DARK FIBRE IN CENTRAL, EASTERN AND SOUTH EASTERN EUROPE

Published May, 2008

This first assessment of Dark Fibre in regional emerging markets (26 country markets are included) reveals encouraging signs of growth in deployment. Demand drivers are present, new optical hardware and software is available although apparently at a higher price than in western markets, and even duct space is present, owned largely by railways and utilities. Yet to ensure that Dark Fibre enables sustained economic progress, and is adopted by enterprises, regulatory action is crucial. So far, it seems only the academic community is lobbying for changes in state policy that will open many of these markets to infrastructure competition, but lack financial firepower. Liberalisation has frequently been delayed in South Eastern Europe. Even where utilities have constructed fibre networks, sales to third parties remains under-exploited and the opportunity diminished.

Against this background of mixed market environments, Dark Fibre is niche, but nevertheless assuming a more important role. Research for the report suggests that in some instances, Dark Fibre is more prevalently perceived as a tactical deployment, as investment focuses on network upgrades to engage in future triple or quad plays. WiMAX, rather than Dark Fibre, is also recognised as a cheaper way to bypass the local loop. NRENs are driving demand for Dark Fibre across the entire region compared to enterprises.

Yet much is forecast to change, and future opportunity for Dark Fibre will emerge as more strategic. In the first instance, there is a clear need to elevate Dark Fibre from its perception as a raw unmanaged capacity to a quality longer term investment, that delivers a range of standard and premium managed services. Additionally, as the increasingly critical mobile segments approach mass maturity, the demand for Dark Fibre will amplify. Alternative operators represent a wholesale opportunity and Enterprises will become a key target segment for services.

The report casts a wide net across 26 markets, where Dark Fibre products still appear to be limited. However this could be a function of market supply and result from the drive towards optical networking evidenced in western Europe. Country markets themselves are changing: Russia is seen to change significantly in terms of its Dark Fibre infrastructure by 2010. Competition in a number of countries (particularly in South Eastern Europe) has been slow to emerge, but there is reason to believe that new forms of telecoms infrastructure will appear over the next twelve months in a number of countries in the region.

Much depends on the regulator, and changes in competition law, stimulated in part as countries who are accession states begin to change legal frameworks. In less developed markets, demand is led by NRENs (“leap-frogging” their western counterparts by adopting optical networks with optical POPs) now, but will extend to enterprises. A wider customer base and the availability of wholesale services will support this evolution. The report did not find that FTTH (fibre to the home) and FTTP (fibre to the premise) deployments were among the key drivers of growth and they remain less popular than in western Europe with the exception of Russia, Poland and Greece. New Dark Fibre routes are also emerging such as Turkey, and also cross-border Dark Fibre within the central and eastern region.