1. INDUSTRY ANALYSIS
Best Year for FTTH Since 2008
Fiber-to-the-home vendors and providers enjoyed a great year in 2012,
according to new research by RVA LLC. RVA forecasts a stable market over
the next few years, followed by a new upturn in 2016.
By Steven S. Ross ■ Broadband Communities
N
orth American fiber-to-the-
home deployers forged ahead in
RVA LLC’s Michael Render will report on his
2012, passing 2.7 million homes next survey about MDU residents and FTTH
with fiber between September 2011 and at the Broadband Communities Summit
September 2012, marketing fiber services in Dallas, April 16 –18.
to 3 million more homes and connecting
1.5 million new FTTH customers.
exhausted. To move forward, deploy- even keel for the next two years. In ad-
This growth – the industry’s best
ers and prospective deployers of FTTH dition, greenfield projects – both MDU
showing since 2008 – occurred as stim-
need either free cash flow or something and single-family – are finally growing.
ulus projects advanced in the United
States and as the leading Canadian telcos to mortgage. In fact, they have an incen- According to Render, “The huge inven-
ramped up their FTTH construction. tive to do so: Money in the bank earns tory of old copper-fed lots [is] finally be-
Revenue kept pace as well, with no interest, and carrying charges are low ing worked down, new developments are
FTTH customers paying, on average, if they borrow. starting again (fiber-fed this time) and
more than $57 a month for data – by far Among the entities that have access housing starts appear to finally be on
the most profitable offering a network to financing in this environment are an upward trend.” In addition, he says,
provider can sell. Customer satisfaction municipalities that can mortgage their FTTH growth in Canada and Mexico
soared, and average take rates continued water or electrical plant and multiple- should help carry the North American
an unbroken, decade-long rise. dwelling-unit (MDU) communities. market.
The good news about 2012 comes Owners and sometimes operators of Thus, from a low in 2011, Render
from market researcher Michael Render large brownfield MDUs and multi­tenant forecasts a slow continued increase in
of RVA LLC. To gather the informa- commercial buildings can often secure FTTH homes marketed in 2013 and
tion, he conducted interviews with 350 bank financing for fiber networks, as 2014, followed by a slight dip in 2015
service providers and multiple vendors these systems are generally considered and then by more rapid growth in 2016
and industry experts. In June, his firm liquid (easily sold by a mortgagor that and 2017, assuming that greenfield de-
surveyed 2,000 broadband users. Mexi- has to take over from a failed operator). velopments continue to grow. He esti-
can deployer data came from IDATE, Greenfield FTTH projects can typi- mates that direct investment in North
the international market research firm. cally be financed by developers as part of American FTTH deployment will total
Render also noted that three of five construction mortgages. (See the Band- $18 billion during the next five years and
current FTTH deployers say they are width Hawk column from the May-June grow to $4.7 billion annually by 2017.
likely to continue building FTTH. Of 2012 issue of this magazine, bbcmag. The revenue potential is there: Ren-
the remainder, many have built out their epubxp.com/i/71834/12.) der predicts that annual revenues de-
entire footprints already, and others, es-
Render notes that in 2013 and 2014, rived by FTTH providers from ultra-
pecially in rural areas, are worried about
Verizon is committed to building out high-bandwidth applications and ser-
changes to Universal Service Fund
FiOS within its existing footprint to vices beyond the triple play will reach
disbursements.
meet its franchise obligations, which $4 billion by 2017, or $9 billion cumu-
Financing Challenges will help keep the FTTH market on an latively over the next five years.
Financing FTTH builds in today’s fi-
nancial environment is challenging.
The ability of deployers to sell stock to About the Author
finance FTTH is zero. The bond market Corporate editor Steve Ross can be reached at steve@bbcmag.com.
is uncertain. Stimulus funds have been
30 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | January/February 2013

2. INDUSTRY ANALYSIS
ECONOMIC IMPACTS
FTTH adds value to homes. Owners
of fiber-connected homes say fiber in-
A fiber connection adds between $5,300 and
creases home value by 2.1 percent, and $6,450 to the value of a home, according to
non-FTTH users in Render’s 2,000-
person sample estimated 1.7 percent. respondents in RVA LLC’s most recent survey.
