Does Fiber Face Credible Competition?

Connecting every household in the Netherlands to fiber may not make sense 

In this second entry of the Future of Fiber blog series we will explore alternatives to fiber. Fiber is the future of broadband. We hear that a lot, but there are alternative access technologies, such as cable, cellular and satellite. Even if they aren’t necessarily as good as fiber, they may be good enough (and more cost-effective) in many cases.

In two of the four potential scenarios (see chart) explored in Deloitte’s Future of Fiber study, fiber is not necessarily the dominant access technology. In both the super fragmentation scenario and the network co-existence scenario, alternative technologies play an important role.

The super-fragmentation scenario envisions competing netcos1 will provide a wide range of heterogeneous network infrastructures - fiber, cable, and mobile – to multiple servcos2. Meanwhile, in the network co-existence scenario, market incumbents leverage their integrated services and brands and upgrade their coaxial cable networks to create a strong competitive offering.

Getting the right broadband mix

In some cases it may not be economically viable to deploy fiber, e.g. in sparsely populated areas. If operators do deploy fiber across such areas, they may have to charge relatively high tariffs to recoup their investments. In that case, consumers may turn to cheaper, alternative mechanisms, particularly as their budgets are squeezed by rises in the cost of fuel, gas and electricity.

However, the Netherlands is a highly urbanized and connected country: only 8% of the Dutch population lives in rural areas3, while almost 98% of Dutch urban and rural areas are covered by a next generation access network providing download speeds of at least 30 Mbps4. That implies there is a business case for fixed networks across 98% of the Dutch market, which would suggest that wireless solutions, such as satellite and FWA (fixed wireless access) will be niche propositions in the Netherlands.

Still, it may not be necessary to deploy fiber all the way to the building to meet most households’ needs. VodafoneZiggo’s HFC (hybrid fiber coax) network
can hit a throughput of 1 Gbps and has the potential to reach 10 Gbps. The
network consists of 97% fiber and 3% coax, deploying fiber-to-the cabinet
(FttC) and bridging the final few hundred meters with coax5.

But it is not yet clear whether HFC will be sufficient to meet consumer and especially business demand for high speed connectivity in 2030. Households will need high-speed connectivity to enable 4k/8k video streaming, augmented reality (AR) and virtual reality (VR), and extensive working from home. High-end VR applications, in particular, could require throughputs of hundreds of megabits per second. If and when, the much-hyped Metaverse is widely used, households may want to access several VR streams simultaneously. For some use cases, such as high-resolution meetings in VR, they may also want very fast uplinks. 

Cable companies have a strategic dilemma

Over the next decade, HFC players will likely pursue one of two network strategies. The first would be to continue deploying HFC networks, potentially taking fiber beyond the cabinet. They could deploy fiber in the street (sometimes referred to as fiber-to-the-curb) to enable higher connectivity speeds, without laying fiber connections into individual homes, which is more expensive. 

This approach would likely require the use of the new DOCSIS 4.0 technology. Although CableLabs published the specifications in 20176, the technology is not yet commercialized7. DOCSIS 4.0 is confronted by the classic challenge facing new consumer technologies: without economies of scale, it may be too expensive to be competitive. If other players around the globe adopt DOCSIS 4.08, costs will fall and it could be viable in the Netherlands.

The second network strategy for HFC players is to deploy fiber all the way to the home (FttH), which is VodafoneZiggo’s strategy for new construction
projects9. In the UK, cable operator Virgin Media O2 is deploying full fiber across its entire fixed network at a cost of £100 per home, with completion scheduled for 202810.

In summary, the outcome of the HFC versus fiber dilemma is largely dependent on the ability to upgrade coax to meet consumer broadband demand and the extent to which upgrading HFC remains cost-competitive
in the long run.

Possibility for wireless?

Many people claim that wireless access is and remains a niche proposition in the Netherlands, as it is one of the few geographies on earth with the luxury of two fixed infrastructures (Fibre and HFC). In other countries though, Fixed Wireless Access (FWA) is an alternative to Fixed broadband access: in the Philippines and Austria over 30% of in-home broadband connections are now on FWA, and in the US and Italy, the percentage of FWA net adds is rapidly growing towards the majority of net adds.

Where FWA started to provide broadband like services to locations unserved with fixed areas, it has grown into a mainstream product category in itself, instantaneously providing broadband access. This is fueled by three factors: prices for FWA equipment have steadily fallen (and are expected to continue to decrease), it is easy to install (‘plug and play’), and in some markets, operators have decided to actively push this (e.g. operators without a (full coverage) fixed network. 

In the Netherlands, no operators have pushed FWA yet. However, that may change in the future. If, after the 2023 5G spectrum license auction, one of the existing operators has ample spectrum, the decision could be to offer FWA to complement existing fixed roll out. Another option is a new entrant participating in the auction and winning spectrum and using that for a pure play FWA roll out strategy.

Our next blog will take a closer look at the two scenarios in which fiber plays a very dominant role, while exploring the separation of physical networks and services. 

Did you find this useful?