European Telcos Will Face 1 Gbps Broadband from Liberty Global in 2016

Telcos had better get ready to compete against cablecos offering 1 Gbps broadband in 2016 and at very affordable monthly rates.

Liberty Global, the largest cableco outside the United States, is testing the next generation DOCSIS 3.1 broadband technology in its labs, will conduct field tests in early 2016 and plans to begin deployments shortly thereafter, according to Liberty Global CEO Mike Fries speaking about the company’s quarterly financial report. Liberty Global mainly operates in Europe yet also has a Latin American operation.

Fries said, “We’re testing EuroDOCSIS 3.1 right now and should begin commercial deployment next year. We feel great about our ability to extend our speed leadership with EuroDOCSIS 3.1.”

bio-fries-2015

Liberty Global CEO Mike Fries: promising affordable 1 Gbps broadband at affordable rates

 

Three factors should scare telcos:
1. Liberty Global plans to expand its footprint so that its network passes more homes, making its service available to even more residences.

2. Liberty Global has already ordered the gear it will need and is readying its network to deploy DOCSIS 3.1 Fries said the company will have more than 40% of its footprint in the UK and Germany ready for 3.1 by the end of this year — 2015 — and about 80% of its footprint ready for 3.1 over the next three years.

3. DOCSIS 3.1 is a low-cost solution. Fries called it “cost-effective and scalable” and estimated the company could install 1 Gbps service to its existing broadband subscribers at a cost of €20 ($22) per home, not including the consumer premises equipment (CPE) — the gateway, router, modem — that goes in the residence. It is unclear whether Fries meant a one-time installation cost of €20 per residence plus the CPE or a continuing monthly cost of €20 per residence. If it is indeed a one-time cost, it’ll give cablecos another leg up on the telcos.

Fries also made a reference to “up to 10 Gbps in the future,” which send another warning to the telcos against whom it competes.

Currently Liberty Global’s network passes nearly 52 million homes in 12 European countries. It already has 16.4 million broadband subscribers.

Its 3.0 DOCSIS network offers 200 Mbps downloads in 11 of the 12 European markets where it operates.

In addition, Fries said, Liberty Global has launched a 500 Mbps service in Switzerland and plans to offer that speed to “the vast majority of our footprint.”

Addressing the UK broadband market, which is becoming one of the most competitive in the world, Fries said that under the company’s €3 billion ($3.3 billion) “Project Lightning,” program in the UK, the company’s Virgin Media plans to increase its footprint by up to 4 million homes and businesses. By 2020, he said, its UK network will pass about 17 million premises, which is two-thirds of the UK. Under Project Lightning, Virgin Media expects to extend its network to 10 more towns and cities in the second half of the year before accelerating in 2016.

As proof of the company’s build-out program, Fries said that over the first half of the year, Virgin Media extended its network past an additional 80,000 residences and laid the groundwork to accelerate new build-outs in major conurbations such as “Northern Powerhouse” cities like Manchester, where it’ll pass 150,000 more homes and in Leeds with 80,000 more homes.

Broadband is Liberty Global’s primary growth engine — it’s adding broadband subscribers at a rapid rate, 905,000 in 2014 including 242,000 in Q4 — but like most cablecos, it’s losing pay TV subscribers —223,000 in 2014 including 35,000 in Q4. At year end its broadband penetration rate of homes passed was 34%, which seems a very low number considering the company’s faster broadband compared to telcos. The company even called it “our superior broadband speeds.” A 60% share in broadband of homes passed would seem to be attainable with an aggressive marketing strategy — why hide its light under a basket?

Fries said, “We’re on target with internal penetration forecasts. And this is just the beginning. Lightning will launch in ten more towns and cities in the second half and will ramp materially in 2016.” He also said the company would expand its Wi-Fi network to 10 million locations by the end of 2015.

Liberty Global also added 597,000 fixed line telephony subscribers in 2014 including 145,000 in Q4. It’s a truly remarkable growth in fixed line telephony considering the dominance that mobile phones have attained — and it’ll certainly taper off, if not decline, as homes abandon their wireline telephone service.

And…
Where is all this headed, because there is no doubt that broadband is the most important service that phone and cable TV companies provide? The shift from linear, ad-supported pay TV to OTT services has become so obvious that even the financial community has recently noticed…

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