These figures were derived by asking
respondents how low a price they’d re-
quire for a non-fiber-connected home. thus a 1.8 percent reduction in total ve- Although people often assure me
Non-FTTH users believe that a home hicle traffic and related public costs. that fiber to the home is unnecessary
that doesn’t already have a very high- Carriers, especially municipal net- because “everyone” accesses the Inter-
speed Internet connection from a di- work providers, notice a substantial eco- net through handheld devices, Render’s
rect fiber optic line and advanced inside nomic impact from fiber to the home. study does not bear out this theory. His
wiring would have to be discounted an FTTH users are more likely to partici- research finds that users spend 88 per-
average of $5,337 to be considered for pate in every online activity than users cent of their online time on laptop or
purchase. Those already using FTTH of other broadband technologies; 67 per- desktop computers. Even the most avid
believe an average discount of $6,451 cent of FTTH users who are employed mobile users – people under 35 – use
would be required. sometimes work at home, and 11 percent computers 82 percent of the time. Users
Availability of a fiber connection is of FTTH users have home-based busi- of all ages spend 5 percent of their on-
among the most important amenities to nesses, which average $55,000 in annual line time on tablets, and other handheld
buyers shopping for new homes. Among revenue ($14,500 in additional income, devices, typically cellphones, account
current FTTH users, it is the most im- after expenses). for 14 percent of online time among
portant amenity. Again assuming 50 percent take those 35 and under and 7 percent of
FTTH also lowers community costs. rates, community revenue increases by time among those older than 35.
FTTH users work an average of 1.2 ad- an average $500,000 and 25 new tradi-
ditional days per month from home tional jobs per 1,000 homes passed with CANADA AND MEXICO
compared with non-FTTH users. As- fiber. The secondary job impact could Of the 9 million FTTH customers in
suming 50 percent FTTH take rates, mean as much as $1.1 million in new an- North America, about 8.3 million are in
FTTH drives a 3 percent community- nual salaries to the community per 1,000 the United States. In the last few years,
wide increase in work from home and FTTH passings. however, FTTH growth in Canada and
Percentage of FTTH customers in each state. Due mainly to Verizon FiOS deployments, the Northeast has the highest FTTH penetration. Not shown:
Hawaii, 1% and Alaska, 0.3%. Data from RVA LLC, September 2012.
January/February 2013 | www.broadbandcommunities.com | BROADBAND COMMUNITIES | 31

3. INDUSTRY ANALYSIS
FTTH Homes Passed, September 2012
(Cumulative, North America)
25
24.30
22.60
21.60
20.80
20 19.90
18.25
17.22
15.50
15
Millions
13.82
11.76
10 9.55
8.00
4.09 6.10
5
0
Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
Source: RVA LLC
Between March and September 2012, an additional 1.7 million North American homes were passed with fiber as stimulus projects advanced in the
United States and Canadian FTTH construction ramped up. That’s well above the previous six months and the fastest growth since 2008.
Mexico occurred faster than some are the 50 Mbps to 100 Mbps range. There, FTTH has increased its market share
aware of. Canada, with more than 1 growth in the past four years has been to about 8 percent of all U.S. house-
million homes marketed and close to 2 startling. Render’s surveys show that in holds, up from almost zero in 2006.
million homes passed by fiber, is catch- just four years, the number of 100 Mbps Cable service increased from 40 to 50
ing up to the United States in percent- users in the United States grew from percent market share in that same pe-
age of homes passed – about 20 percent 7,200 to well over 500,000. riod. The growth of FTTH and cable
(the United States has about 22 percent). came primarily at the expense of DSL
Providers in Mexico include Telmex, (which dropped from about 40 percent
Axtel and TotalPlay. In Canada, Bell 100 Mbps Subscribers
2009 7,200 to 32 percent despite widespread deploy-
Aliant leads the way. There are 700,000 ment of U-verse by AT&T) and of fixed
homes passed by fiber in the Caribbean, 2010 69,700
2011 170,300 wireless, which dropped slightly to 10
more than 10 percent of all homes out- percent.
side Cuba. 2012 516,500
As demand for faster service in-
Mexico’s low 17 percent take rate 50 Mbps Subscribers creases, FTTH looks better and bet-
(FTTH is just getting started there de- 2009 39,800 ter. Median tested download speeds for
spite almost 1.5 million homes passed 2010 162,500 FTTH connections now top 20 Mbps,
and marketed) depressed the North 2011 347,650 up from 5 Mbps in 2007. Cable upload
American average, however. For the 2012 803,461 speeds increased more slowly, from 7
United States only, take rate was 44.2
percent, but when the 2.5 million homes Mbps in 2009 (FTTH was at 12 Mbps
being marketed in Canada and Mexico U.S. broadband users are moving that year) to 14 Mbps.
are added in, the combined North Amer- from slower technologies such as DSL Fiber’s advantage for upload speeds
ican take rate (homes connected divided and fixed wireless to FTTH and cable. is, of course, even better. Median tested
by homes marketed) is 42.2 percent.
