Optic fibre constitutes a major part of telecom carriers’ infrastructure spend

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As demand for internet data accelerates, digital infrastructure across the world needs to be upgraded. Fibre optic networks are key for upcoming 5G technology and FTTx environments. Optical fibre is the primary medium for almost unlimited bandwidth, long-distance communications between organisations, telephone companies, and several other long-distance communications applications. As networks evolve, it will be interesting to see the revenue models and the use cases that emerge. One thig however, is certain – Optical Fibre will lie at the core of this digital ecosystem.

Read further to find out more about:

  • Optical Fibre and its role in digital networks
  • Factors driving rapid investments in Optical Fibre
  • Optical Fibre as an investment for unlocking lasting value 

Understanding Optical Fibre and its role in digital networks

What is Optical Fibre? Optical fibre is the technology for data transmission using light pulses travelling through long strands of thin, transparent fibre. The fibres are as thin as human hair and are either plastic optical fibres – where polymethylmethacrylate is used, or glass optical fibre – wherein pure glass is used.

How does it work?

In an optical fibre, data to be transmitted from a device starts as electrical energy, gets converted into light rays. These rays travel in waves through the inner part of the fibre, called core. The core of the optical fibre passes the light rays through principle of total internal reflection. These light particles move up and down the fibre core, getting reflected back. An outer layer, known as the cladding keeps the light in the core intact. When the light particles reach the destination, an optical receiver converts it back to electrical energy. The receiver is then able to read and understand the data.

Examining the market opportunity and growth potential

The hunger for increased internet speed is widespread, and this has prompted a fierce competition between telecommunication companies (and their copper networks) and cable companies (in conjunction with their coaxial networks). The competition has brought out the truth that access to the internet via copper wires can support bandwidths in the range of a few Gbps, but the only hope for unlimited bandwidth in the future is the installation of optical fibre. The demand for more bandwidth continues to grow at an average of 70 % compound annual growth rate (CAGR), with video-on-demand (VoD) being the biggest driving factor. Optical Fibre allows consumers to consume data from a variety of sources, listen and view HD audio-visual formats, experience immersive content, and generally gain access to increased volumes of digital data.

By 2025, the number of network end points will have surged due to increasing adoption of FTTx, 5G and IoT with as much as 20% global connections on 5G and 21.5 Bn connected devices using IoT.

Figure 2 gives us a peek into the current state of Fibre to the Home (FTTH) penetration across some of the leading economies of the world but with lagging FTTH adoption.

With 5G spectrum auctions due in 2021, Indian telecom operators will target to achieve at least 70% fibre connectivity to backhaul networks, as a prerequisite for making 5G a reality in the country.  By 2024, a country like India will be looking at spending nearly $14 Bn or INR 1 lakh crore as optical fibre investment. Land cost and Right of Way (RoW) approvals are another huge costs involved in laying fibre with per kilometre costs as high as INR 1 crore in metros.

Global telecoms like AT&T and Verizon (US) and Deutsche Telekom (Germany) have made strategic investment in fibre network ahead of their 5G network roll outs. Similarly, there is significant interest in 5G and fibre investments among PE firms as well. KKR bought 37.5% stake in Telecom Italia Broadband project for 1.8 Bn euros; EQT and OMERS jointly acquired Deutsche Glasfaser (DG) for 2.8 Bn euros.

Factors driving accelerated investments in Optical Fibre networks

Rise of FTTH as the preferred home broadband technology in the post-COVID era

Fibre to the home is a popular integrated communication technology that uses fibre optic technology to enable faster and more effective communication. The technology connects homes to the operator via optic fibre wires. There are increased efforts to ensure that affordable FTTH services are available for many customers, and this will positively foster global economic growth. Analysts foresee that fibre optic wires will eventually replace the infrastructure based on copper wire.

Some of the main trends in the past couple of years include:

  • A decrease of nearly 7% in new connections on copper lines
  • FTTH connections increasing Y-o-Y by at least 15%
  • China’s record setting fibre market growth; at 66% of global FTTH net additions
  • Belgium, Thailand, Argentina, Philippines, Chile and South Africa among others saw significant FTTH growth rates Q-o-Q

Backhaul fibre connectivity as a prerequisite for 5G

According to Ovum, 5G is expected to achieve 37 million in 2020, 156 million by end of 2021 and more than half a billion in 2022. 5G Americas’ member company Ericsson has forecast that 5G subscriptions are expected to reach 1.9 billion globally in 2024. This has necessitated major optical fibre deployments in the backhaul networks across the globe.

Currently, India’s fibre penetration in backhaul infrastructure stands at below 30%, compared to China which boasts a 99% penetration. Governments across the globe are realizing the role of fibre in backhaul infrastructure and are making significant investments in filling the gap. Figure 3 below shows some major investments in the realm of optical fibre networks.

Fibre optics is a long term investment with rich payoffs

Installing optic fibre may appear to be a very high CAPEX intensive initiative. However, if planned and executed rightly, the fibre optic network’s longevity, lower maintenance, and fewer hardware means operators put up capital upfront with rich payoffs in the long run. Let us look at the top 3 long term payoffs of Optical Fibre below:

Optical Fibre helps appreciate real estate value in the long run

An FTTH Council Americas report claims that a residential real estate value can appreciate by $5000+ if a fibre connection is a part of the property. Clearly, there’s a lot of value in a fibre connection. In the age of internet-based businesses, traditional models of real estate appraisals have changed, and the physical location of your business might not be as important — if you have the right internet connection.

Fibre Optic networks are easy to maintain

If only upfront capital is considered, installing optical fibre may turn out to be way more expensive and unviable especially when compared with copper cable networks. However, the total ownership cost of optical fibre networks is much lower than copper cable networks. Optical Fibre networks require fewer hardware and yet cover longer distances before the need for splicing. They can withstand significant downward pressure and thus can be laid deeper in the ground which means higher resilience to cuts.

Optical Fibre cables are durable

As mentioned before, the optical fibre can withstand pressure in the range of 100-200 pounds, thus making it an ideal choice for deep underground deployment and ensuring its safety from damages during routine operations. Copper cables on the other hand can withstand a maximum of 25 pounds of pressure before they start showing damages. This feature renders copper cables prone to damage with ease during routine operations in a telecom environment. STL research has also proven that a properly calibrated optical fibre network can increase network life by at least 10 years.

STL brings to you end-to-end digital solutions

STL, an industry leading integrator of digital networks, has long been a proponent of harnessing technology to create a world with next generation connected experiences that transform everyday living. With intense focus on end-to-end network solutions development, STL develops solutions for global telecom companies, cloud companies, citizen networks and large enterprises for their fixed and wireless networks for current and future needs. Do check out our core capabilities in Optical InterconnectVirtualised Access SolutionsNetwork Software and System Integration

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