Fiber Tops DSL for Fixed Broadband Access:

Fiber has surpassed DSL as the most common fixed broadband access type, accounting for 43.2% of the global market, market research firm SNL Kagan wrote in a recently released market research report (subscription required). Kagan is a unit of S&P Global Intelligence.

Growth in fiber network deployment rose a sharp 55.6% worldwide year over year in 2016, putting fixed broadband connections on track to reach 1 billion subscriber lines by year-end 2021, a five-year CAGR of 5.2 %, Kagan wrote.

Note:  It’s not clear if the fiber numbers cited by Kagan are based on FTTH via GPON, optical Ethernet or other technology such as hybrid fiber-copper/coax. Please see quotes below on deep fiber penetration from Jeff Heynen.

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In contrast, the global DSL market (ADSL, VDSL, SHDSL, etc) registered a 32% gain, according to Kagan’s data.

China and the U.S., respectively, are the two largest fixed broadband markets, accounting for 46.9% of the worldwide total in 2016. China alone accounts for 34.7% of the global total, and fixed broadband connections increased 45.7% in 2016 as Chinese providers continue to follow through on the central government’s Broadband China initiative.

In addition to a growing FTTH footprint in the U.S., fiber-connected commercial buildings are on the rise as well. The number of fiber-connected commercial buildings in the U.S. soared 49.6 percent year-to-year in 2016, according to the latest market data from Vertical Systems Group.

Nine in 10 U.S. commercial buildings lacked fiber network access back in 2004. That dropped to 50.4% last year.

Source:  Article by Andrew Burger of Telecompetitor

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Telcos Transition to Deep Fiber Technologies & G.fast:

Jeff Heynen of SP Global Market Intelligence wrote in a recent blog post:

“The need to compete with cable gigabit service rollouts has forced telcos globally to shift spending on traditional ADSL and VDSL modems and gateways to units supporting deep fiber technologies, including fiber-to-the-home, or FTTH, and G.fast. The lone copper-based technology expected to see significant unit growth, G.fast, is forecast to jump from 825,500 units in 2017 to nearly 18 million units in 2022. In 2017, G.fast units are expected to represent just 1% of total DSL customer premises equipment, or CPE shipments. But by 2022, G.fast units, with the promise of faster speeds on traditional copper loops, are forecast to represent 31% of the total market. British Telecom (BT) should drive the most CPE shipments, with its announced plan to pass 10 million homes with G.fast by 2020. Beyond BT, Orange SA, AT&T Inc., CenturyLink Inc., Telekom Austria Group, Chunghwa Telecom and Israel’s Bezeq are expected to rely on G.fast for both single-family and multi-dwelling unit (MDU) deployments.”

Regarding AT&T’s announce move from VDSL2 to PON for it’s U-verse triple play service bundle, Heynen wrote:

“AT&T remains a major wildcard in the deployment of G.fast. Though the company has been firmly committed to shifting from its VDSL2-based U-Verse to Gigabit passive optical network (GPON)-based AT&T Fiber, the question is just how much of its existing U-Verse footprint will move to G.fast as opposed to full FTTH. Our expectation is that AT&T will use G.fast in certain residential markets, particularly MDUs and townhomes where G.fast can be deployed to address more than eight residences from a single DPU.”

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Residential Broadband Forecast by SNL Kagan:

Broadband subscriptions are on track to surpass 80% of U.S. households in 2017 and enjoy growing appeal in the five-year outlook. However, like the U.S. multichannel segment before it, the shadow of cord cutting threatens to darken service providers’ doorways in the extended forecast.

Residential high-speed data subscriptions are expected to crest the 100 million mark by the end of 2017 and hit 106.7 million by 2021, according the latest forecast from Kagan, a media research group within S&P Global Market Intelligence.

In the process, primary residential broadband connections from cable, telco, wireless and satellite services would reach nearly 84% of occupied households. While the appeal of broadband connections is not expected to lose its shine, the growth opportunity for wireline services faces limitations because of a consumer migration to wireless-only configurations.

