FTTP challengers in developed markets: case studies and analysis FTTP challengers in developed markets: case studies and analysis Stephen Wilson FTTP challengers in developed markets: case studies and analysis 2 About this report This case study report assesses the strategies adopted by non- CASE STUDIES incumbent FTTP operators in developed markets. ▪ MásMóvil (Spain) It also provides recommendations for non-incumbent FTTP ▪ Vodafone (Portugal) operators that are hoping to find success in the fixed broadband ▪ Salt (Switzerland) segment. ▪ Altibox (Norway) It is based on several sources: ▪ Sky (Italy) ▪ Analysys Mason’s internal research such as the Western Europe Telecoms Market Matrix ▪ interviews with stakeholders in the fixed broadband market. KEY QUESTIONS ANSWERED IN THIS REPORT WHO SHOULD READ THIS REPORT ▪ How quickly can non-incumbent FTTP operators increase fibre ▪ Strategy and product executives in companies such as MNOs, energy subscriber conversion rates? companies and DTH operators that are considering launching retail fixed ▪ What is the optimal FTTP infrastructure investment strategy for non- broadband offers. incumbent FTTP operators? ▪ Strategy and product executives in non-incumbent FTTP operators that ▪ How can non-incumbent FTTP operators differentiate their retail fixed wish to understand best practice on monetising deployments. broadband offers? ▪ Strategy and product executives in incumbent FTTP operators that wish ▪ How important is having exclusive content for FTTP challenger to understand the threat posed by competitors. operators? 7 The case studies in this report analyse the strategies adopted by non-incumbent FTTP challengers in developed markets Rationale for launching FTTP Retail offers and strategy The case studies in this report show the reasons why different In this report, we use case studies to analyse the retail players may choose to enter the fixed broadband market. For components of challenger operators’ FTTP offers. This includes an example, MNOs may offer fixed broadband to compete in markets analysis of retail prices compared to those of competitors, as well where the take-up of fixed–mobile convergence (FMC) bundles is as different features of bundles such as the broadband speeds growing. DTH players may offer fixed broadband to protect their offered (including Salt’s 10Gbit/s offer in Switzerland) and any core pay-TV revenue. Other players such as energy companies advanced Wi-Fi functionality. may use fixed broadband services to diversify their businesses. We also consider how video is positioned within these operators’ Infrastructure investment strategy offers. Some operators, particularly Sky Italia, place a greater emphasis on traditional pay-TV offers, while others, notably There are multiple routes through which challengers can enter the MásMóvil, have focused mainly on FTTP plus mobile bundles and fixed broadband market. They could choose to build their own have added ‘pay TV lite’ options at a later date. We examine the networks, as in the case of Vodafone Portugal and, to a lesser extent to which these FTTP challengers are relying on exclusive extent, MásMóvil in Spain. Altibox in Norway also has ownership content in order to drive broadband adoption. Sky Italia’s of the underlying FTTP infrastructure for some of its subscriber ownership of most of the rights to Serie A Italian football is the base through the Lyse Group of companies. most prominent example of this, though Altibox in Norway has There is also an increasing number of wholesale access options also previously emphasised exclusive content. that operators can use for passive unbundling or active bitstream. Results Alternative infrastructure has become more widely deployed as investors have flooded the market. Sky Italia is taking advantage The report analyses the results of FTTP challengers’ strategies in of competition in the wholesale FTTP market by using passive terms of fibre conversion rates of premises passed and market access on Open Fiber’s network, and MásMóvil has extensive shares of fixed broadband subscribers. In addition, we analyse agreements for passive access to Orange’s FTTP network in financial KPIs such as fixed broadband revenue market share and Spain. ARPU. We also provide a forward-looking view on how these operators are likely to fare in the future. 