Market Watch

US Regional Incumbent Telco TDS Expands VDSL Roll-Out


Display Driver IC Forecast

US regional incumbent telco TDS will expand its VDSL footprint across 13 states by the end of Q1 2011, in addition to the 7 states announced at year-end 2010 (Georgia, Indiana, Michigan, Vermont, New Hampshire, Wisconsin and Tennessee).

The provider is currently selling its new 25Mbit/s download (5Mbit/s upload) product at $69.95 per month when bought standalone, or $55.00 when bundled with a fixed-line call package.

The telco has opted to deploy fibre-to-the-premises (FTTP) in Monticello in Minnesota, where it has been offering its fastest broadband product, 50Mbit/s, for $49.95/month, or $39.95 bundled, since October 2009.

Analysis
According to IHS Screen Digest data, part of the new Broadband Technology service, there were 1.4m VDSL broadband subscribers in the USA at year-end 2009, accounting for 4.4% of the total DSL market; the VDSL market is forecast to expand to 3.6m connections by 2014, generating $1.7bn of retail revenue for ISPs. Overall, next-generation retail broadband connections (including VDSL, DOCSIS 3.0 and FTTP) are expected to provide over $10.2bn by the same year.
VDSL products are offered at a price premium by telcos: on a per subscriber basis, VDSL ARPU grew to $37.48 per month (from $33.70 the previous year), in comparison to ADSL/ADSL2+ ARPU which reached $28.08 per month (from $23.35 in 2008).

Competition between providers, coupled with an absence of a requirement for telcos to offer third parties wholesale access to next-generation networks at regulated prices, has been the basis for significant investment in VDSL, FTTP and DOCSIS 3.0 in the US.

AT&T has led VDSL deployment in the country, launching under the U-Verse brand in Q2 2006; the provider also offers ADSL2+ packages under the same brand. The telco has already upgraded 26m homes to ADSL2+/VDSL, extending that to 30m, or 50% of its footprint, by year-end 2011. However, AT&T's broadband via VDSL maxes out at 24Mbit/s (3Mbit/s upload) costing $65 per month when bundled with a TV package.

Qwest has followed a similar path to AT&T, rolling out fibre to the cabinet to offer ADSL2+ and, since Q2 2009, VDSL at 40Mbit/s.

Rolling out fibre all the way to the premises, rather than just to the street cabinet as is the case with VDSL, is another option for telcos to respond to competition from high-speed DOCSIS 3.0 networks being built out by the major cablecos. Verizon is the most notable telco deploying FTTP, in addition to Surewest Communications and Cincinatti Bell.
In terms of costs, VDSL costs ~$200-300 per home passed, FTTP ~$600-700 and DOCSIS 3.0 ~$60. As for speed, theoretically VDSL is capable of delivering ~50Mbit/s to users; but with VDSL, as with ADSL, actual speed achieved is always lower than that advertised, contingent on user location and other factors such as network congestion. FTTP by contrast can provide up to 1Gbit/s and DOCSIS 3.0 over 200Mbit/s to users, in theory; unlike DSL, FTTP and DOCSIS 3.0 user speeds are not affected by user location, but are subject to the same speed deterioration caused by network congestion.

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