THE BANDWIDTH IMPERATIVE
Although gigabit networks have re-
U.S. broadband households are migrating from
ceived widespread news coverage and DSL and wireless service to fiber and cable
about two dozen providers offer 1 Gbps
service, the number of gigabit custom- service, which offer higher speeds.
ers is still quite low. The real action is in
32 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | January/February 2013

4. INDUSTRY ANALYSIS
FTTH Homes Marketed, September 2012
(Cumulative, North America)
22 21.30
20 19.20
18.30
18
16.50 17.60
16
15.40
14 14.40
Millions
13.30
12 12.36
10 10.08
64
8
6.
8.00
08
6
5.
22
3.
4
2
0
Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
Source: RVA LLC
The increase in homes marketed for FTTH rose by a healthy 2.1 million for the March-September period, the largest increase since 2008.
upload speeds are now about 10 Mbps, that deploy fiber tend to be rural and count for more than half the remainder.
compared with 1 Mbps in 2007. Ca- have lower demand for speed, less CLECs and municipal providers are
ble upload speeds went from less than competition and higher costs for con- best at taking advantage of fiber’s ability
1 Mbps in 2009 (at which point FTTH nections to the national telecommuni- to provide symmetrical or near-symmet-
speeds were above 2 Mbps) to a median cations grid. However, middle-mile net- rical bandwidth.
of 3 Mbps in 2012. In addition, FTTH works funded by the stimulus program Then there is Google.
carriers have bandwidth to spare; few of put them into the gigabit game. Render reports that Google had more
them set limits on the volume of cus- More than three-quarters of all than 30,000 registrants in Kansas City
tomer uploads and downloads. FTTH connections are by RBOCs – in September and had approved fiber
Gigabit speeds are the next plateau. In- mainly Verizon. Small ILECs and their construction in 180 of the 202 “fiber-
cumbent local exchange carriers (ILECs) competitive (CLEC) subsidiaries ac- hoods” it had identified there. Rumors
FTTH Homes Connected, September 2012
(Cumulative, North America)
9 9.00
8.00
8
7.50
7 7.09
80
5.
6
28
6.45
5.
42
Millions
4.
5
76
3.
4
91
2.
3
14
2.
8
2
4
1.
01
1.
67
1
0.
-
Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
Source: RVA LLC
FTTH connections rose at a record pace – 1 million in the six months ending last September. That’s double the previous six months and a record for any
six-month period.
January/February 2013 | www.broadbandcommunities.com | BROADBAND COMMUNITIES | 33

5. INDUSTRY ANALYSIS
FTTH Take Rates, US vs. North America
50%
US Only 44.2%
45% 43.3%
42.3%
North America 41.0%
38.8%
40% 37.8% 42.2%
37.0% 41.7%
39.5% 39.9%
33.4% 37.7%
35% 36.7% 37.4%
30.4%
28.8% 33.3%
30% 26.8%
25% 22.3%
20%
Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
Source: RVA LLC
The U.S. take rate for fiber has now reached 44.2 percent. Mexico’s low 17 percent take rate (FTTH is just getting started there) depressed the North
American average, however.
are strong that Google will eventually
expand into at least a few other munici-
US FTTH Connections by Provider Type Electric Co-op
0.1%
palities and perhaps be a source of capi- Cable TV Provider
tal for others’ gigabit builds. 1.0%
RBOC
Do users need the bandwidth? Ap- 78.2% CLEC Division of
parently, yes. Median peak download ILEC
demand for users who have uncon- 1.1%
Real Estate
strained access now tops 40 Mbps – Developer
about half from data downloads and 1.5%
about half from HD video. Growth in Competitive
Provider
the number of of HD screens in typical 2.6%
households could push this to 100 Mbps Municipal Utility
in just the next two years. The 30 Mbps ILEC 4.2%
Source: RVA LLC 11.3%
mark was passed in 2009.
