Frans van camp

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FTTH Conference Europe 2012
Munich, 14 Feb 2012

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Frans van camp

  1. 1. FTTH Moves The Market FTTH Conference 2012 Munich, February 15 Frans van Camp
  2. 2. FTTH Moves The MarketAgenda Background on Conjoint Analysis Study Insights from Conjoint Analysis Study Implications for Incumbents Implications for Cable Conclusions
  3. 3. FTTH Moves The MarketAgenda Background on Conjoint Analysis Study Insights from Conjoint Analysis Study Implications for Incumbents Implications for Cable Conclusions
  4. 4. Background on Conjoint Analysis StudyWe developed the Fiber Transition Model (FTM), a decision supporttool for operators, service providers, regulators and investors Use Cases • Network Operators/Service Providers – Strategic/Business Planning – Product Management – Management Learning • Regulators – Market Simulation • Investors – Due diligence
  5. 5. Background on Conjoint Analysis StudyFTM uses Conjoint Analysis (CA) and dynamic modeling to overcomeshortcomings of typical business planning/market models Typical model FTM Shortcoming #1 - Reliance on Use of Conjoint Analysis to model ‘guestimates’ regarding market customer behavior and derive shares theoretical market shares Each actor is modeled individually, Shortcoming #2 - Assumes that with its own technology roadmap, competitive environment is static rollout strategies and propositions Incorporates various dynamic Shortcoming #3 - Weak, static links feedback loops with respect to between modules portfolio, market shares, network capacity and performance
  6. 6. Background on Conjoint Analysis StudyStudy was performed in the Netherlands in September/October 2010by Blauw Research• A total of 3600 respondents (300/province) participated in web-based survey• Survey was designed around 9 attributes, which make up a typical dual/ triple-play proposition; technology by inference – TV provider (9) – BB provider (6) – Telephony (2) – #channels (5) – Download (6) – #HD channels (4) – Upload (4) – Price TV(6) – Price BB (4)• Resulting dataset provides basis for Dutch version of FTM
  7. 7. Background on Conjoint Analysis StudyObserved dynamics are probably also applicable in other cable-richcountries and at a local level elsewhere Dutch Market Fixed Broadband Coverage Europe FTTB/FTTH Cable/HFC DSL:#Households 7M MT Ø 15% Ø 52% Ø 93% > 75% reach Cable w/ NLInternet penetration >80% BG BE PTDSL coverage 99% HU Cable w/ 50-75% reach LUCable coverage 93% EE RO LVFTTH coverage ~13% DK DE ESMarket share DSL broadband ~55% SI LTMarket share Cable broadband ~40% UK Cable w/ 25-50% reach SE CZMarket share FTTH broadband ~5% AT FI PLMarket share Cable TV 90% IE SKMarket share DVB-T 8% NO CYMarket share IPTV 2% FR cable IT No GR DSL Cable Fiber Note: EU-27 countries + Norway; data for Switzerland not available Source: iDATE, European Commission, Solon
  8. 8. FTTH Moves The MarketAgenda Background on Conjoint Analysis Study Insights from Conjoint Analysis Study Implications for Incumbents Implications for Cable Conclusions
  9. 9. Insights from Conjoint Analysis StudyPricing and brand reputation dictate over 60% of consumers’ choiceof proposition Attribute Importance Broadband:TV ~3:1 Price BB:BB provider: ~5:2 Price TV:TV provider: ~3:5 Cable TV:IPTV >60%Price Prov ider Download Telephony ~4:1 IPTV on par with analog cableUpload #channels #HD channels
  10. 10. Insights from Conjoint Analysis StudyGiven current bandwidth demand, symmetrical propositions appearto have limited appeal and enjoy only a small price premium Download:Upload ~5:1 Fiber Premium 8-15% Or ~€5 in absolute terms
  11. 11. Insights from Conjoint Analysis StudyAs bandwidth demand rises, the average Dutch consumer seems tobe only marginally more likely to migrate to FTTH as to cable Customer Preferences Current Avg. down/up: Avg. down/up: situation +10/+1 Mbps +30/+3 Mbps 20.8 21.6 ∆ = +0.8% 23.5 ∆ = +1.9% 32.6 33.4 ∆ = +0.8% 35.1 ∆ = +1.7% 46.6 45 41.4 xDSL Cable FTTH