Chart Courtesy of SNL Kagan

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Kagan’s revised outlook includes assumptions for an intensification of wireless competition, ramping up in 2020 and 2021 behind broader availability of 5G. However, the outlook still anticipates a reliance on wireline broadband for the majority of households as incumbent providers combat the lure of Internet cord cutting. The factors supporting confidence in wireline broadband include:

* Increasing speeds and monthly throughput — Wireline providers have consistently boosted speeds year over year with no sign of a ceiling.
* Greater in-home integration — Service providers are reaching beyond the three-product bundle to serve as home integrators of connectivity and other enhancements.
* Price competition — ISPs have capitalized on pricing headroom to boost rates and increase revenue but the thick HSD margins provide room to combat wireless replacement with more competitive prices.
* Interlocking fixed and wireless broadband packages — 5G’s reliance on dense local wireline networks for backhaul of the small cell architectures offers an opportunity for wireline providers to combine fixed and mobile subscriptions in a single package.

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Telco forecast by SNL Kagan:

U.S. telco’s residential broadband customers declined in 2016 with record full-year losses as a result of the drag from the diminishing legacy DSL base and cable competition.

According to Kagan estimates, the full industry finished the year with 33.1 million residential subs. Total HSD customers, including small businesses using DSL and fiber-deep connections, were also down at 36.4 million at the end of 2016.

With telcos losing legacy DSL customers primarily to cable, the industry has seen annual growth declines turn into net losses in the years since 2011 it had 800,000 net adds in 2011.

AT&T has demonstrated its long-term broadband commitment with its AT&T Fiber (previously called Giga Fiber) expansion. The service, which is more capable of competing with cable’s higher speeds, marks a shift from fiber-to-the-node to FTTH, allowing for planned speeds of up to 1 Gbps. However, AT&T’s decision to de-emphasize U-verse video stalled growth as some video customers defected to cable, switching broadband services in the process.

AT&T will lead the fiber-based telco footprint expansion. The AT&T 1 Gbps service is available in 52 of the 75 metro areas announced for the 100% fiber footprint as of the first quarter. By the end of 2016, the company had 4 million FTTH passings and expects to reach 12.5 million by mid-2019.

Verizon Communications Inc. announced it has upgraded speeds to nearly 1 Gbps in parts of its footprint. The enhancement, pushing customers to 940 Mbps down and 880 Mbps up, launched late April and is available to 8 million passings, more than half of the 14.1 million FiOS internet homes marketed as of the end of the first quarter.

Chart Courtesy of SNL Kagan

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Wireless-only forecast by SNL Kagan:

The wireless-only segment, i.e., households that use a wireless service as their primary Internet connection, has been kept in check with limited speeds and capacity constraints, but the landscape is expected to change. The opportunity for wireline HSD disruption and accelerated growth in single data services for consumers arrives later in the outlook with the adoption of the 5G platform.

Verizon expects the 5G standard to feature an exponential increase in speed with download speeds of multiple gigabits per second and millisecond latency that will deliver the benefits of fiber to wireless including 4K video streaming.

Verizon said a launch before 2020 is a real possibility based on the wireless industry’s engagement.

In the near term, the top two telcos, AT&T and Verizon, are moving ahead with their network upgrades to 5G. AT&T announced it will begin its transition to 5G in 20 metro areas by the end of 2017 and Verizon said it will deliver 5G services to customers in 11 markets in the first half of 2017.

We anticipate 5G standards to be in place midway through the outlook, with increased adoption of the service picking up in 2020 when the services launches.

AT&T launched its fixed wireless internet service in April. The company said the service will reach 400,000 locations by the end of 2017 and more than 1.1 million by 2020. The service is marketed at $60 per month for 160 GB of data. However, with fixed wireless download speeds initially pegged at 10 Mbps, we expect satellite HSD with its faster speeds to grow faster in rural and unserved areas until fixed wireless speeds increase.

The next generation of technology has the potential to lift wireless-only customers with the draw of improved speeds. However, even with 5G speeds on par or exceeding wireline HSD, we do not see it is a displacement for wireline offerings. We forecast the wireless segment to increase but still represent only a small portion of customers that rely on it solely for broadband access due to bandwidth limitations and a 5G rollout that could favor major metropolitan areas.

Kagan expects the number of households relying solely on wireless HSD connections to increase to 6.4 million by 2021. (To avoid double-counting, our tally excludes customers with wireless connections who also subscribe to wired HSD services.

Chart Courtesy of SNL Kagan

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