Deutsche Telekom has given a clear indication that it will start work on a much bigger rollout of fiber-to-the-premises (FTTP) technology in 2019 to meet demand for higher-speed broadband services.
The German former state-owned monopoly has until now resisted any major commitment to FTTP out of concern about the investment required and the likelihood that it would be forced to open the network to rivals on regulated terms.
Instead, it has been channeling funds into a rollout of more limited fiber-to-the-curb (FTTC) networks, using a technology called vectoring to boost connection speeds over the last-mile copper loops to customer premises.
But during an earnings call with analysts today, it promised that FTTP would start to figure a lot more prominently in its broadband plans from 2019 onwards. (See DT Lifts Profit Outlook on US, German Growth.)
"For sure, without giving guidance, from 2019 onwards you will start to see much larger capex going into FTTH [fiber-to-the-home networks]," said Thomas Dannenfeldt, Deutsche Telekom AG (NYSE: DT)'s chief financial officer.
While details are scanty, the launch of an FTTH project would more or less coincide with the planned completion of work on Deutsche Telekom's all-IP transformation in Germany, through which it is shifting customers off the old-fashioned PSTN (public switched telephony network) and onto Internet Protocol-based systems.
At the end of June, about 61% of Deutsche Telekom's German access lines were based on all-IP infrastructure. The operator hopes to have completely phased out its PSTN networks by the end of next year, which could free up funds for investment in FTTH and make the upgrade easier to manage. (See DT Eyes FTTH Solution to German Opex Issue.)
The update comes after Deutsche Telekom held FTTH discussions with Germany's Federal Network Agency between March and April. Authorities are said to be considering feedback from the German incumbent and other network operators on the regulatory framework for a rollout of FTTH networks.
A big commitment to FTTH would mark a clear change in strategy for Deutsche Telekom, which as recently as May was playing down suggestions that it might follow BT Group plc (NYSE: BT; London: BTA) and start to look more seriously at an FTTH rollout.
Last month, the UK fixed-line incumbent, in which Deutsche Telekom currently holds a 12% stake, said it was considering an investment that would bring FTTH technology to about 10 million UK premises by 2025. (See BT Rejigs Consumer Biz as Profits Hit by £225M Italy Payout.)
Like BT, however, Deutsche Telekom has been under growing pressure from competition and customer needs, not to mention government interest in developing "gigabit-capable" infrastructure. (See FTTH Pressure Grows on Deutsche Telekom.)
Touting higher-speed technologies, Germany's cable rivals have continued to gnaw away at Deutsche Telekom's share of the broadband market, which shrank to 39.6% in the April-to-June quarter, from 40.5% a year earlier.
Cable market leader Vodafone Germany now offers a 500Mbit/s service to around 2.5 million households, or 6% of the German total.
By contrast, Deutsche Telekom can support a maximum connection speed of just 100 Mbit/s on its vectoring-enabled FTTC network.
At the end of March, it claimed to have "passed" around 28 million homes with FTTC but acknowledged that only 18 million of these could receive a service of more than 50 Mbit/s.
Even so, the rollout of FTTC is proving costly. Deutsche Telekom plans to spend about €1.5 billion ($1.8 billion) on FTTC and vectoring this year alone -- a figure that equals about 15% of annual revenues from German fixed-line services -- and its overall German capex was 17% higher in the first six months of this year, at €2 billion ($2.4 billion), than in the year-earlier period.
An investment in FTTH, which would require more civil engineering work near customer premises, could prove far costlier. A senior executive previously estimated that it would cost between €60 billion ($71 billion) and €80 billion ($95 billion) to connect every home in Germany using FTTH technology, which means any rollout by Deutsche Telekom is likely to focus on the most densely populated parts of the country.
Source: http://www.lightreading.com/gigabit/fttx/dt-to-ramp-up-ftth-capex-starting-in-2019/d/d-id/735167