Market Watch

Canadian Regional Incumbent Telco Sasktel Invests $670m in VDSL and FTTP Network Upgrades


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Incumbent telco of Saskatchewan, Sasktel, has announced it will spend $670m during 2011-2017 period to upgrade its broadband network with fibre to the premises (FTTP) and develop its existing VDSL infrastructure (so called Next Generation Broadband Access program), in the province's nine largest cities and communities. In 2011, Sasktel will spend $16m of the allocated money, with the first FTTP deployments expected to serve premises in Saskatoon and Regina before the end of 2011, initially supplying speeds of 200Mbit/s.

In separate programs, the telco will spend $52m to continue building its 4G wireless network capable of 21Mbit/s, and $27m to boosting the minimum speed offered by Sasktel to rural communities from 1.5Mbit/s to 5Mbit/s. In the most remote areas, the telco will use wireless and satellite solutions for connectivity.

Sasktel commercially launched VDSL services in Q4 2009, and now joins a number of Canadian telcos deploying a mix of VDSL and FTTP in selected areas.

  • Bell Aliant: the only operator offering FTTP services at YE 2010, alongside VDSL products, has earmarked $350m for passing 0.6m homes and businesses with FTTP by year-end 2012
  • MTS: is expanding VDSL footprint, but also plans to spend $125m to pass 0.12m homes with FTTP by year-end 2015
  • Telus: launched VDSL services in 2010, and according to the Canadian telecoms regulator, is expected to undertake further upgrade initiatives.

Analysis
VDSL has typically been the first upgrade step for telcos, towards FTTP, with the notable exceptions of Verizon in the US and France Telecom in its home market (which jumped straight into FTTP). VDSL has a low capex comparative to FTTP ($200-300 vs $600-700 per home passed). With VDSL, fibre run to the street cabinet and copper to the end user, while with FTTP, fibre is run directly to houses or to the base of the building (with copper/Ethernet to flats inside).

But VDSL speeds in practice can only offer a max advertised of 50Mbit/s - a disadvantage when in competition with packages marketed from FTTP providers (theoretically capable of speeds over 1Gbit/s) and cable providers rolling out DOCSIS 3.0 (capable of speeds over 200Mbit/s). Sasktel's latest ramping up to FTTP will enable it to compete on a speed level with competitor DOCSIS 3.0 networks already deployed by the country's cablecos, including all four major companies (Shaw, Rogers, Videotron, Cogeco) which begun marketing speeds of 50Mbit/s or higher by year-end 2009.

Canada still claims relatively expensive broadband compared to certain markets in Europe: according to IHS Screen Digest, average revenue per user (ARPU) in Canada actually rose from $30.69 to $34.76 between 2009 and 2010, versus a decline in Western Europe from $21.89 to $20.73 during the same time. In addition, consumers are being squeezed by particularly low data caps on broadband services.

While competition between regional incumbent telcos and cablecos is comparatively healthy, there is little in the way of competition to incumbent telcos from smaller DSL ISPs in their service areas. Much of the reason for this is that wholesale and unbundled DSL product prices in Canada are not as strictly price-regulated as in Western Europe where DSL market competition is considerably fiercer.

The heavy premium on next-gen products has hindered uptake of VDSL, FTTP and DOCSIS 3.0 which together make up only 1.4% of 1.0m total broadband connections at YE 2010. IHS Screen Digest forecasts that next-gen broadband uptake will rise relatively slowly, to 13.8% of 1.1m broadband connections by 2015.

Find Out More > IHS Screen Digest Broadband Media Intelligence