Swisscom to Invest US$2 bil. in FTTH Roll-Out

Swisscom has announced plans to connect 100,000 residential customers with fibre-to-the-home (FTTH) in 2009, with investment of an estimated 2.8 billion Swiss francs (US$2.3 billion) planned. The Swiss incumbent says that it will invest a total of 8 billion Swiss francs in network infrastructure and IT over the coming six years.

Swisscom has already completed significant roll-outs of fibre-to-the-node (FTTN) and fibre-to-the-office (FTTO), to connect business users and make FTTH possible. The company has already started work in the Zürich, Basel, and Geneva metropolitan areas, to complete the first stage of its FTTH roll-out by the end of next year. Swisscom then plans to further extend the network to include residential premises in the cities of St Gallen, Berne, Fribourg, and Lausanne. The first offerings for residential customers and small and medium-sized enterprises (SMEs) will be launched in the first half of 2009.

Outlook and Implications

• The Fibre Network of the Future? Swisscom claims that it is building the fibre-optic broadband network of the future, which will meet the demand for applications such as voice over IP (VoIP), video downloading, and IPTV, which are driving the need for increasingly higher network capacities. The company recently signed an agreement with Huawei for the supply of the new optical transport platform as an element of a future all-IP network (see Switzerland: 25 November 2008: Swisscom Selects Huawei's Optical Transport Solution), and has signed an agreement with U.S. giant Verizon to boost its business offerings (see Switzerland: 28 May 2008: Verizon Business Partners with Swisscom). Swisscom says that its existing infrastructure will support the current expansion, following significant investment in the backbone fibre-optic network and the extension of fibre-optic cabling for VDSL distribution to residential neighbourhoods. The incumbent hopes that the expansion of its fibre network will boost available bandwidths and help it compete for customers, generating a potential return to profitable growth, as Swisscom has seen profits fall steadily as its home market becomes saturated and traditional fixed-line revenues fall (see Europe: 5 November 2008: Swisscom Q3 Profit Falls, Propped Up by FastWeb Growth).

• Stimulating the Growth of Fibre in Switzerland: Swisscom has been providing large businesses in Switzerland with fibre-optic networking connectivity for more than 10 years now,and the company estimates that around one-third of its corporate customers already use broadband services over the high-speed FTTO network—a total of 12,500 business premises in the country. Swisscom has seen its fibre-optic customer base increase by 40% in the past year, and the company says that the interest in fibre networks is growing apace as demand for next-generation network (NGN) connectivity grows beyond the business sector.

• Offering a Fair Deal to Competitors: Swisscom has agreed to lay several fibres per household in all areas of expansion, to enable potential partners to expand their own fibre-optic infrastructure after the construction work has been completed, using an unlit line leased from the incumbent. Swisscom has also invited investors to contribute to the cost of fibre roll-out in exchange for duct access or reduced leasing fees; however, it is unclear to what extent such partnerships have been built. The incumbent still dominates around 50% of all broadband connections in the country, with second-placed Cablecom holding about 20%. Swisscom says that the multi-fibre model will prevent the creation of a new network monopoly, while saving costs and accelerating the introduction of broadband in Switzerland. However, although Swisscom is attempting to trumpet the fibre-sharing aspect of its FTTH roll-out as a model of fairness, in reality the company has been forced to share by a revised Telecommunications Act that came into force in April 2007, mandating local-loop unbundling across the country. Swisscom has a long history of clashes with its regulator over fixed-line access, most recently seeing leasing charges being cut retroactively (see Switzerland: 13 November 2008: Regulator Calls for US$200m Swisscom Fine over ADSL Pricing and Switzerland: 11 November 2008: Swisscom Cuts 2007 Fixed-Line Charges to Rivals Retroactively). However, the fibre roll-out model is a clear sign that Swisscom has accepted the need for an open and competitive broadband market in Switzerland—and although it was some time in coming, IHS Global Insight believes that it is a fine example of successful regulation against a dominant incumbent.