives. Or if they can get access, for example by using a satellite service, it can cost two or three times the average price. Many governments subsidise the cost of building out high-speed broadband in rural areas or, in some cases, take matters into their own hands and set up a government owned company to build out broadband connectivity. The big question here is whether such approaches can keep pace with market demand and with the speeds required to get access to key services. In the US, the Federal Communications Commission reckons that 21 million people lack access to “advanced” broadband which it defines as a broadband connection with a download speeds of at least 25 megabits per second and an upload speeds of 3 megabits. So, there is no shortage of demand for high speed broadband connections. But this doesn’t mean that the business case always stacks up for the telecoms operator. For a start, they have little control over cost (and time) of digging up roads and laying ducts. Some 80% of the total costs of fiber deployment come from civil works. The best that operators can do here is to put pressure on the government and local authorities to do their jobs more efficiently through strong collaboration between different companies and organizations such as transport authorities and utilities. Granting permits more quickly and efficiently can also make a difference. Where buildings are already equipped with the right gear to house new fiber connections, operators can save valuable time and money.
Where operators can really make a difference to the business case for installing fiber is in the 20% of costs that they can control – planning, procuring, deploying and operating fiber and associated network equipment in partnership with third party vendors.
Good forward planning is essential for any fiber deployment project. It can help resolve some of the key challenges and choices that operators face: Building a complete, holistic picture of a deployment can help an operator achieve a better ROI and demonstrate to government bodies – which may be funding or partly funding the project – that the operator is meeting its commitments. Operators need to decide whether to work with one, or with multiple partners. Working with a single vendor can be an advantage if it can deliver on all the different aspects of the project. For an operator planning its fiber deployment roll-out strategy, finding operational efficiencies can make a crucial difference to a project where the ROI is in doubt. Despite the burgeoning demand for fiber connectivity, the economics for an operator can be challenging. According to analysts at Credit Suisse, fiber-to-the-home is attractive where uptake is at least 50% of homes passed. Currently, the average figure in Europe is 38% although they expect this to rise to the mid-40% over the next four to five years. Watch the related webinar on-demand now: Bridging the digital chasm.