Ovum: Emphasis shifts to FTTH, ADSL on the decline

JULY 9, 2009 -- Following the adoption in Korea and Japan, a number of western countries will start to see a rapid increase in FTTH/B and thus a decline in ADSL over the next couple of years, according to the latest research from Ovum.

JULY 9, 2009 -- In countries such as Korea and Japan, the rapid take-up of FTTH/B and subsequent decline of ADSL technologies is nothing new. However, the network evolution is now spreading outside of Asia, and a number of western countries will start to see a rapid increase in FTTH/B and thus a decline in ADSL over the next couple of years, according to the latest research from Ovum (search Lightwave for Ovum). Most notable examples are the United States, Sweden, Denmark, Finland, and the Netherlands.

Access fiber deployment is not just confined to "developed countries," says the market researcher. A number of emerging markets such as China and Malaysia also have very ambitious FTTH/B projects.

"Even if we take into account an element of government and vendor hype for these markets, Ovum still forecasts a rapid take-up of advanced broadband services in those countries," says Michael Philpott, practice leader of Ovum's consumer team and based in London. This take-up of next-generation access technologies such as FTTH and FTTB will see traditional DSL technologies saturate at around 320 million lines in the residential market by 2014, with FTTH/B still growing fast at over 160 million lines by the end of the same year. In Asia Pacific, the move to FTTH/B will be even more pronounced, with FTTH/B connections overtaking DSL to be the leading technology in 2014, reports Ovum.

Although the worldwide market for at least ADSL technology will slow over the next five years, there are still opportunities for DSL vendors. Not all countries have yet announced FTTH/B initiatives and so will see significant growth in DSL over Ovum's forecast period. "Eastern Europe, South and Central America, and Middle East and Africa will still be good growth regions for DSL operators, and thus vendors, for some years to come," adds Philpott.

Not all NGA developments are pure FTTH/B, cautions the firm. A number, such as Japan, are actually a mix of NGA technologies, with the advanced DSL technology VDSL2 often being used in the final few hundred meters to connect apartments and individual homes to the fiber network. Other NGA developments, such as in Belgium and the United Kingdom, will be predominantly fiber to the cabinet and then VDSL2 in the final mile. Such NGA deployments are actually good news for DSL-based vendors as they signify the upgrade of millions of homes from ADSL line cards located in local exchanges to VDSL line cards located in street cabinets.

Although worldwide growth will come to a standstill, says Ovum, there will still be more than 360 million DSL lines (including business lines) in operation in 2014, with maintenance contracts running for many years to come beyond that. In Asia Pacific, however, DSL connections peak in 2011.

According to Ovum's research, the migration to FTTH/B is not the only phenomenon to stall DSL growth. By the end of 2014, worldwide consumer fixed broadband penetration will have reached only 34% of households. In theory, says the firm, there should be plenty of growth opportunity for all fixed broadband technologies, including FTTH/B. However, a large percentage of these remaining households do not have a fixed line; and whereas at one time it would have been assumed that investment in broadband would have pushed fixed lines out further, with mobile broadband devices and services becoming more readily available and affordable this will no longer be the case -- at least in the medium term.

Mobile broadband has in effect set a lower ceiling for fixed broadband than what would have been predicted only 12 months ago, says the researcher, and whether this ceiling is permanent or not remains to be seen. Although mobile broadband impacts fixed broadband in emerging markets more, it is not completely restricted to such countries. Western Europe, Austria, Finland, Italy, and the Netherlands will all saturate at 65% of households or lower, concludes the firm's forecast.

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