Four? Two? One? Go? It’s not quite lift-off time for FTTH in Switzerland

Posted by Lucy Berridge Wednesday, January 28th, 2009

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To date fiber-to-the-home/building rollouts in Europe have been either operator-led (France, Finland, Slovenia) or muni/utility-led (Denmark, Norway, Sweden). The Dutch incumbent KPN has a foot in both camps following the recent approval of its joint venture with construction company Reggefiber.
Now Swisscom is proposing a model under which it would work with utility companies and operators through a variety of options from co-investment to resale.

First mooted last June, Swisscom fleshed out its Fibre Suisse proposal in December. It plans to spend CHF2.8 million (US$2.4 million) on expanding its network with fiber over the next six years. The aim is to have passed 100,000 households with FTTH by the year-end, covering parts of the municipalities of Zurich, Basel, Geneva, St Gallen, Berne, Fribourg and Lausanne.

Swisscom was spurred to action by the utility companies: rivals say its move from VDSL to FTTH looks more like a retention case than a business opportunity. EWZ’s open-access network Zurinet launched in Zurich last summer and there are trials ongoing or proposals in place for a number of other cities. In addition the leading cable operator Cablecom plans to launch services based on DOCSIS 3.0 by mid-year.

Fibre Suisse entails deploying four fibers to each home or building, one of which will be used by Swisscom, the remainder by other providers. Swisscom’s intention is to reduce costs, avoid regulation and protect its market share – its retail broadband subscribers accounted for 51.5% of the total at end-3Q08.

The incumbent has proposed four cooperation models. Under the first, duct owners such as cable and utility companies could lay multi-fiber networks in separate regions. Each would get a separate fiber on each other’s networks in return. If the networks are more or less the same size, no money would need to change hands.

In the second model, operators without ducts could pay upfront for Swisscom to roll out FTTH in exchange for one fiber. Or if they do not want to invest in the network they could rent already deployed fibers, which Swisscom says would give them a level of control similar to LLU. The fourth option is to buy capacity on them in a similar way to DSL resale.

Four ISPs have agreed to trial resale from March, with a commercial service beginning in 3Q09.

Utility companies and some other operators are yet to be convinced by the incumbent’s proposals. IWB is negotiating with Swisscom and will put forward a proposal to co-invest in Basel on the proviso that the network is open-access.

Potential service providers hope a successful outcome to these talks will set a precedent that other muni projects can follow.

Observers expect lengthy negotiations before interested parties find a solution that is agreeable to all. Cost sharing and capex reduction are beneficial for operators and customers but companies need to resolve a number of key questions such as who will actually own the networks, who will be able to sell services over them and how will the costs be shared.

There are several other matters to be resolved before fiber will make real progress.

The regulator ComCom has set up working groups to look at standardization for in-house wiring and enabling operators to offer the same services on all networks. It has announced a workshop on Feb. 5 to discuss these matters and is expected to publish its findings in the spring.

Current regulation does not include third-party access to fiber networks. At its latest FTTH round-table event in December, ComCom said it would review the situation in six months.

Swisscom maintains it will delay its rollout if the telecoms law is amended to include fiber. Observers do expect regulation in the longer term but the question remains at what level: as the government still owns more than 55% of Swisscom it will not rush to pass a law which might dissuade the incumbent from investing.

Finally, there are now three business models being mooted. In addition to the open-access Zurinet and Fibre Suisse, some regional utilities have suggested a two-fiber model, one for the incumbent to encourage co-investment, the other offered on an open-access basis to other service providers.

Alternative operators Sunrise and Orange will not commit to additional FTTH projects until these various matters have been clarified. They add that the utility companies’ uncoordinated rollout plans are adding to the confusion.

Sunrise is to start offering services over Zurinet this spring. It has signed a strategic partnership agreement with Openaxs, the association of electricity companies which promotes the rollout of open-access FTTH networks. Sunrise is also in talks with a number of utilities including those in Berne and St Gallen. Both Sunrise and IWB have denied rumors that their discussions have ended.

Orange already offers services on Zurinet and is the service provider on several trial networks including Geneva and St Gallen. The proposal for the St Gallen network is due to be put to a public vote Feb. 8.

Rumor has it that Orange has set its sights on buying Sunrise. Neither party would comment, but local press reports suggest France Telecom is interested buying the TDC-backed operator for a suggested purchase price of EURO3-4 billion (US$3.9-5.2 billion).

On paper the two would fit well. Their FTTH strategies appear similar while their divergent approaches to DSL could be symbiotic. Orange cites the move to fiber, the strength of the cable sector and the growth of mobile broadband services behind its decision not to move into unbundling. But if, as Sunrise anticipates, FTTH does not make headway for a couple of years, Orange could benefit from Sunrise’s accelerated LLU strategy under which it aims to have coverage of 80% of households by the year-end.