8 This report looks at three types of challenger FTTP operator: MNOs, energy company-backed operators and DTH pay-TV operators MNOs Energy companies MNOs are the most common type of FTTP challenger operator. We Energy companies have adopted a range of means to enter the consider MásMóvil in Spain, Vodafone in Portugal and Salt in fixed broadband market, including being active only on an Switzerland in this report. infrastructure level. Some energy company backed ISPs, such as Altibox in Norway and Waoo! In Denmark, have built strong retail We use case studies to examine the extent to which MNOs have brands. Altibox has a franchising model and has achieved very invested in their own FTTP infrastructure. Most MNOs have not high take-up rates. We believe that energy companies with well- built their own FTTP, although there are exceptions (such as crafted strategies can become a force in the retail broadband Vodafone Portugal). Many MNOs are able to use attractively market, but the franchise model used in Norway may not be priced wholesale fibre offers, particularly for passive access, in replicable elsewhere. order to grow their role in the fixed broadband market. DTH pay-TV operators The case studies look at the extent to which FMC bundles have been used to drive fibre take-up. The MNOs covered in this report A number of DTH operators have entered the fixed broadband have used various strategies; Vodafone Portugal has achieved market in Europe. Examples include Sky in the UK, Ireland and high take-up without FMC plans. Italy, Viasat in Sweden, Cyfrowy Polsat in Poland, Bulsatcom in Bulgaria and Telly in Czechia. Sky in New Zealand (unrelated to None of the MNOs in this report have exclusive video content, the European Sky operators) also intends to launch FTTP in 2021. which reflects both the high costs of acquiring sports rights and DTH operators are coming under increasing competitive pressure the difficulties in monetising them while the fixed broadband due to the success of OTT players, and many are launching subscriber base remains relatively modest. broadband to prevent churn in their existing pay-TV subscriber All three MNOs covered in this report have achieved good results base while providing new revenue growth opportunities. The in the FTTP market. This shows that MNOs can successfully gain launch of FTTP could help DTH operators to modernise their pay- market share despite their late entrance to the fixed broadband TV offers by accelerating the move to IP video. market. We believe that it will become increasingly important for We believe that exclusive content from DTH players retains some MNOs in developed markets to formulate a fixed broadband importance and that the DSL take-up rates seen for Sky UK and strategy as FMC bundles become more popular. Ireland could broadly be replicated by Sky Italia. FTTP challengers in developed markets: case studies and analysis Contents Executive summary Analysis Case studies About the author and Analysys Mason FTTP challengers in developed markets: case studies and analysis 28 About the author Stephen Wilson (Principal Analyst) is the lead analyst for Analysys Mason's Fixed Broadband Services and Fixed–Mobile Convergence research programmes. He leads Analysys Mason’s annual FTTx coverage, capex and conversion forecasts, and other recent areas of focus include examining the retail tariff strategies employed by operators for early launches of 5G fixed-wireless access (FWA). Stephen has more than 12 years of experience in the telecoms sector and is a graduate in Philosophy, Politics and Economics from St Catherine's College, Oxford University. FTTP challengers in developed markets: case studies and analysis 29 Analysys Mason’s consulting and research are uniquely positioned Analysys Mason’s consulting services and research portfolio Consulting We deliver tangible benefits to clients across the telecoms industry: ▪ communications and digital service providers, vendors, financial and strategic investors, private equity and infrastructure funds, governments, regulators, broadcasters and service and content providers Our sector specialists understand the distinct local challenges facing clients, in addition to the wider effects of global forces. We are future-focused and help clients understand the challenges and opportunities new technology brings. Research Our dedicated team of analysts track and forecast the different services accessed by consumers and enterprises. We offer detailed insight into the software, infrastructure and technology delivering those services. Clients benefit from regular and timely intelligence, and direct access to analysts. FTTP challengers in developed markets: case studies and analysis 30 Research from Analysys Mason FTTP challengers in developed markets: case studies and analysis 31 Consulting from Analysys Mason FTTP challengers in developed markets: case studies and analysis PUBLISHED BY ANALYSYS MASON LIMITED IN DECEMBER 2020 Bush House • North West Wing • Aldwych • London • WC2B 4PJ • UK Tel: +44 (0)20 7395 9000 • Email: [email protected] • www.analysysmason.com/research • Registered in England and Wales No. 5177472 © Analysys Mason Limited 2020. All rights