Episode 4: the Investors Committee


Thomas Miller, Chair of the Investors Committee of the FTTH Council Europe, shares his perspective on the evolution of the FTTH business in the months to come. While providing guidance to those willing to navigate their way to profitable investments in full-fibre networks, Thomas also presents some of the activities we can expect from the committees in the near future. In this episode, our guest will answer to these questions and much more:

  1. How do you see FTTH investments in Europe evolving in the next 12 months?
  2. From an investor perspective, what are the key factors you keep into account while assessing fibre networks financing?
  3. It looks like financing fibre optics is becoming more difficult nowadays: how can investors and entrepreneurs successfully navigate their way to profitable investments?
  4. What can you tell us about the upcoming initiatives from the Investors Committee?

Read the full interview below to get the answers to these questions.

 

How do you see FTTH investments in Europe evolving in the next 12 months?

Over the past decade, the European fibre sector has attracted billions of euros in investment. Thus, many investors have built up large exposures in the fiber sector, often to their limit. Which is a technical reason why the market for fibre investment in 2023 has become more challenging. More importantly, the mentality of "build and they will come" is clearly outdated. In some regions, providers are struggling to meet their economic targets.  

Overall, investors are taking a much closer look at fibre operators than they were a year ago. This makes it difficult for some providers to raise the funds they need.

Existing players may have to rethink their growth strategy and think about cooperating with competitors or even cutting costs and optimizing processes. In the UK and Germany in particular, we are likely to see more restructuring. Mergers, acquisitions, and joint ventures will enter the stage. It’s climate change, if you will. 

In the picture on the right, Thomas Miller moderating "Panel 5 - Investors Panel" during the FTTH Conference 2023 in Madrid.

From an investor perspective, what are the key factors you keep into account while assessing fibre networks financing?

Clearly, investors require a good track record. The focus is much more on ARPU and how many of the homes passed have actually signed up. Speaking of “homes passed”, this KPI has lost much of its relevance. If anything, investors are looking at “RFS” (“ready for service”). But, to reiterate a key fact, investors are paying much more attention to cash generation today than they did in 2022, which means greenfield investments (i.e., investments with no track record) are often off the radar.

Investors are also much more aware of vendors' business models, especially when comparing wholesale to retail. They also value providers adapting to the "climate change" that has gripped the fiber landscape. This means some are likely to support reasonable plans on how to successfully address the challenges ahead. Such support may include short-term extensions of debt or accommodating waiver requests.


It looks like financing fibre optics is becoming more difficult nowadays: how can investors and entrepreneurs successfully navigate their way to profitable investments?

I didn't mean to sound overly pessimistic. Fibre is a key technology for Europe, we need this infrastructure. There is therefore no doubt that we will manage the roll-out overall. Like in every dynamic market opinions, strategies and forecasts are diverging more strongly. In such an environment, it is essential to base decisions on a solid foundation of good information.

The Investors Committee would like to contribute to this with our Investment Tracker, which we produce twice a year together with Macquarie. In it, we show current developments in credit volumes, interest rates, KPIs, covenants and information requirements for the main European regions.

In addition, our Guide to Successful Fibre Business Models provides a good overview of the business models relevant on the market. These differ significantly in terms of opportunities and risks and thus in the structure of an investment.

 

What can you tell us about the upcoming initiatives from the Investors Committee?

It is certainly not easy to keep track of things in the current environment. But that is precisely why our approach is not fatalistic. We firmly believe that the future can be shaped. To this end, it is more important than ever that entrepreneurs and investors talk to each other. We have our Investors Committee for this exchange. With the Investment Tracker and the Guide to Successful Fibre Business Models, we continue to produce decision-relevant information. However, sensemaking is also important, and that is what we do in the dialog between our committee members.

 

More about Thomas Miller


 

 

Since 2006 at Hamburg Commercial Bank, Executive Director. Publisher of several studies on fiber financing. Writer and speaker for bank financing. University lecturer at Hamburg School of Business Administration and International School of Management. Head of the FttH Council Investors Forum.

