Presentation at the Workshop on Municipal Fiber Networks, October 24th 2011 in Ghent, Belgium. The workshop was organised by Ghent University - IBCN / IBBT. More information about this event can be found at http://http://events.ibbt.be/en/workshop-municipal-fiber-networks.

1. FTTH Market & Financing of FTTH
Hartwig Tauber, Director General, FTTH Council Europe
Workshop on Municipal Fiber Networks

2. Photo by Nicolo Baravalle
FTTH
Europe
Council

3. FTTH Council Europe
Our Vision: A sustainable future enabled by Fibre to the Home
Our Mission
• To accelerate FTTH adoption through information and
promotion in order to enhance the quality of life, contribute
to a better environment and increased competitiveness
Organisation
• Founded in 2004, non-profit industry organisation
• More than 150 member companies
• Industry only – no operators

4. FTTH Conference 2012
14-16 February 2012, Munich, Germany
www.ftthconference.eu

5. Photo by Nicolo Baravalle
Europe in the slow lane?

6. Digital Agenda of European Commission
• By 2020…
• At least 50% of the households in European Union will use
broadband connections of 100 Mbit/s or more
• All households in European Union have broadband connections of
at least 30 Mbit/s available
• Published in Q2/2010
• High priority in some European countries

7. FTTH Global panorama mid-2011 – Total subscribers
5.6 M
9.5 M 4.6 M 46 M
0.3 M
… and FTTH continues to grow

8. FTTH Global Ranking – mid-2011

9. FTTH European Ranking – mid-2011

10. New FTTH/B subscribers 1H11
• Top 5 countries
• France +87,300
• Portugal +71,000
• Bulgaria +69,000
• Netherlands +43,000
• Spain +41,149 (Russia: + 964,000)
Source: IDATE for FTTH Council Europe

11. Analysis of European Broadband Market
• EU is not one single telecommunication market (like US)
• Each member state has its specific broadband market with different
players involved. Examples:
• Countries with strong utility involvement: e.g Sweden, Denmark
• Countries with strong competition on last mile: e.g. The Netherlands,
France
• Countries with strong government involvement: e.g. Portugal,
Slovenia
• Countries with strong incumbent and competition mainly on
unbundling basis: e.g. Germany, UK
• Countries with main focus on mobile market: e.g. Austria
• There are no real „pan-European“ players. One operators often acts very
different in different countries, e.g. Deutsche Telekom or France Telecom

12. FTTH in Eastern Europe
• High number of former Easter European countries in European ranking:
• Baltic states
• Slovenia
• Slovakia
• Bulgaria
• Rumania
• Czech Republic
• Three main reasons:
• Need for building or rebuilding communication infrastructure (e.g.
Lithuania)
• Strong involvement of Western European Operators (e.g. Slovakia)
• Dynamic market with many new players (e.g. Bulgaria)

13. European Region FTTH Forecast
35000
32604
30000
Connected Households, 000s
25665
25000
19430
20000
14476
15000
11065
10000 8265
5519
5000 3509
1892
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Heavy Reading for FTTH Council Europe, February 2011
Note: Households connected directly to fibre (FTTH) and apartments connected via basement fibre termination (FTTB)

14. Europe in Context: the Race to Fibre Maturity
After
Country 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020
Japan
Korea
China
Taiwan
Australia
India
USA
Canada
Brazil
Russia
France
Germany
Italy
UK
Spain
Sweden
Netherlands
Portugal
Switzerland
Note: chart shows the year in which each territory
Denmark is expected on current trends and plans to
EUROPEAN UNION achieve “fiber maturity”, defined here as 20%
household penetration of FTTH or FTTB
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Heavy Reading for FTTH Council Europe, February 2011

15. Financing of FTTH Networks
Photo by Nicolo Baravalle

16. The Challenge
• FTTH is an infrastructure  financing needed
• Financing of deployment of end-user fixed network is a new scenario for all players
• Typical misunderstandings:
• FTTH financing does not work because ROI is more than 4 years  basic
misunderstanding: FTTH is an infrastructure
• FTTH is too expensive (I)  investments in Telecommunication infrastructure in
Germany was 82,7 billion EUR from 1998-2008. This is 2.000 EUR/household
• FTTH is too expensive (II)  no need for expensive frequency spectrum fees. In
Germany operators paid 3 billion EUR just for frequency-licences of the “digital
dividend” in 2010
• FTTH investments are compared with interim investments in “alternative”
technologies  FTTH is the end game solution, no expensive “migration path”
necessary
• Situation changes if FTTH is understood as infrastructure like railroads, streets, water
supply or sewers

17. Different Players – Different Requirements
Municipalities & Utility
Alternative Operators Incumbents
companies
• Long term investments • Enter a competitive • Own a
• Regional projects market telecommunication
• Project costs relatively • Limited cash flow network already
small • Challenge of low • Limited by
• Business case based equity „shareholder value
on open access in • Short-term planning requirements“
many cases • High risk • Short-term (and
• Lack of experience in sometimes mid-term)
• Good experience in
planning, operating planning
operating and
and marketing marketing • „big and slow“
telecommunication telecommunication • „bound“ to national
networks networks perspective

18. Different Players – Different Requirements
Institutional Risk Capital &
Banks EIB
Investors Business Angels
• High volume • Low volume • Medium volume • High volume
• Stock exchange • Risk avers • Need to be • Official „role“ to
listed companies (Basel III) addressed finance FTTH
only (with some • Lack of directly • Good
exceptions) understanding • Need for a good understanding
• Require a of FTTH „business story“ of FTTH
„professional“ • Short term • „slow“
business case investments • Trigger private
• Some • Lack of share
understanding understanding
of FTTH of FTTH

19. How to Match?
Networks • Create understanding &
• Municipalities & increase awareness
Utility Companies • Neutral information
• Alternative • Political agenda
Operators
• Incumbents
• Marketing
• Lower risk
• Eurobonds
• PPP
Financing • Cooperation models
• Institutional
• Public investment
Investors
• Banks • Innovative approaches
• Risk Capital & • Investment aggeregation
Business Angels
• EIB • „multiple usage“ of
investment (e.g. for LTE)

20. Photo by Nicolo Baravalle
The Impact of FTTH

21. Example of Hudkisvall
• Hudkisvall:
– Population: 15.000
– Location: 300 km North of Stockholm
– FTTH-Network decision: 2004
• Impact:
– Population decline stopped, partial increase
– Increase of number of businesses: 6-14% per year
– Two high-growth businesses founded premises in Hudkisvall
– Old@home Ehealth-project started
– National research instituted stared subsidiary

22. Example of ARGE Glasfaser Waldviertel
• Three municipalities (Bad Großpertholz, St. Martin, Großschönau)
in rural Austrian area
• Start of deploying new sewers network in 2006
• Mayors decision: deployment of FTTH in parallel
– With support of local population
– Against incumbent and regional politics (Bundesland)
• Impact:
– 100 Mbit/s parallel network available including
triple play
– Young families start to move back into
municipalities
– “Connected tourists”
– “Sonnenplatz” – competence centre on passive
houses founded in Großschönau
– Special connected homes for elderly people will
open 2012

23. Conclusion

24. Conclusion
• FTTH is the infrastructure of the 21st century
• FTTH stands for
– Quality of life
– Economic leadership
– Socioeconomic benefits
• …and the basis for a competitive Europe

25. Thank you for your attention!
www.ftthcouncil.eu