Thursday, 16 May 2013

Rising mobile offload to Wifi - saviour of the case for FTTH, or warning sign?

The ever-interesting BenoƮt Felten has a post up about WiFi offload, with some stats from Mobidia. These figures show that between two-thirds and three-quarters of traffic to mobile devices travels by WiFi, not macrocellular.

His conclusion is:

   Take that, “we’ll only need mobile networks in the future” posse…

And in that he's surely right. No matter how exciting the potential of mobile data, its simply not, at a nationwide level, a substitute for fixed broadband. If the traffic off-loaded to WiFi and the fixed network today were to be 'on-loaded' on to the cellular network, the cellular network would fall over. (This is different of course from decisions at an individual consumer level - some households may decide they can get by with mobile broadband and no fixed broadband).

However, while the future of fixed broadband seems secure, I think usage of mobile devices has a more subtle message regarding the prospects for superfast broadband. Sandvine have recently released their fascinating Global Internet Phenomena Report. One finding is that in North America, 25% of streaming audio and video traffic is delivered to a mobile device in the home - up, presumably, from 0% just a few years ago in the era before smartphones and tablets. This is roughly consistent with figures from the BBC regarding usage of their iPlayer on-demand TV service - 30% of requests for programmes are coming from mobiles and tablets (up from 15% a year ago).

What's this got to do with FTTH? Well, one of the supposed drivers of the need for FTTH is 4K TVs -here's NBN Co getting excited about 85" TV screens. However, if usage of on-demand TV is already shifting to small, handheld devices, that suggests usage on mega-TVs may not be quite what the enthusiasts hope. Mobile devices offer the convenience of a personal device that they can watch in any room of the house (or perhaps in bed - iPlayer's peak of requests is after 10pm). Consumers increasingly seem to be choosing this over watching the content on a bigger screen, be that a TV or a PC monitor.

This isn't an absolute, of course. Households may want the huge screen for the big film on a Saturday night. But for day-to-day use, convenience may trump resolution.

[A footnote : I suspect the Mobidia numbers may be somewhat too high. The data is drawn from the users of Mobidia's 'My Data Manager' app, tag-line: "Take control of your mobile data". I suspect this may not be a representative sample, since such users may be a little more inclined than average to ... err ... take control of their mobile data. They perhaps are more diligent than the average in offloading. However, there's no doubt that WiFi offload is very significant, and drives an ongoing need for widespread fixed broadband.]

Wednesday, 15 May 2013

Are there any serious analysts still gung-ho for fibre?

Once upon a time it was a lonely path being a fibre sceptic. These days I am in very good company indeed. Here's what leading international telecoms analysts have to say about FTTH:

"The disproportionately high spend on [FTTH] is highly problematic. It may come to be seen as inappropriate use of capital in the emerging competitive environment." [March 2012]

"The time required to roll out and install FTTH is as large a barrier as cost … There are very few plausible combinations of home services that will require over 100Mbps bandwidth by 2017." [April 2012]

"FTTH deployment costs are about five times greater than FTTC costs." [March 2013]

"In the current economic climate, it seems unnecessarily dogmatic to espouse ubiquitous FTTH, particularly when the broader ecosystem and regulatory support is out of step with market realities ... [A]lthough deeper penetration of fiber into the network is a must, universal FTTH is an impractical luxury that telcos cannot really afford. … It is difficult for a significant volume of users to justify paying a premium for higher speeds when the applications that they currently use function sufficiently well over high-speed DSL lines" [February 2013]

"The combination of sunk costs and highly uncertain demand (both in terms of take up and willingness to pay for ultra-fast broadband services) makes [FTTH] investments very risky … services that would make full use of the higher bandwidth of FTTH are not at present available" [Summer 2012]

"The initial focus of the European institutions and of national governments to date has been largely on deployment of fibre-based NGA – [FTTH] – largely to the exclusion of other high speed broadband capable infrastructure. This focus was arguably excessive … More recent statements by the European Commission suggest an increasing recognition of the need for a … strategy that acknowledges the potentially complementary role of other technologies." [September 2012]

"Operators’ interest in pay-as-you-grow strategies is also motivated by a dawning realisation of quite how hard – and expensive – rolling fiber right to the home is. In particular, the challenge of installing fibre in front gardens, buildings and individual homes has been “vastly underestimated”" [November 2012]

"Australia’s current FTTH-led model … is actually going very much against the global trend of operators using existing network assets to avoid the huge costs of FTTH in brown field sites." [March 2013]

Tuesday, 14 May 2013

Japan - FTTP with tumbleweeds

Japan is often cited as one of the world leaders for superfast broadband. It has been rolling out fibre-to-the-premises for more than a decade, and now has one of the fastest fixed broadband networks in the world, second only to South Korea in terms of measured speed, with average speeds clocking in at 10.8 Mbps. (The speed of the last mile will be appreciably higher than this).

Of course, we all know that by itself FTTP is just glass in the ground. What matters is what you do with it. How much traffic is travelling across this network? Happily, Japan is one of the countries that tracks and reports this, so we can take a look. [Health warning - what follows is in part based on Google Translate, so there is the possibility I've missed a critical footnote].

Here's Japan's traffic per fixed broadband line since 2004:

A few observations:

  • Bandwidth usage is growing, but not exponentially. The growth rate in the last year was 17%
  • This is despite the fact that there was major adoption of FTTP in this period - as a share of fixed broadband it rose from 36% at the start of 2007 to 67% today (data here)
  • Usage is low relative to the line capacity - 54 Kbps vs the average speed of 10.8 Mbps measured by Akamai, representing a utilisation of 0.5% (though certainly it will periodically spike far higher than this for any given line)
  • It's also not the case that fibre delivered massive growth in per-line upload traffic - this peaked in late 2009, and has fallen almost 30% since then
It seems fair to call this a little underwhelming.  One factor may be that consumers are choosing to use the LTE mobile network rather than fixed connections. Indeed, it seems some consumers are seeing LTE as a complete substitute. According to Informa:
"NTT East and NTT West have been forced to slash their FTTH prices for new subscribers by an eye-watering 34% from ¥5,460 (US$66.70) to ¥3,600 per month to try and re-ignite their subscriber growth and stop the outflow of subscribers to cheaper LTE mobile broadband services."
Be that as it may, given that other countries are spending billions to replicate Japan's superfast fibre-optic infrastructure, presumably Japan is streets ahead of what's typical usage on copper networks? Another country that publishes usage stats is Australia, where the current government is investing massively to build FTTP (though 96% of households are still on cable or DSL).

Here's how Japan and Australia's per line traffic compares:

Source: Australia fixed lines and traffic from ABS. Japan as above
Note: Japan units converted from average kbps to monthly total GB

As of the end of last year, Australia's per-line fixed broadband traffic was roughly 70% higher than that in Japan. Despite a network that is undoubtedly technically inferior to Japan's, Australia is seeing robust growth. Of course all traffic is not created equal, but it seems fair to guess that Australia is getting more value out of the fixed internet than Japan is. By contrast, Japan's very expensive investment in FTTP doesn't seem to have delivered that much.

Network infrastructure is only as valuable as the usage it enables. Is it time for Japan to start envying Australia?