FIBER-TO-THE-HOME: NORTH AMERICAN MARKET UPDATE FOR THE FTTH COUNCIL by RVA Market Research & Consulting
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1 WHY OUR INFRASTRUCTURE, WHY FTTH? What is Fiber to the Home? Fiber to the home (FTTH) is the delivery of a communications signal over optical fiber from the operator s switching equipment all the way to a home or business, thereby replacing existing copper infrastructure such as telephone wires and coaxial cable. Fiber to the home is a relatively new and fast growing method of providing vastly higher bandwidth to consumers and businesses, and thereby enabling more robust video, internet and voice services. Connecting homes directly to fiber optic cable enables enormous improvements in the bandwidth that can be provided to consumers. Current fiber optic technology can provide two-way transmission speeds of up to 100 megabits per second. Further, as cable modem and DSL providers are struggling to squeeze increments of higher bandwidth out of their technologies, ongoing improvements in fiber optic equipment are constantly increasing available bandwidth without having to change the fiber. That s why fiber networks are said to be future proof. FIBER-TO-THE-HOME: NORTH AMERICAN MARKET UPDATE FOR THE FTTH COUNCIL by RVA Market Research & Consulting OVERVIEW OF NORTH AMERICAN FTTH ACTIVITY The term homes passed in this report means the actual number of homes where a fiber connection is available i.e. a homeowner already has a connection, or could call and order a connection and receive service within a short time. Homes-marketed means the actual number of homes being marketed to consumers. There is sometimes a delay between technically being able to serve consumers and tangibly marketing to them. This is especially true for large builds. In certain instances, providers may choose to avoid marketing to a specific area until the entire area is ready for service. Homes-connected means the actual number of homes connected via fiber and getting some kind of service over fiber. FTTH MARKET SIZE HOMES-PASSED, MARKETED, AND CONNECTED It is clear that the market for FTTH is truly a market of the new century. FTTH may have been conceived in the previous century (it first became commercially viable around 1998), but for the past several years, America has watched the birth of a new market. The FTTH market continues to grow. As of March 30, 2009, there are approximately 15.2 million homes-passed in North America. Over 98% of this activity has been in the United States to date.
2 The estimated number of actual FTTH homes-marketed to consumers is approximately 13.9 million as of March 30, The number of homes actually connected has now exceeded 4.4 million.
3 The number of homes served video-over-fiber is approximately 2.7 million. FTTH GROWTH VERSUS HISTORIC COPPER AND COAX RATES Comparison to the first two hard-wired networks in the United States (copper telephone lines started in 1876 and coax cable TV lines started in 1948) is made to help put deployment timelines in context. I.e., it is important to consider the speed of installation of a completely new physical network such as FTTH into every home in America compared with similar deployments of earlier generation networks. While deploying FTTH will take time, reaching ninety percent of Americans with FTTH will not likely take ninety years like copper, or fifty years like coax.
4 OVERALL PENETRATION FTTH has now reached nearly 13% penetration of U.S. households in terms of homes passed and 4% in terms of homes connected. Why do we need all that bandwidth? If all you want to do is surf web pages, download a few songs, send and receive some photographs, or watch streaming video at current picture quality levels, then the bandwidth provided by today s cable modems and DSL services is probably good enough for you. But the world is moving toward vastly higher bandwidth applications.
5 Companies like Netflix, Amazon and Wal Mart are offering feature-length movies for download. More people are looking to upload their own home movies into s or web pages. Consumer electronics companies are coming out with devices that connect televisions to the Internet. High-definition video is fast becoming the state-of-the-art, and one high definition movie takes up as much bandwidth as 35,000 web pages. In the meantime, a growing number of companies are offering software as service meaning you subscribe to applications on the net rather than install them on your own computer. These cloud computing applications are now available for word processing, ing, automated remote file backup, and a host of business and personal services. All of these applications and many others we haven t even dreamed of yet are going to require much greater bandwidth than what is generally available today, even from broadband providers. All this adds up to consumer bandwidth demands that are growing at an enormously high rate, and are projected to grow for years to come. According to Cisco's Visual Networking Index, global IP traffic will quadruple from 2009 to Overall, IP traffic will grow at a compound annual growth rate (CAGR) of 34 percent. Clearly, the explosion in online video is driving today's increases in bandwidth demand. It would take over two years to watch the amount of video that will cross global IP networks every second in It would take 72 million years to watch the amount of video that will cross global IP networks during calendar year According to Cisco, video-on-demand (VoD) traffic will double every two and a half years through Consumer IPTV and CATV traffic will grow at a 33 percent CAGR between 2009 and Global Internet video traffic will surpass global peer-to-peer (P2P) traffic by the end of For the first time since 2000, P2P traffic will not be the largest Internet traffic type. Advanced Internet video (3D and HD) will increase 23-fold between 2009 and By 2014, 3D and HD Internet video will comprise 46 percent of consumer Internet video traffic. Real-time video is also growing in importance. By 2014, Internet TV will be over 8 percent of consumer Internet traffic, and ambient video will be an additional 5 percent of consumer Internet traffic. Live TV has gained substantial ground in the past few years. Globally, P2P TV is now over 280 petabytes per month. Consumer Video Traffic is Driving Bandwidth Requirements...
