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October 8, 2009
In our recent Europe Insider, Fiber Buildouts in Europe: A Competitive Necessity for Telcos, we looked at several Central and Eastern European (CEE) markets in terms of FTTH and FTTB adoption. Interestingly, Russia, which has always lagged in terms of broadband adoption because of slow DSL rollouts, is now at the forefront of access fiber adoption in CEE.
As of 2009, Russia contributed 64% to the total number of FTTH and FTTB broadband access lines in CEE — more than any other market in the region (see Exhibit 1). In Pyramid Research’s Q3 2009 Fixed Communications Forecasts for the CEE region, we projected that by 2014, there will be more than 5.7m FTTH and FTTB connections in Russia, compared with 2.9m in 2008.
Exhibit 1: FTTB+FTTH broadband access lines, CEE, 2008-2014
Source: Pyramid Research, Q3 2009 Fixed Communications Forecasts, Central and Eastern Europe
Three factors are behind this growth: Low broadband penetration, the economic attractiveness of FTTB and commitment from several large market players. Broadband penetration remains low in Russia; we estimate that it was 5.5% at the end of 2008 and will reach 7.3% at the end of 2009. Incumbent Svyazinvest’s operator subsidiaries are working hard to roll out DSL in the Russian regions, but this is a mammoth task considering the geography and the fact that Svyazinvest’s network digitalization level is about 72-73%. In any case, alternative operators cannot rely on Svyazinvest, as there is no local loop unbundling.
This is where FTTB steps in. Since a large proportion of the urban population — around 24m — lives in Soviet-style apartment blocks closely located to each other, it is very quick and easy to roll out FTTB. Most operators lay the main fiber over the rooftops of the buildings to simplify the rollout and to avoid having to wait for ground building permission. This potentially saves more than 50% on capex. In fact, operators say that it’s now cheaper to roll out FTTB than copper.
With soaring demand for broadband, FTTB became the technology of choice for VimpelCom, Comstar and ER-Telecom. At the end of Q2 2009, ER-Telecom, the FTTB operator working in Russia’s Volga, Urals and Siberian federal districts, had more than 3m installed and 1.6m active FTTB lines. Comstar enabled FTTB/FTTC for 600,000 households and plans to selectively enable FTTB/FTTC for 80% of the 4m households it passes by 2011. VimpelCom has covered 60 cities and has around 900,000 FTTB subscribers. It is planning to cover 80 cities by the end of 2009 and more than 300 cities by 2011 (see Exhibit 2).
Exhibit 2: VimpelCom’s FTTB rollout plans, 2009-2011
Source: VimpelCom
As Russia comes out of the recession, we believe that FTTB will become very big in Moscow and even more so in the Russian regions lacking competition where extremely high broadband prices ensure its profitability.
— Bakhyt Weeks, Analyst, EMEA
Related content:
Fiber Buildouts in Europe: A Competitive Necessity for Telcos
Europe Telecom Insider published August 2009
As European economies start to show positive growth, operators’ position on fiber coverage will become decisive for competitiveness and post-recession growth, as DSL is increasingly lagging in terms of coverage, capacity and price compared with cable and especially fiber. Fiber could shield telcos from mounting competition and fixed-mobile substitution and provide opportunity for further growth. This report examines the potential of fiber developments in Europe and contains a detailed analysis of the competitive technology and fiber developments in selected countries: the Netherlands, Romania, Russia and Spain. The report also provides Pyramid Research’s five-year forecast on FTTH and FTTB in the four selected markets and in Europe overall.
Central & Eastern Europe Fixed Communications Forecasts
Forecasts published quarterly
Our Fixed Communications Forecast products provide a complete picture of wireline voice and data communications in each of 8 Central & Eastern Europe markets. The Excel output includes five years of historical data and five years of market projections for metrics such as demographics and economic trends, penetration of broadband and narrowband lines, Internet users, business users, voice telephony lines, VoIP, PCs, IPTV and revenue. We believe our Fixed Communications Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.
Central & Eastern Europe Fixed Operator Market Share Forecasts
Forecasts published quarterly
Our Fixed Operator Market Share Forecast products provide a complete picture of wireline voice and data communications in each of eight markets in Central & Eastern Europe. The Excel output includes five years of historical data and five years of market projections for metrics such as fixed lines, voice telephony, VoIP, circuit-switched lines, ARPM, narrowband, broadband, Internet accounts, fiber, DSL, cable and revenue — most of them broken down for the mobile operators in the respective markets. We believe our Fixed Operator Market Share Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.
Communications Markets in Russia
Country Intelligence Report published February 2009
Russia’s telecom revenue reached US$37.2bn in 2008, but the market is looking increasingly saturated. Still, we expect it to be the fastest growing in Central & Eastern Europe. Mobile voice will remain the largest revenue segment for the forecast period, but growth of mobile voice revenue will still trail that of fixed voice. Despite the economic crisis, 3G services remain the greatest mobile opportunity. This Country Intelligence Report analyzes Russia’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.
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