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Fiber to the Home is Not a Business Strategy

In 2005, only 4 percent of the world's homes that made their broadband connection over fiber-to-the-home received video services. By the end of 2011, according to a new study from ABI Research, that figure could be 55 percent.

According to ABI Research principal analyst Michael Arden, this increase will primarily be the result of a business model argument for operators. The cost of installing video equipment, though not insignificant, is only a relatively small addition to the basic cost of installing fiber-to-the-home access equipment.

Arden says, "Companies are going to considerable expense to deploy fiber-to-the-home; spending a little more to establish a video network helps them to pay off the access network investment. That's why wherever you see a fiber-to-the-home deployment today, the service providers are talking about offering triple play services."

However, this growth will not play out in the same way in all parts of the world. Although Japan and South Korea have the world's highest rates of FTTH deployment, the regulatory environment in those countries may prevent the addition of most linear television services.

In an effort to protect the market positions of cable and satellite operators, their regulatory regimes prevent operators from offering TV except in the limited form of video-on-demand. China too shows great potential, but its government is also limiting the licenses it is issuing to telecom operators.

"We will see higher video-over-fiber take-rates in regions such as North America and Western Europe, particularly Scandinavia, where the regulatory climate is more favorable," forecasts Arden.

In contrast, I don't see any substantive evidence that regional or local telecom regulation has been a problem for those who can create a viable video delivery model. In fact, true innovation appears to have been fueled by the regulatory climate in both the Asia-Pacific and European regions -- where more advanced services are already available via fiber, and at a lower cost, than within the North American region.

IMHO, Mr. Arden may be mixing infrastructure investment strategy and service provider business strategy, as though they are the same. Clearly, they are not always combined in a cohesive effort. Moreover, the inability to deliver linear TV programming may have actually forced some telco service providers to add meaningful value to differentiate their VOD service offerings. A mandate 'not to mimic incumbent pay-TV' can be a very good thing.

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