6 On top of all this, there are a wide range of online applications now in development that are likely to add to bandwidth demands in the near future. As one example, there are currently 200 telemedicine networks in the U.S. connecting 2,000 institutions, while surveys show that three-fourths of U.S. consumers anticipate using telehealth services when they are made available online in their homes. Revenue from such services are projected to grow to $6 billion annually by Other services, such as distance learning and remote energy management through fiberenabled "smart grid systems, are also expected to expand considerably over the next several years, adding to bandwidth demands. Think about it. Just six years ago, the video site YouTube did not even exist. A large percentage of Americans still used dial-up service. Given how far we have come in just that short period of time with regard to bandwidth demand, is there any doubt that consumers are going to need the almost unlimited bandwidth capabilities of all-fiber networks to keep pace and be able to access state-of-the-art applications? North America Forecast Highlights IP Traffic In North America, IP traffic will grow 3-fold from 2010 to 2015, a compound annual growth rate of 26%. In North America, IP traffic will reach 22.3 Exabytes per month in 2015, up from 7.0 Exabytes per month in North America's IP networks will carry 732 Petabytes per day in 2015, up from 230 Petabytes per day in In North America, IP traffic will reach an annual run rate of Exabytes in 2015, up from an annual run rate of 84.0 Exabytes in North America's IP traffic in 2015 will be equivalent to 67 billion DVDs per year, 6 billion DVDs per month, or 8 million DVDs per hour. In 2015, the equivalent of an archive of all movies ever made will cross North America's IP networks every 16 minutes. In North America, IP traffic will reach 58 Gigabytes per capita in 2015, up from 19 Gigabytes per capita in In North America, average IP traffic will reach 68 Tbps in 2015, the equivalent of 56,500,000 people streaming Internet HD video simultaneously, all day, every day. North America - Consumer IP Traffic
7 In North America, Consumer IP traffic will grow 3-fold from 2010 to 2015, a compound annual growth rate of 28%. In North America, Consumer IP traffic will reach 19,414,757 Terabytes (19.4 Exabytes) per month in 2015, the equivalent of 4,854 million DVDs per month. In North America, Consumer IP traffic was 5,722,747 Terabytes (5.7 Exabytes) per month in 2010, the equivalent of 1,431 million DVDs each minute. North America's Consumer IP traffic grew 43% in North America's Consumer IP traffic was 82% of total IP traffic in 2010, and will be 87% of total IP traffic in Five Milestones by 2015 In 2005, when Cisco began forecasting network traffic, YouTube had just launched, the average broadband speed was under 1 Mbps, and P2P file sharing was nearly two-thirds of consumer Internet traffic. Five years later, in 2010, Internet video has surpassed P2P as the largest consumer Internet traffic category, YouTube traffic has already been surpassed by new forms of Internet video, and the global average broadband speed has reached 7 Mbps. What can we expect in the next five years? Video will continue to gain traffic share and will transform the nature of the network in new ways as the video mix evolves towards real-time video content and applications. In addition to video, there is now evidence of a second transformation that will bolster growth and alter the dynamic of network traffic. This second transformation is not to be found in the network application mix, but rather in how we interface with the network, through a rapidly increasing and diversifying body of network devices. The following five milestones (illustrated in Figure 1) measure overall traffic growth and mark major shifts in the global IP application and device mix. 2012: Internet video will surpass 50 percent of consumer Internet traffic. 2012: The number of households generating over 1 terabyte per month of Internet traffic will reach 1 million. 2014: One-fifth of Internet video traffic will come from TVs, handsets, and other non- PC devices. 2015: Internet traffic from wireless devices will surpass the volume of traffic from wired devices. 2015: The annual run rate of global IP traffic will reach the zettabyte threshold (966 exabytes). In addition to the five traffic milestones, three milestones are related to crucial traffic generators. 2011: By the end of the year there will be more networked devices than people on earth. 2011: Digital screen surface area will reach 1 square foot per capita 2015: There will be twice as many networked devices as people on earth. Figure 1. Five Traffic Milestones and Three Traffic Generator Milestones by 2015
