FTTH: the return of the king

Telecom Asia, July, 2004

A DSL and cable modems may currently dominate the broadband landscape, but that dominance is considered by a growing number of believers to be a stop-gap to the ultimate Fixed-line broadband technology: fiber-to-the-home (FTTH), a.k.a. fiber-to-the-premises (FTTP).

The irony is striking, since one reason technologies like DSL, cable, Fixed wireless and powerline exist at all is because the telecoms industry gave up on FTTH as economically unfeasible years ago. But markets like Japan, South Korea, Sweden and Italy currently have strong FTTH residential offerings in commercial operation thanks to affordable equipment costs and escalating demand for broadband services driven by pioneer DSL/cable operators.

FTTH subscribers in Japan grew from around 12,000 at the end of 2001 to over 233,000 by the start of 2003. By the end of March 2004, that number was over 1.1 million--a mere fraction of the market's nearly 15 million broadband users, but by then FTTH's new adds per month were pushing the 100,000 mark, while DSL's new adds were down year-on-year, according to figures from market leader Yahoo! BB. What's more, FTTH provider USEN Corp, which launched the country's first commercial FTTH service in March 2001, says more than 44% of its new subscribers have switched from DSL.

Meanwhile, NTT East and NTT West, which currently dominate the FTTH market, say they plan to throw some weight behind their FTTH businesses this fiscal year with increased capex and a goal of growing its user base from 705,000 FTTH customers at the end of January to two million by April 2005. One reason NTT can do that is that it has been deploying passive optical network (PON) units to curbsides across the country since the late 1990s. The last mile might still be copper, but it could just as easily be fiber if the customer wants it.

While FTTH may do as well or better in other markets with similar regulatory roadmaps, how well it does in other broadband markets is open to debate. One challenge that FTTH faces today that it didn't face in the mid-90s is the installed base of broadband technologies that exploit existing infrastructure. The copper loop is now capable of supporting Ethernet and 50-Mbps VDSL, which takes some bite out of FTTH's formerly touted speed advantages.

Even so, broadband access analysts like Lindsay Schroth of Yankee Group insist the ADSL was just the beginning of the broadband revolution, and that service providers had better realize that "it will be easier to migrate customers to FTTH from their own copper connections than to try to churn them from competitors."