When discussing business cases and deployment models for Next Generation Access (NGA) / FTTx it´s clear from a number of studies, such as the Yankee Group FTTH Business Model Report, that one of the most critical factor for reducing the pay-back time of the investment is the take-rate of the services offered.
Today, the dominant way to deliver broadband in the EU is via ADSL2+ from the CO (Central Office) or MDF (Main Distribution Frame), both for the incumbent operator as well as challenging operators using LLU (Local Loop Unbundling). The coverage of DSL is in general good with an average in the OECD countries of 88%. However, the bandwidth depends on the length of the local loop and to deliver higher bandwidth, deeper fiber penetration is necessary. This is what is meant with NGA.
Source: Wikipeda
There are also different versions of NGA:
• FTTN (Fiber To The Node) / FTTC (Fiber To The Curb)
• FTTB (Fiber To The Building)
• FTTH (Fiber To The Home)
As visualized in the picture the difference is how far the fiber infrastructure is built out toward the end customer. For the FTTN and FTTC cases fiber is built to DSLAMs located closer to the customer to be able to increase the bandwidth using VDSL2 over existing copper lines. When built out customers in the area covered can be addressed with the new higher bandwidth service with the same logic as for current ADSL2+.
For FTTB and FTTH the fiber reach all the way to the building and the sales model is therefor a bit different from the traditional DSL sales. Here the service provider needs to address the owner of the house as well to get access into the building and for greenfield deployments they also have to address the construction companies. The difference between FTTH and FTTB is that for multi dwelling units the fiber is not always pulled all the way to each apartment as for pure FTTH. Instead the fiber is terminated in a network node, as example in the basement, and each apartment gets the connectivity over Ethernet/LAN cables or VDSL2/phone wires.
When these contracts are signed and the NGA infrastructure is in place so each individual household can be addressed with the NGA service, the sum of potential households is noted as “Homes Passed”. Depending on the market and the business model the take rate can vary from small numbers increasing over time and in the extreme case 100% (e.g. when landlords see broadband Internet access as part of the basic infrastructure of the house, as example Lulebo in Luleå Sweden).
There is definitely a first mover advantage factor that needs to be taken into account for NGA business planning. The competitors will be behind in terms of bandwidth and with an increased gap the closer to the customer the fiber gets. The second operator offering NGA services in the same area will not reach the same penetration or price levels as the first mover and is in fact also locked out due to exclusive FTTB/FTTH contracts or the incumbent operator control of the local loop. This is an area now heavily debated by the competition authorities and regulatory bodies and there are different view on regulation depending on country and that needs to be taken into account as well, but I leave that discussion to a later blog post.