8 There will be an unprecedented increase in the number of devices on the network, and the traffic balance will begin to shift away from traditional PCs and towards TVs, phones, tablets, and other devices. In a related trend, the device mix is becoming increasingly portable, and traffic originating from Wi-Fi devices will surpass traffic from wired devices in The volume of traffic will continue to grow, generated largely by video, and Internet video will officially reach the 50 percent mark in There will be an unprecedented increase in the number of devices on the network, and the traffic balance will begin to shift away from traditional PCs and towards TVs, phones, tablets, and other devices. In a related trend, the device mix is becoming increasingly portable, and traffic originating from Wi-Fi devices will surpass traffic from wired devices in The volume of traffic will continue to grow, generated largely by video, and Internet video will officially reach the 50 percent mark in Figure 3. The VNI Forecast Within Historical Context
9 Most IP traffic growth results from growth in Internet traffic, compared to managed IP traffic. Of the 80.5 total exabytes, 60 are due to fixed Internet and 6 are due to mobile Internet. Fixed and mobile Internet traffic, in turn, are propelled by video. Figure 4. Cisco VNI Global IP Traffic Forecast As in previous forecasts, the sum of all forms of IP video (Internet video, IP VoD, video files exchanged through file sharing, video-streamed gaming, and video conferencing) will ultimately reach 90 percent of total IP traffic. Taking a more narrow definition of Internet video that excludes file sharing and gaming, Internet video will account for 61 percent of consumer Internet traffic in 2015 (Figure 5). Figure 5. Global Consumer Internet Traffic
10 Broadband Speed Broadband speed is another crucial promoter of IP traffic. Broadband speed improvement results in increased consumption and use of high-bandwidth content and applications. The global average broadband speed continues to grow and will quadruple from 2010 to 2015, from 7.0 Mbps to 28 Mbps. In addition, 3 percent of households in 2015 will have broadband speeds greater than 100 Mbps. Consider how long it takes to download a highdefinition movie at these speeds: at 5 Mbps, it would take 41 minutes to download the movie; at 10 Mbps, it would take 20 minutes; but at 100 Mbps, it would take only 2 minutes. High-bandwidth speeds will be an essential support for consumer cloud storage, making the download of large multimedia files as fast as a transfer from a hard drive. Table 3 shows the number of households with broadband speeds above various benchmarks. Table 3. Households by Broadband Speed, Households by Broadband Speed CAGR Number of Households by Average Traffic per Month (Millions of Households) Households with greater than 5 Mbps % Households with greater than 10 Mbps % Households with greater than 50 Mbps %
11 Households with greater than 100 Mbps % Number of Households as a Percentage of Total Internet Households Households with greater than 5 Mbps 41% 45% 50% 56% 62% 68% - Households with greater than 10 Mbps 24% 27% 30% 33% 37% 40% - Households with greater than 50 Mbps 4% 4% 5% 6% 7% 7% - Households with greater than 100 Mbps 1% 1% 1% 2% 2% 3% - Source: Cisco VNI, 2011 Trends to Watch Cisco's approach to forecasting IP traffic is conservative, and there are certain emerging trends that have the potential to increase the traffic outlook significantly. The most rapid upswings in traffic occur when consumer media consumption migrates from offline to online or from broadcast to unicast. Applications that might migrate from offline to online (cloud): The crucial application to watch in this category is gaming. Gaming-on-demand and streaming gaming platforms have been in development for several years, with many newly released in 2010 or With traditional gaming, graphical processing is done locally on the gamer's computer or console. With cloud gaming, game graphics are produced on a remote server, and transmitted over the network to the gamer. Currently, online gaming traffic represents only 0.03 percent of the total information content associated with online and offline gameplay2. If cloud gaming takes hold, gaming could quickly become one of the largest Internet traffic categories. Behavior that might migrate from broadcast to unicast: Live TV is currently distributed by means of a broadcast network, which is highly efficient in that it carries one stream to many viewers. Live TV over the Internet would carry a separate stream for each viewer. AT&T estimates that a shift from multicast or broadcast to over-the-top unicast "would multiply the IP backbone traffic by more than an order of magnitude".3 New consumer behavior: The adoption of three-dimensional TV (3DTV) would fall into the category of "new consumer behavior." The most likely scenario for home 3DTV is that it will take 3 to 5 years to gain momentum. However, 3DTV on the PC may gain momentum earlier, because it requires only a software decoder rather than a hardware decoder and therefore does not require any purchase or subscription beyond what is already paid for PC Internet access.
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