Is LTE a substitute for FTTH? Not really . . .

Tuesday 27 November 2012 | 15:13 CET | Market Commentary
Japanese incumbent NTT is cutting its FTTH prices in an attempt to limit churn in subscribers to LTE services. Its fixed-line units NTT East and NTT West are cutting prices by 34 percent to JPY 3,600 per month (EUR 34). Growth in FTTH has slowed drastically, while LTE in Japan is growing rapidly. Its mobile subsidiary NTT DoCoMo charges just JPY 5,000 per month for an LTE subscription at up to 75Mbps, with a data cap of 3GB per month. 

The situation is such that many young subscribers prefer just one broadband subscription (LTE), instead of a combination of FTTH and LTE. It should be noted that the regulator does not allow NTT to sell a bundled offer of FTTH and LTE, such as a quad-play plan. Its competitor KDDI does offer such a plan. The Japanese market also has its own particular characteristics. People are often on the go, using public transport, which may mean they have less need for a fixed broadband subscription - especially young people who can meet their video needs fine with a LTE plan. It also helps that LTE in Japan offers an average bandwidth of 10-15Mbps, with the characteristic low latency inherent in LTE, according to Nokia Siemens Networks.

The news has since attracted much international attention. This is not surprising, as it points to a recurring theme: is mobile complementary to fixed broadband or actually a substitute? Opinions diverge greatly. 

To start with, we usually use just one connection at a time (setting aside multitasking, such as social TV with a smartphone or tablet close by while watching TV). In this sense, LTE, at least from time to time, can be a substitute for fixed broadband. At the same time, mobile is not yet suitable for massive video streaming. NTT underlines this by putting a cap of 3GB on its plans. With a download speed of 1.5Mbps, a bandwidth common when streaming on an iPad, 3GB will be used up in five hours of streaming or downloading. So, not really enough for a whole month. This figure suggests that LTE is mainly a complementary service to fixed broadband, such as FTTH. Only a light user will find LTE covers all his needs. 

Only once a LTE operator drops the data caps can the technology really compete with xDSL, FTTx or HFC. But this appears unlikely, given the fact that LTE (the same as HFC) is a 'shared' access line. This means operators will continue to encourage serious work over a fixed connection, while leaving the light work (Facebook, chat, email, YouTube and other apps) to LTE.

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