Monthly Archives: August 2015

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RBC Report on Fibre Investment

Category : Investment

“Over the next decade, we believe FTTH will play an increasingly important role in determining returns for investors in the Canadian telecom sector…”

Royal Bank of Canada (RBC) Capital Markets has released research on the investment outlook of Fibre-To-The-Home (FTTH) service that provides perspective for investors in the telecom sector. Essentially it is examining the ROI for deploying FTTH and what that all entails.

Some interesting results have surfaced in this research that shows the importance of bringing this modern service to all Canadians. Fibre is reservedly being referred to as the last leap-frog technology for Canadian telecoms since Fibre is a scalable technology that makes non-incremental step-function gains possible. This is important because the payback for investing in FTTH is anywhere from 8-18 years according to RBC. A long term payback on a technology that will be around for at least as long and can be scaled up is attractive to investors.

RBC doesn’t hide the fact the FTTH is a costly investment that only few companies can afford. The big telcos/cablecos have the capital to be able to rapidly deploy Fibre and survive until they start making a return. Some recommendations to mitigate over-expenditures are to use route through existing fibre rather than overlap services and consider the much cheaper aerial installation rather than buried lines.

The demand for Fibre speeds have been rising over the years with users depending on it as a alternative to traditional television and communication services. This increased demand is responsible for revisiting the feasibility of large scale FTTH roll-out.

However, FTTH remains a less feasible option for rural applications. The report acknowledges as much by repeating the long held argument that rural fibre is unlikely to payout to telecom providers. The report suggests telcos focus on new wireless tech to bring fibre-like service to unserviceable rural areas. Rural areas are in no less need of fibre service than urban areas, the only difference is household density.

The report goes on to forecast that local incumbents aiming to provide FTTH could face potential competition with Google.  Google has begun deploying fibre services in select US cities at a fraction of a cost of competitors. If local providers don’t step up deployment and service, they could see their efforts and investments marginalized. With new mandates coming from the government stipulating minimum service standards for all Canadians, ISPs need to invest now and look forward at the big picture.

Click here to view the complete RBC Capital Investments report.

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Internet regulated as a Utility?

Much debate has arisen over the years about the unfair prices of internet access. The communications oligopoly in Canada is seen by many to be bad for the wallets of Canadian. There is often little choice of what service to use and often are left with a hefty bill. This victimization has led to suggestions that internet service should operate as a utility to enable fair pricing.

Internet is quickly becoming the main way Canadians communicate to each other by voice, email, and video. Telephone service is going by the wayside for many as it is seen as an unnecessary expense and a dated technology. Telephone was established as a utility that every Canadian had a right to have access to. With internet now serving the role as a main communication tool, some wish to see increased regulation.

In urban areas, internet service is for the most part guaranteed. With Bell and other incumbents, as Bell’s Gigabit Fibe service stands at $150 compared to Old’s gigabit service O-net priced at $120 and Urbanfibre in Vancouver priced even lower at $69. Small ISP’s offer lower rates, but are only available in small areas, Bell will get many customers just because those customers have not other option if they want faster speeds.
well as smaller ISP’s, announcing 1 gigabit fibre service in many urban centres, cost are also sky-rocketing to obtain these services. The introductory price for

Adding to arguments that internet should be a regulated service, with the onset of gigabit service, the urban-rural divide is increasing. The new investment and roll-outs of gigabit are only occurring in urban settings such as Toronto, Quebec City. No mention is made of rural areas receiving internet infrastructure investments.

Can the internet be treated as a utility? Will that help bring faster service to rural Ontario? With initiatives like SWIFT already making headway in bringing gigabit service to rural Southwestern Ontario. With an aim to bring 1 Gbps service to 3.5 million people for under $100, regulation may not be the best answer. Adding more players to the market can increase competition and lower prices, and help bring high-speed service to under-served areas that deserve parity with their urban counterparts.