 

Innovating to reduce the carbon footprint of subscriber connections

May 9, 2022
Company type: | Vendor/Reseller (Products) |

Member company: Acome
Country or geographical scope: Europe
Period: 2021 and beyond
Company type: Vendor/Reseller
Product/service category involved: Drop cable

Abstract

Assessing the carbon footprint of the network infrastructure by using Product Environmental Profiles, (PEP), shows that a significant part (35% in our model) of the passive infrastructure carbon emissions comes from the last 100 meters. Drop cables are the necessary links that generate the main part. As small installation lengths are required and mostly handled by hand, drop cables usually come in drums of shorter length. This leads to an increase in the number of drums, and consequently to a reduction in the maximum shippable length per pallet. The redesign of the drop cable using an eco-design approach made it possible to go from 3 km of drop cable per pallet to 12 km, therefore drastically reducing the logistics carbon footprint.

Context

Assessing the impact in order to reduce it. Based on the principle that we cannot improve what we are unable to measure, ACOME evaluates the carbon impact of its products by using Product Environmental Profiles (PEPs).

A PEP is a type of EPD (Environmental Product Declaration). It can be used to create an environmental identity card for a product. A PEP is based on the results of a Life Cycle Assessment (LCA) which takes into account all the life stages of a product, from the extraction of the raw materials, to the manufacture, right until the end of its life, not forgetting the transportation and use of the product. 

Environmental impact calculations are carried out using dedicated life cycle assessment and eco-design software. Finally, all rules are verified by an approved third party, thus ensuring the compliance and neutrality of the data made available on the PEP ecopassport® website.

PEP ecopassport® is an international environmental reporting program created in 2009  by industrial partners and in collaboration with the European Commission with the aim of establishing a Europe-wide environmental regulation, the PEF (Product Environmental Footprint). The objective is to establish a common reference framework for calculating and then reporting the environmental footprint of a product in a rigorous and transparent manner.  PEPs are therefore widely used in Europe. This standard framework for life cycle assessments (ISO14040 / ISO14025) was supplemented with the drafting of the PCR (Product Category Rules), which includes rules on the generic calculations for a family of products, and the drafting of the PSR (Product Specific Rules), which defines the sub-rules for specific calculations for optical equipment.

Different environmental indicators emerge from this rigorous calculation method, including the GWP or Global Warming Potential, also known as the “carbon impact” of the product. This indicator, whose unit is kg CO2-eq, counts the gas emissions contributing to the greenhouse effect that are produced throughout the product’s life.

Solutions

As the assessment framework is based on the environmental declarations produced, it is possible to calculate the carbon impact distribution across the passive infrastructure of an optical network.

By using on a simplified model that only takes the products into account (i.e. it excludes civil engineering and installation), we can sum up the different contributions of the elements that make up the passive infrastructure of the network and then break this down to a carbon weight per subscriber. In this analysis, it is already interesting to note that a PON architecture consumes approximately 65 kg CO2-eq per subscriber. This means that it consumes 40% less CO2 than a point-to-point architecture. This is due to the intrinsic pooling of fibres in this type of PON architecture and the use of passive coupling elements.

By analysing the overall impact per subscriber in a PON architecture (cables/connectors/cabinets), we can see that the "transportation" part only represents 5% and the "distribution" part 60%, but the "connection" part alone represents 35% of the overall carbon impact of the passive architecture.

Over the many kilometres of optical cables required to connect the central unit to the subscriber, you can see that the carbon weight is mainly accrued over the last few metres of the connection. In fact, the less fibre there is in the optical cable, the greater the impact of the fibre protection elements on the carbon weight. For example, a single-mode optical fibre has a carbon weight of approximately 2.6 kg CO2-eq/km. For example, in a 48-fibre cable the carbon weight per fibre is amount to 6.6 kg CO2-eq/km. All the optical fibres contained in this cable represent 40% of its carbon weight. For a single-fibre connection cable, the carbon impact of the cable can be up to a hundred kg CO2-eq/km, but the fibre itself only accounts for around 2 to 3% of this. The rest comes from the protection elements surrounding the fibre. In view of this information, it therefore seems quite logical that the carbon weight of products increases the closer the cable is to the subscriber.

