The combination of modest FTTP costs per home passed and evidence of strong uptake and willingness to pay for fiber among emerging-market consumers makes for a strong business case for FTTP investment in emerging markets.
Omdia view
Summary
The combination of modest fiber-to-the-premises (FTTP) costs per home passed and evidence of strong uptake and willingness among emerging-market consumers to pay for fiber makes for a strong business case for FTTP investment in emerging markets.
The costs of FTTP rollout in emerging markets need not be prohibitive
In many emerging markets FTTP costs per home passed are around $100–200. This is considerably lower than in many developed markets, where the figure can be $300–1,000. Lower costs in emerging markets reflect much lower labor costs and the fact that population density in urban areas in such countries can be very high. Moreover, in emerging markets fiber can often be deployed aerially, which reduces the required civil infrastructure work.
FTTP in emerging markets also enjoys some cost advantages over fixed wireless access (FWA) alternatives. It is possible that 4G or 5G FWA will have no or very low initial costs per home passed, for example, where an operator uses existing spectrum, existing sites, and existing fiber backhaul for FWA. Nevertheless, over time FWA traffic will grow and could conceivably account for the greater part of total cellular traffic. This would then require continual network upgrades to improve capacity. This is different from FTTP, where even Gigabit Passive Optical Network (GPON) networks can cope with far higher levels of traffic.
In addition 5G FWA midband customer premises equipment (CPE) today costs around $200, which could fall to around $100 as volumes increase. However, this is still much more expensive than the approximate $30 cost of a GPON optical network terminal (ONT) today. If FWA operators wish to provide a fiber-like experience, a professional CPE installation may also be required, mirroring the need for an FTTP installation.
Demand for FTTP in emerging markets can be strong
Emerging-market consumers will pay 4–6% of their household income on a decent quality FTTP connection, according to evidence from countries such as Nepal, the Philippines, and Armenia. Moreover, data shows that factors such as electricity availability and household computer penetration are unlikely to be significant constraints on fixed broadband subscription take-up.
This combined evidence suggests that take-up for FTTP rollouts in emerging markets can be high. Early FTTP rollouts in some markets confirm this impression. For example, Safaricom in Kenya has a higher FTTP subscription take-up rate than many developed-market incumbents (see Figure 1).
Figure 1: FTTP subscription take-up rates, selected operators, 2Q22
Source: Omdia
Analysis of the ratio of FTTP costs per home passed and line ARPUs shows the figure is often below 10 in emerging markets and is more often above 10 and sometimes above 15 in developed markets. This, taken with the evidence on willingness to pay and subscription take-up, suggests there is a good business case for FTTP rollout in emerging markets.
As a result of this panorama fiber access equipment vendors should place a focus on emerging markets, particularly in Africa and India where there is especially significant room for FTTP coverage growth. Operators and investors should be aware of the potential for organic revenue growth from FTTP rollouts in emerging markets. Governments and policymakers also have a very important role in driving FTTP coverage growth, for example, through the development of national broadband plans.
Appendix
Further reading
Market Landscape: FTTP in Emerging Markets, a Huge Opportunity (November 2022)
Fiber Development Index: 2022 (October 2022)
Author
Stephen Wilson, Senior Principal Analyst, Broadband Access Intelligence Service
