Goldman Sachs: cable forcing telco investment
11.09 Europe/London, September 29, 2011 By Julian Clover Cable could lose its competitive advantage against the telcos within five years, but could redress the balance through pricing power, according to Goldman Sachs.
Writing in Cable News, published by trade body Cable Europe, Tim Boddy and Hugh McCaffrey of Goldman Sachs European Telecoms/Cable Investment Research argue that as cable forces the incumbents to invest in fibre-based Next Generation Access (NGA) technologies, losing cable its competitive advantage over a five to seven-year period, cable should gain in pricing power as the infrastructure market re-consolidates, squeezing local loop unbundlers.
The team says the combination of high-speed internet brought by DOCSIS 3.0 and increasing interest in on demand video is piling on the pressure for operators to invest, particularly in cable areas. “We believe it will take most operators at least five years (and potentially longer) to deploy fibre-to-the-home [FTTH] given a limited supply of construction engineers and time-consuming local planning consents. If consumer demand for bandwidth jumps before operators are ready to respond, market share losses could be large and value destruction substantial given operators’ high fixed costs and significant financial leverage.
Recent estimates from Goldman Sachs suggest it could cost an extra €41bn for incumbents to deploy FTTH across the European cable footprint.