So, let’s focus on the last few tens of metres of drop cable that link the optical connection point to the subscriber’s home. Let's look at the results of the eco-design methods that Acome uses to reduce the carbon impact of this last section of the infrastructure which is so significant when it comes to the overall carbon impact per subscriber.

Results

The example of eco-design used here is that of a subscriber drop cable which is widely used in the French market and designed to meet the connection needs of FTTH access networks. This drop cable is strippable and can be used for the overhead or underground connections of individual houses. It is an optical cable without intermediate splicing that goes from the optical connection point located in the street to the optical wall outlet located in the subscriber's home. This type of cable uses strippable technology. This means that the cable sheath tears when the cable is installed inside the home, saving time and reducing the TCO. By avoiding splicing, the optical budget of the FTTH network is also improved. 

As explained above, the carbon impact per subscriber is largely in this section of the connection. It is therefore necessary to innovate in order to reduce this impact. The originally designed single-fibre drop cable, which meets current standards and specifications, had a carbon weight of 120.4 kg CO2-eq/km. The environmental assessment of the life cycle carried out showed that the main part of the carbon impact came from the manufacturing. Some of the processes and cable engineering have been redesigned to reduce inputs of certain materials. The new generation of drop cable resulting from this eco-design phase now has a carbon impact of 89.8 kg CO2-eq/km, a reduction of over 25%, but still has the same very good traction and handling performance which ensures the durability of these sections of the connection cable.

The distribution logistics also makes a signification contribution to the overall carbon impact calculated in the life cycle assessment of a connection cable. To reduce the impact, we need to rethink the distribution phase based on the idea that the truck that does not drive is the one that pollutes the least. More concretely, to reduce the carbon footprint it is preferable to optimise the filling of the truck with well-thought through, but also with more environmentally friendly packaging.

This type of drop cable is packaged on small 500 m drums, so that it can be easily handled on the field by the technicians that make the connections. It should be noted that the first generations of this cable were packaged by pallets of 3 km (i.e. 6 drums, with 3 levels of 2 drums). The desire for eco-design has forced us to come up with more innovative solutions. The new cable design made it possible to reduce the size of the barrel and cable drum, in order to increase the amount of drop cable per pallet to 9 km (3 levels of 6 drums). Finally, a final step in the optimisation of the packaging and a new arrangement of the pallets then made it possible to pack 12 km on a similar pallet (4 levels of 8 drums). All this work on packaging multiplied the truck filling rate by 4 and drastically reduced the carbon impact of the distribution logistics of these drop cables.

Conclusions

To conclude, we have seen that it is possible to act and innovate on all stages of a product's value chain in order to minimise its carbon impact. Whether in terms of the choice of materials, the production processes, the packaging or the distribution logistics chain, each choice can have a positive impact.

Here we have taken the example of an optical drop cable, which can seem like a small part of the picture as only a few tens of metres are used in the overall passive infrastructure of an FTTH architecture. However, analysis models show that these sections are actually very significant when it comes to the overall carbon impact per subscriber of the passive infrastructure of the network. The environmental analyses produced allow us to carefully assess and identify the areas where we can act and innovate to minimise our impact.

Further reading

[Publication] Impact of choices and uses on the network carbon footprint
[Magazine] ACOME INSIDE : Carbon transition

Contact

Xavier RENARD, Telecoms Marketing Director, Telecom Business Unit, ACOME
xavier.renard@acome.fr

View all

More episodes from this series

 

 

Help us create a brighter future!

Join the Fibre Council Europe
today and benefit from Europe’s
largest ecosystem of fibre players

Members Benefits

FIBRE COUNCIL EUROPE
Rue de la Presse 4 | B-1000 Brussels | Belgium 
FAQ | Legal Notice | Privacy Notice

Logo