The case for fibre

CommsMEA investigates the issues facing operators in the region around deployment of high capacity fibre networks

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By  Administrator Published  November 10, 2008

Since the rapid rise of the internet in the mid 90s, bandwidth usage has increased dramatically. High capacity fibre networks, linking homes and businesses to operators can transport large amounts of data, but they are costly and expensive to install. CommsMEA investigates some of the issues concerning operators in the region.

What goes up, must come down, is the Newtonian principle being borne out by events in the stock exchanges around the world. Many facets of the internet have suffered from the boom and bust economy, but one element continues to rise inexorably.

Bandwidth usage keeps growing and shows no sign of slowing down. Gaming, VoIP, peer to peer file sharing, user generated content and video on demand services continue to push bandwidth growth and the technology that carries the information needs to keep pace.

User appetite for bandwidth is growing, with no end in sight. - Milan Sallaba, Oliver Wyman.

"There are some historical data points," says Floyd Wagoner, Motorola. "Jakob Nielsen created a formula to understand how broadband usage maps back to broadband availability. Based on historical data he's been able to bring together a formula that says, based on bandwidth availability and bandwidth usage, here's what a consumer would use and based on current user trends we'll see 100mbps by 2015," Wagoner says.

Oliver Wyman analyst Milan Sallaba agrees that the need for more bandwidth will continue: "User appetite for bandwidth is growing, with no end in sight," he says. It is not just consumers that are creating the demand. With so many countries in the Gulf looking to establish themselves as regional powerhouses for business, a reliable and quick connection to the rest of the world is an essential part of any enterprise solution.

Regional differences

The Middle East is distinct and different from other areas, and needs to be treated as such, according to analysts, who say that no single business case can be applied where fibre-to-the-home is concerned. Operator focus in the region has largely been on mobile broadband, and despite the fact that telecoms are a fundamental part of the economy regulators have been concerned with the liberalisation of cellular rather than fixed networks.

Julian Herbert, principle analyst at Informa, says: "One percent of the world's broadband subscribers are in the Middle East and North Africa region, but in terms of net additions it's punching above its weight," he says.

He points out that just two countries in the region - most likely Egypt and Saudi Arabia - are expected to pass one million subscribers in the next 12 months; cable broadband in this region is virtually non-existent, but it is rising and it is rising faster than in most other places in the world.

The Middle East has a plethora of greenfield sites and dense urban areas that provide massive opportunities for operators to roll out their services. "What's important for operators in the Middle East is to be looking at their business cases and how their current technology can sustain their service environment based on what the trends show - will they be able to stay in step with the continued increasing demand for broadband?" Wagoner says.

The Middle East has more financial muscle than many regions around the world, but cost is still a real concern, indeed Sallaba says that "optimising CAPEX is the key profit driver for FTTX". Industry figures say that the cost of installing FTTX has never been so low, but it is still a time and money consuming exercise, with Stefan Stanislawski, partner, Ventura Team saying that in general, it takes in the region of four years to install a fibre network in a city.

In some respects, the Middle East has a significant advantage over other regions in the world. With so much development, it gives operators the chance to start from scratch. While operators in Europe and North America look to save money by pushing ducts through sewage pipes or along power cables, operators in the Gulf can bundle fibre in with other utilities from the beginning of a project, helping to reduce CAPEX.

The concept of the ‘Smart city' has become something of a catchphrase over the past few months, with developers keen to promote their latest project as cutting edge and thoroughly hi-tech. Operators and vendors are similarly keen to seize the opportunity to rollout their technology in a CAPEX friendly manner.

Gains can also be made though OPEX savings, with fibre networks cheaper to run and less costly to maintain than ageing copper networks. Indeed Wagoner says that it has been suggested that US-based carrier Verizon will justify its business case on OPEX savings alone.

Despite the savings to be made in OPEX, there needs to be a greater return on investment to convince operators that it is a worthwhile proposition.

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