Fujitsu makes some surprising choices with UK FTTH network

Monday 18 April 2011 | 12:59 CET | Market Commentary
Fujitsu has unveiled a striking plan for the UK market. The company wants to roll out a FTTH network in rural areas, or the 5 million locations that make up the 'final third' of the market. These are the third of the country unserved by BT and Virgin Media's high-speed services. Partners in the project are Virgin Media and TalkTalk as the envisaged service providers; it's expected to be a wholesale-only (so open access) network. Cisco has been signed up to provide equipment. The first customers should be connected by the end of 2012, and the roll-out will take in total 3-5 years. Fujitsu expects to invest GBP 1.5-2.0 billion.

Some of the striking elements of the announcement include:
◦Rural areas. While Reggefiber in the Netherlands is passing these areas over, Fujitsu will focus expressly on rural sites. It should be noted that the project is based on the assumption it can attract a large part of the planned GBP 530 million in government subsidies for rural broadband, and it will have regulated access to BT's ducts and poles.
◦1 Gbps. While it remains difficult to explain the advantages of an excess of bandwidth, Fujitsu has chosen easily for this amount of bandwidth, which is quickly gaining acceptance. Other networks offering or planning to depoy 1Gbps include Reggefiber, Google Fiber (in Kansas City), the National Broadband Network in Australia and the Next-Generation National Broadband Network in Singapore, as well as various local operators in different countries (US, Brasil, Hong Kong, etc.). What's positive is also that Fujitsu is willing to invest itself in order to show the usefulness of a gigabit network.
◦Wholesale-only. This element is also growing in popularity. LightSquared is doing it with LTE in the US, and most of the FTTH operators mentioned above are also based on this principle. A high capacity utilisation rate on the network is necessary in order to make it financially attractive.
◦Virgin Media. It's not so strange that DSL operator TalkTalk is interested, as this will significantly expand its reach. It's more remarkable that cable operator Virgin Media is participating. Virgin is showing it can be technology-neutral - strange behaviour for the cable sector. We are unlikely to see a company such as Ziggo start operating on Reggefiber networks, as it doesn't want to be a customer of its biggest rival (Reggefiber is controlled by KPN). One can ask whether Virgin would be signing up if BT instead Fujitsu was rolling out the network.

FTTH in rural areas is usually considered a financial problem: the low population density necessitates high prices in order for the builder to earn a return over a healthy period. However, there may not be enough attention given to price elasticity in this case. The network will have no competiton in the British countryside, and with reasonable pricing it should achieve a decent utilisation rate. The participation of well-known names like Virgin and TalkTalk is crucial for the project.

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