No business case for mass FTTH/B deployments by MENA operators
The first step on the path to addressing a problem is acknowledging that there is a problem in the first place. Only then can a solution can be sought. In the context of fiber deployments in the Middle East, this was evident at Informa Telecoms & Media’s FTTx MEGNA 2011 conference this month in Dubai: Operators agreed to admit that the business case for the mass fiber-access deployment by them is, simply put, just not strong enough.
Some have been overly optimistic in recent years about the prospects of fiber NGAs’ success, so the soberness of the conference panelists appeased many of the less-optimistic attendees. Representatives from Etisalat, STC and Du agreed on two things: The future is fiber-to-the-home/building, and generating revenues from these networks is going to be difficult.
Nobody was confident enough to identify any particular service or application that would guarantee ROI – not even IPTV, which is now increasingly being viewed as a tool to reduce churn by being bundled with broadband, rather than bringing in the previously envisioned bags of money to make up for fiber investments. IPTV and other video services, such as VOD, OTT and videoconferencing, are generally seen as the truest drivers of fiber, but none of the industry insiders could admit that any – or even all of these combined – could make a compelling business case for broadband-over-glass.
If ROI cannot be guaranteed through video services, it is wishful thinking to suggest that the likes of e-health, e-government, e-education and all the other “e’s” – which no doubt can create the smartest of pipes – will be able to turn investment into long-term profitability. A difficult reality is dawning for the big regional telecoms operators, after the hype of being on the cutting edge of NGA in the past couple of years.
And this doesn’t even take into account other factors that add complexity to the situation, such as the launch of LTE eating away at the return on investment in FTTH/B; the lack of quality content over fiber; the high prices of services; etc.
European operators are squeezing every cent out of xDSL by vectoring, refarming, upgrading to VDSL and using phantom mode, but the long-term digital-economy strategies of the UAE, Saudi Arabia and others continue to tout the necessity of fiber access, while the need for fiber backhaul for the much-sought-after LTE mobile technology isn’t going away either. As Batelco said, the fiber-investment conundrum is about balancing today’s obligations with future obligations.
It is a given that the heart and mind of Etisalat UAE, for example, is set firmly on fiber, without any prospect of turning back to xDSL acceleration. Part of the reason might be that it wants to future-proof fixed technologies, but there is always an element of unneeded hastiness regarding rollouts of superfast next-generation fixed networks.
The problem in terms of ROI posed by operator fiber deployments is clear, and the solution is unknown, but the likes of Etisalat, Du and STC feel they have no other choice but to roll out fiber-optics as soon as possible. My gut feeling is that this problem is not going to go away, which will make FTTx MEGNA 2012 all the more interesting.
Perhaps the solution lies in sidestepping ROI worries altogether – throwing the burden of fiber investment onto the shoulders of governments, whose economies will arguably prosper far more than the telecoms operators’ balance sheets. This is already manifesting itself in Qatar’s greenfield areas through the Qatar National Broadband Network (Q.NBN), in Oman’s Muscat governorate via the Haya Water sewage-utility company, and in Kuwait via the government’s NBN initiative (which has been temporarily suspended). The NBN model is becoming an attractive NGA-deployment method. (Ironically, one can even argue that the networks rolled out by Etisalat, Du and STC are de facto NBNs – albeit without the open access traditional NBNs are tailored for – since their governments have large or majority stakes in them anyway.)
If operators in regional markets apart from the ones already mentioned can “sit it out” until their governments act to stimulate fiber access by way of subsidies or public investment, they can protect themselves from the financial problems faced by operator-owned networks. In the meantime, they have the option of turning their focus toward doing the best they can with the copper they have, with guidance from European xDSL, which in many cases is being pushed way beyond its limits.
The problem with this, however, is that most of the richer Middle Eastern countries have been accounted for in the above paragraphs. That leaves Afghanistan, Yemen, Syria, Palestine, Lebanon, Iraq, Jordan, Iran and Bahrain, where – barring the last three to a certain degree – local operators can kiss goodbye the prospect of fiber-based open-access NBNs rolled out by their governments anytime soon.