Paths to broadband

Countries across the region face widely differing challenges in deploying broadband

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Paths to broadband Richard Jones: Profiting from fibre can involve a delicate balancing act
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By  Roger Field Published  April 9, 2011

With countries throughout the MEA region being at widely varying stages of broadband deployment, the Broadband World Forum MEA, held in Dubai last month, made for an eclectic event that reflected the diversity of challenges faced by operators, vendors and regulators in the region.

Indeed, it was clear from the various conferences and discussions at the event that while there is a huge gap between the average broadband penetration in the Gulf countries and many other countries in the region, one factor is consistent across the MEA region. And that is the huge potential of broadband, whether fixed or mobile.

Indeed, even in Gulf countries including the UAE, Bahrain and Saudi Arabia, broadband penetration remains relatively low compared with markets in Europe. For example, the broadband penetration rate in Saudi Arabia is estimated to be about 12%, compared to an average of over 50% in Europe and the US.

But with big differences in regulation, competition and the type of technologies deployed to offer broadband in countries in the MEA region, operators and vendors face diverse challenges as they seek to deploy and operate broadband networks.

The case for fixed

While Gulf operators including Etisalat and Qtel have been busy deploying nationwide FTTH networks with an eye on offering services such as IPTV and video-on-demand, operators in many other countries have to be more conscious of cost, and more discerning in the way they deploy fixed-line network infrastructure.

This was a key theme for Richard Jones, founding partner of Ventura Team, a consulting and investment firm that has earned its stripes by deploying its own FTTH network in Sweden.

Jones, who chaired a number of conference sessions at Broadband World Forum MEA, pointed out that operators must look carefully at the costs and the business case of deploying fibre, and tailor each deployment to the individual market.

“The first thing if you are an incumbent trying to balance those things out is that you have to get the right business model at a very detailed level,” Jones says.

“You have to try to balance out what to do for fibre. FTTH will cost you about five times the capex of fibre-to-the-cabinet. Then when you have a certain amount of fibre-to-the-cabinet, what do you do beyond that?” he asks.

“Maybe you can use some ADSL, which in the region is often low-quality copper, for the distances from the exchanges to the cabinets. But where there is no DSL, what do you do? You have got the un-served and the underserved, and in those areas you might have to use satellite, perhaps some 3G, or perhaps some WiMAX, to fill-in.”

This approach, of tweaking a fibre network with other technologies, can mean the difference between a network making a sound business case or not.

“What we have seen is that changing by 5% to 10% the balance between FTTH and fibre-to-the-cabinet, adding some LTE, taking in some HSPA, can lead to swings of a few percent in the internal rate of return measure for the project and essentially you can go from having a project that is unattractive to something that is viable and attractive,” Jones says.

“It is not a slam-dunk like the UAE where you can just do fibre everywhere, or just do fibre-to-the-cabinet everywhere as can occur in other countries,” Jones says. “That balance is hard to strike and you have to look at the local geography and get the right business case.”

Amir Ghoddoussi, BBA sales development manager for Ericsson Middle East, agrees that it is important to tailor fibre deployments. For example, he says that copper networks within buildings can often be retained, reducing the cost of a deployment significantly.

“The fact is that some buildings have copper in them and the business case doesn’t make sense to replace all the copper with fibre within the building. So in some cases they want to utilise the existing copper. But in new buildings the business case makes sense for all fibre access,” he says.

But in order to decide how to go about deploying a fibre network, operators also need to make a realistic appraisal of the subscriber take-up they can achieve in the market, according to Jones.

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