Altnets are winninf support

A report from Point Topic finds that smaller network operators are beginning to find a niche for high-speed broadband services in the UK, despite BT and Virgin Media gaining real scale with their own market-dominating services.

Although not all altnets will be successful, some are expected to find that a varied and localised approach can prosper as they bring super-fast broadband to individual communities that have often been struggling with access to even the most basic of broadband services.

The report predicts that alternative operators in the UK have increased their residential customer base by 85 per cent since the middle of 2011, and had around 8,400 fibre-based super-fast end-user connections at the end of last year. These include fibre-to-the-premises, fibre-to-the-building and fibre-to-the-cabinet providers.

“This connections number is small fry compared with the big network owners BT and Virgin Media, but it is highly significant for the communities being reached, some of which would otherwise run the risk of being left without super-fast broadband, at least for some years to come,” said Annelise Berendt, Senior Analyst at Point Topic.

“There is evidence, including from BT, that take up of super-fast services is highest in those areas previously experiencing poor speeds of 2Mbps or below, and this bodes well for those addressing such markets and aiming to make the business case stake up.”

A recent Point Topic survey found that some of the altnets working closely with specific communities are seeing strong results, both in terms of getting infrastructure in the ground and in getting customers onto their networks.

“Players such as Call Flow Solutions and Rutland Telecom using sub loop unbundling to provide fibre-to-the-cabinet solutions are building solid customer bases in the areas in which they are active,” added Berendt. “That is in small but not necessarily very remote communities, which tend to be located some distance from their serving BT exchange, and which are often prepared to put money into network rollout themselves.

“Local knowledge of potential demand and the geographical terrain, as well as being able to tap into local enthusiasm for broadband provision, are essential to getting these networks up and running. Indeed it is no surprise that several local authorities are recruiting ‘broadband champions’ to canvas support and demand registration for their Local Broadband Plans, and to feed back ideas from the ground up. It is also notable that new approaches to raising finance and negotiations with local land owners on wayleaves help to turn a desired deployment into a viable business venture.”

Point Topic predicts that initiatives to make the growing number of scattered alternative networks more readily available to the country’s Internet service providers and especially the larger more well known brands will become increasingly valid as the numbers of these networks rise.

“Fluidata’s wholesale platform and the Quality Marque being developed by INCA, the Independent Networks Cooperative Association, are good examples of projects that could make a real difference to the ability of these altnets to flourish over the longer term.”

Point Topic’s research also highlights the innovative use of alternative backhaul networks. FibreSpeed in Wales and NYnet in North Yorkshire are each being used by Internet service providers to bring their offerings to more remote communities.

Meanwhile, players such as AB Internet and Netserve in Wales through the ‘FibreSpeed spreads its wings’ initiative, and Moorsweb and LN Communications through the Connecting North Yorkshire project, are using wireless technologies to provide broadband.

“While not as high speed as fibre networks, improvements in wireless broadband capabilities are resulting in some premises receiving super-fast speeds. And of course such offerings would not be possible were it not for access to affordable backhaul provision,” concluded Berendt.

European telcos are expected to start rolling out fibre to the masses

National incumbent operators such as BT and Deutsche Telekom have been caught on the back foot by cable carriers and their bundled offerings, with analysts expecting a mass deployment of fibre in a bid to avoid large scale subscriber loss.

In a research note published Wednesday, analysts at investment firm Execution Ltd said that 2010 will see a step change in European fibre optic cable rollout as incumbent telecom operators seek to limit subscriber migration to cable operators.

The analysts believe that for home media and telephony, cable is the clear winner versus wireless and non-cable, resulting in a mass deployment of fibre to the street cabinet (FTTC) and fibre to the home (FTTH), starting imminently.

“Cable has emerged as the winning technology for data to the home and we expect to see the mass deployment of fibre to start imminently as current providers such as BT seek to avoid large scale subscriber loss,” said Execution analyst Nick Paton.

“The interest for telco investors is our stance on fibre. We believe the incumbents will be forced – dragging their heels all the way – to deploy both FTTC and FTTH as they lose markets share in triple plays to the cable operators.”

For the past eight years, fibre sales have been lacklustre as existing technology (copper) has been sufficient to provide bandwidth requirements. But 2009 is set to be a turning point as technologies have settled and the increasing penetration of triple play data content (internet, telephone and TV) has driven a major shift to fibre optic-based technologies.

The step up in the deployment of millions of kilometres of fibre will have a huge incremental capex impact on incumbent suppliers, Paton said, and will be a very big deal for fibre optic manufacturers such as Prysmian. Prysmian has a 15 per cent share of the global optical fibre market and the top three players – Prysmian, Corning, and Draka – control 50 per cent of the global market.

In related news, Orange UK on Wednesday announced plans to upgrade its fixed line broadband offering, introducing 20Mbps download speeds as standard. To complement the upgrade, Orange has introduce d a number of new pricing schemes topping out at £6.50 a month for Orange mobile contract customers, with line rental of just £10.50, compared to the standard £11.25 line rental charge from BT.

While Execution notes that Orange’s move is “helpful,” the analyst warns that no customer is likely to get that speed over a DSL line no matter how close they live to their local exchange. The average local loop in the UK is thought to be around two kilometres, and signal attenuation over DSL is such that a 20Mbps connection would fall to below half this speed at two kilometres. Furthermore, 20Mbps will be insufficient to compete with cable operators using DOCSIS 3.0 technology capable of delivering reliable download speeds to the home in excess of 100Mbps.

“Orange has been losing market share in the fixed-line broadband market in UK and its customer base has declined to below one million. Orange’s strategy is to use broadband as a tool to reduce mobile phone churn offering its cheapest plans to its mobile phone customers on a contract,” Paton said.

Virgin Media is the first ISP in the UK to offer a “super fast” residential broadband service of 50Mbps.

Using FTTC (fibre-to-the-cabinet) technology and then a high-speed copper link to the home, the service is not cheap: it is £51 per month, although this can be reduced to £35 if Virgin Media’s broadband users opt for a Virgin phone line, which costs £11 per month.

Virgin Media has been conducting trials of the service during summer 2008 and is aiming to roll out the 50Mbps service across its cable network - which covers around half the UK – over the next six months. If all goes to plan, the broadband service should reach 12.6 million UK households by summer 2009.

Virgin Media has said it has already invested £1.5bn in laying fibre as far as the street.

With faster speeds, the idea is that customers will be able to do such things as interactive gaming, download online video quickly and watch HDTV, simultaneously, via multiple devices (PC and TV) in the home.

“This service will transform the way people interact and entertain themselves online,” Virgin Media chief executive Neil Berkett said in a statement.

Virgin Media’s consumer broadband service is, on average, nine times faster than what is available in the UK today.