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Cable Technology Feature Article

June 17, 2010

User Demand Still a Problem for Singapore FTTH

By Gary Kim, Contributing Editor

Fiber to the home apparently still is not a product that 'sells it itself,' if recent experience from Singapore is any indication. The Asian city-state is building a wholesale fiber-to-home network that can be used by retailers to provide services directly to customers. 
But customer demand is not always as obvious as you might think. 
'Nobody's sure what's going to happen,' says Neil Montefiore, StarHub CEO. StarHub is among firms expecting to offer Internet and cable TV service using the new network. In fact, there are reports some Singaporeans are refusing to take free connections to the network. 
'Some people don't even know what's next-gen broadband network, they see the letter of offer and they throw the letter away,' says Khoong Hock Yun, Assistant CEO of the Infocomm Development Authority. 
The problem is not unusual. Ask users what they think they can do with fourth-generation networks that they cannot already do with third-generation networks, and most will have trouble pointing to anything other than 'faster downloads' or some other similar metric such as 'more bandwidth.'
In the absence of some easily-understood new 'killer application,' the value of 'more bandwidth' or 'faster speed' is likely to remain latent, in many cases. 
Consider Verizon (News - Alert), which is nearing the completion of its FiOS fiber to the home network. 
Verizon is averaging just under 30 percent FiOS (News - Alert) penetration across the entire footprint, saysVerizon CEO Ivan Seidenberg. "My people think they can get to 34 percent,' he says. 'They're not going to get paid very much if they don't get to 40 percent,' he adds, referrring to the current structure of key employee compensation, which is weighted in the wireline segment to improving FiOS penetration.
You might wonder why FiOS penetration is not some vastly-higher number, given the advantages of FTTH access networks. The answer is that 'fiber' does not sell itself to most end users, who are evaluating a number of parameters, including competitive offers. 
In its most-recent quarter, for example, Verizon added less than 200,000 net new FiOS customers. If fiber, by itself, were a huge attraction, more people would be signing up. 
The point is that not even a high-speed fiber access service can 'sell itself.' There are many other relevant buyer considerations, ranging from price and service to availability of features, plus other services that can be bundled with fiber access. 
It might seem silly to wonder how a brand-new, very-high-speed network will appeal to end users. It isn't an idle question at all. That is one reason why a narrow focus on the supply side of the equation is not as important as some seem to believe. In the end, the demand side is what is crucial. 

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary's articles, please visit his columnist page.

Edited by Patrick Barnard