  12. 12. FTTH Moves The MarketAgenda Background on Conjoint Analysis Study Insights from Conjoint Analysis Study Implications for Incumbents Implications for Cable Conclusions
  13. 13. Implications for IncumbentsSurvey data illustrates why incumbents may still hesitate to invest infiber at this point in time• In the longer term, incumbents will need fiber to successfully compete with cable• Currently, most incumbents face something of a Catch-22 situation when it comes to the timing of their fiber investments – Too early : insufficient demand/interest – Too late : churn to cable• There is no single best answer to the timing of fiber investments, as a lot depends on how bandwidth demand and competitive dynamics develop
  14. 14. Implications for IncumbentsIncumbents should avoid ‘build-it-and-they-will-come’ strategies andrely on demand aggregation and competitive pricing instead Autonomous FTTH Demand Assumptions Demand threshold • 3 xDSL providers 40% – KPN – Tele2 – Online Gap of ~10% to be 30% • 1 Cable operator (UPC) closed by marketing push ∆ = +1.9% • 1 FTTH provider (KPN) – Portfolio A: – 30/30 @ €55 – 50/50 @ €65 – 100/100 @ €85 – Portfolio B: – 50/50 @ €55 – 100/100 @ €65 – 500/500 @ €85 • Instant migration, no customer inertia
  15. 15. Implications for IncumbentsDSL upgrades in areas not yet served by FTTH will help incumbentsto counter the threat of cable throughout their FTTH rollout Effect of DSL Upgrade • It will take incumbents many years to build a national fiber infrastructure • As bandwidth demand rises, churn to cable is likely to increase in areas not yet served by FTTH • It is far more difficult and expensive to win a customer back than to migrate an 35 existing customer 41 • An ability to offer higher bandwidth DSL propositions (i.e. 60/6 and 80/6 Mbps) would greatly reduce churn to cable 65 59 ∆ = +6% • When offered alongside FTTH, these DSL propositions will reduce FTTH’s Current DSL upgrade preference share by 2.5% (21→18.5) Customer Preferences xDSL Cable
  16. 16. FTTH Moves The MarketAgenda Background on Conjoint Analysis Study Insights from Conjoint Analysis Study Implications for Incumbents Implications for Cable Conclusions
  17. 17. Implications for CableIn the absence of FTTH and DSL upgrades, the competitive balancegradually shifts in cable’s favor as bandwidth demand rises Linear Growth (20%) Linear Growth (50%) Customer Preferences Customer Preferences 40 Mbps 40 Mbps 25 20 Mbps 20 Mbps 15 2012 2015
  18. 18. Implications for CableTo maintain its market position once FTTH is widely available, cableneeds further infrastructure investments too Cable trumps xDSL... • Cable trumps xDSL and fiber, until fiber xDSL Cable prices come down by 20-30% 20/2/€35 1.07 25/1.5/€35 • In order to compete with FTTH speeds 40/3/€45 1.28 60/6/€35 and retain high-end customers, cable networks need to be upgraded ...and fiber... Cable Fiber • Both coax and fiber upgrade options are available 60/6/€35 1.40 50/50/€55 120/10/€55 1.27 100/100/€65 • Lacking a burning platform, such decisions may prove even harder than ...until fiber prices come down those currently faced by incumbents Cable Fiber • Involvement of private equity may 60/6/€35 = 50/50/€37 complicate things further 120/10/€55 = 100/100/€51 x = Comparative attractiveness cable = = Equally attractive
  19. 19. FTTH Moves The MarketAgenda Background on Conjoint Analysis Study Insights from Conjoint Analysis Study Implications for Incumbents Implications for Cable Conclusions
  20. 20. ConclusionsCompetition between incumbents and cable operators drives FTTHdeployments and shifts market balance• Incumbents’ FTTH deployments are more likely to be driven by national TV markets’ competitiveness than by consumers’ bandwidth demand• Over the coming years, the competitive balance is expected to shift in cable’s favor• Incumbents’ longer term competitive position depends as much on their own strategic choices as those of their cable competitors
  21. 21. WWW.XSINSIGHT.COMWWW.FIBERTRANSITIONMODEL.COM

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