Incumbents to remain broadband 'top dogs'

21-11-2006

by Ciara O'Brien

Incumbent operators will drive broadband growth in Europe in the near future, despite moves by some cities to build municipal fibre networks.

So says a new report from technology research firm Strategy Analytics, which predicts that the impact of such public networks will be marginal in the short term.

Amsterdam, Paris and Vienna are just some of the cities that have laid high hopes on public broadband infrastructure, but Strategy Analytics researchers believe incumbent telecom operators and other commercial providers will still remain the top dogs in broadband.

"Despite the attention that municipal FTTH (fibre to the home) plans have attracted from the media, politicians and equipment vendors, their impact on the European broadband market is likely to be quite limited," said James Penhune, the report's author and director of the Strategy Analytics' Broadband Media & Communications service.

"With competition driving down prices throughout Europe, most consumers who want broadband will already be able to afford it."

Penhune pointed out that this trend would make it harder for cities to justify building their own networks in order to provide low-cost or free services to their citizens.

The report is also predicting that network operators will take a more measured and economical approach to upgrading the network in the next five years, favouring incremental moves from the current ADSL technologies to more advanced alternatives such as Very High Bit-rate Digital Subscriber Lines (VDSL) and Fiber to the Node (FTTN).

VDSL is a high speed transmission technology that performs its fastest speeds over short distances.

"Unlike local governments, which can justify investing in expensive FTTH technology on the grounds that it may benefit the public or stimulate economic growth, telcos and other shareholder-owned companies face intense pressure to limit costs and show near-term returns on investment," said Penhune.

He added that this financial pressure would make FTTH difficult to rationalise in the near term.