More than three-quarters of U.S. FTTH connections are provided by RBOCs – mainly Verizon. Small
FTTH TAKE RATES ARE HIGH ILECs and their CLEC subsidiaries account for more than half the remainder.
Most new builds are in rural areas,
which historically have high take rates –
typically because customers have few or FTTH Has the Fewest Usage Limitations:
no alternatives. Render tallied 880 ex- Percent of Respondents Aware of Volume Caps
isting or planned FTTH providers. Of
those, all but 25 have fewer than 10,000 FTTH 3%
subscribers.
One carrier in seven enjoys take rates
DSL 6%
above 90 percent. One in four has a take
rate higher than 80 percent. In general,
real estate developers who install FTTH Cable Modem 12%
enjoy the highest take rates.
Verizon, which has about 78 percent Wireless 17%
of all FTTH homes passed in the United
States, has a take rate close to 40 percent. Source: RVA LLC
Most of its footprint puts it into direct FTTH carriers have bandwidth to spare; few set limits on the volume of customer uploads and
competition with cable carriers. v downloads.
34 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | January/February 2013

6. INDUSTRY ANALYSIS
The North American Fiber to the Home and Advanced Broadband Review and Forecast to 2017 report is a detailed review
and forecast of both FTTH deployment and consumer desires for advanced broadband applications and services.
Information is available at www.rvallc.com.
FTTH Has the Lowest Cost per Mbps
And the Highest Monthly Data ARPU
$57.35
$49.38 $49.60 $50.80
Cost per Mbps $44.30
Monthly Revenue per
Households connected to FTTH enjoy User for Data Services
the lowest prices per Mbps (great for
customers) and yield the highest
revenue (great for carriers).
$17.60
$15.30
$6.40
$3.68
$2.64
Wireless DSL FTTN Cable FTTH
Source: RVA LLC
Percent Saying They Are “Very Satisfied”
With Aspects of Service
FTTH Other Broadband
65%
Service Uptime
44%
FTTH customers are significantly
Download Speed
61% happier with their service than
35% are customers who use other
60% broadband technologies.
Upload Speed
34%
55%
Consistency of Speed
32%
47%
Streaming Quality
24%
Source: RVA LLC
Percent of Time Spent Online by Device
Type (Average for All Ages)
Laptop Handheld device
40% 7%
Tablet device
5%
Broadband users still spend
most of their online time in front
of computers, not with tablets.
Desktop
48%
Source: RVA LLC
January/February 2013 | www.broadbandcommunities.com | BROADBAND COMMUNITIES | 35

7. INDUSTRY ANALYSIS
Real estate developers who
FTTH Take Rates by Provider Type install FTTH enjoy the highest
take rates.
Real Estate Developer 81%
Cable TV 66%
ILEC 63%
CLEC Division of ILEC 55%
Electric Co-op 53%
Competitive Provider 49%
Municipal Retail 46%
RBOC 40%
Non FTTH Users: Importance of Area
Municipal Wholesale 29%
Amenities if Shopping for New Home
Green Space for Walking, Jogging 83%
FTTH 78%
24-Hour Neighborhood Patrol 61%
Fitness Center/Clubhouse 55%
Current FTTH Users: Importance of Area
Community Pool/Park 53%
Amenities if Shopping for New Home
FTTH 89%
Availability of a fiber connection is among
the most important amenities for buyers
shopping for new homes. Among current
Green Space for Walking, Jogging 81%
FTTH users, it is the most important amenity.
Community Pool/Park 54%
24-Hour Neighborhood Patrol 54%
Fitness Center/Clubhouse 53%
Source: RVA LLC
FTTH Providers Noticing Economic Impact
(all providers)
Home-Based Business Expansion 51%
Employer Attraction 26%
FTTH Providers Noticing Economic Impact
(municipal providers only) Employer Expansion 21%
Employer Retention 21%
Employer Attraction 66%
Home-Based Business Expansion 51%
Any Economic Development 58%
Employer Expansion 21%
Employer Retention 21% Carriers, especially municipal network
providers, notice substantial economic
impact from FTTH.
Any Economic Development 87%
Source: RVA LLC
See the digital edition of Broadband Communities online at www.bbcmag.com
for another 14 charts showing additional findings from the RVA report.
36 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | January/February 2013