One year ago, at the FTTH Conference 2011 in Milan, there was great excitement about how the new Digital Agenda targets could catalyse the market for fibre to the home (FTTH).

The target for availability called for every citizen in Europe to have access to 30Mbps broadband by 2020. The target around uptake was even more ambitious: the European Commission wanted half of all subscribers to be taking 100Mbps services by 2020. As Chris Holden, president of the FTTH Council Europe, pointed out at the time, such a high penetration would require almost ubiquitous availability of 100Mbps services – something that FTTH is well placed to deliver.

So how are things looking one year on? The European Commission recently published the 2011 scoreboard (see below), which indicates that very little progress has been made towards the take-up goal in particular. The FTTH Conference 2012 in Munich provided the ideal opportunity to delve a little deeper into how things are shaping up.

First, the good news: FTTH continued to grow at a reasonable pace in 2011 in spite of global economic uncertainty, according to market research firm iDATE. There were 600,000 new subscribers in the region (specifically the 27 European member states plus 8 other countries on the continent) corresponding to a growth rate of 28%.

The number of homes passed by fibre grew even faster with a 41% increase year on year. However, as a result of deployment exceeding take-up by new subscribers, the overall take rate of FTTH in Europe (the percentage of people taking the service where it’s available) actually fell from 20.3% at the end of 2010 to 18.4% at year end 2011.

The fact that subscriber take-up lags deployment sounds worrying, but is quite normal. The results of a study by consultancy firm Diffraction Analysis, also unveiled at the event, confirm something that may seem self-evident – it takes time to build a subscriber base. FTTH operators in the study gained between 5% and 7% market penetration for each year that they were in business.

The detail of the market panorama also bears this out. Countries with more mature FTTH markets also tend to have higher take rates, the highest being Norway (60%), the Czech Republic (42%), Sweden (39%) and Lithuania (29%). (By the way, Lithuania continues to lead the FTTH Ranking, Norway has moved up to second place, and Sweden is in third, while major economies like Germany and the UK still do not feature.)

Looking ahead, however, the news is not so good. Analyst firm Heavy Reading has downgraded its market forecast for the third year in a row, as actors have failed to achieve the objectives they have set themselves. Heavy Reading now forecasts that the FTTH subscriber base is expected to grow from around 10.3 million subscribers today to 32 million in 2016 (this figure is for 38 European countries including Russia).

When considering European Union member states only, the numbers correspond to around 8.7% of homes subscribing to fibre by 2016. That would leave just four years for Europe to reach the 50% target in the Digital Agenda. In fact, Heavy Reading’s forecast indicates that by 2020 Europe is expected to attain FTTH market penetration of only 20%.

Incumbent operators are being particularly slow. “If incumbents were solely responsible for FTTH additions, and kept going at the same rate, then it would take about 450 years to connect all the homes in Europe,” said Graham Finnie, Heavy Reading’s chief analyst. “I think we can all agree that’s too slow.”

Incumbents only accounted for roughly one third of FTTH deployment in 2011, but the situation is not much better among municipal projects and alternative operators, who are also struggling to meet deployment objectives on time. If FTTH is to be a major contributor to Digital Agenda targets, then deployment needs to accelerate dramatically and, given that subscriber take-up lags the roll out, it needs to start soon.

The alternative scenario, which is probably slightly disturbing to fibre evangelists, is that other technologies, like cable television networks and fibre to the cabinet (FTTC), will have to play the dominant role in delivering high-speed broadband by 2020.

By 2020 all cable networks will be upgraded to offer 100Mbps – indeed in many countries they already are capable of such speeds. Improvements in copper technology, such as vectoring, could lead to VDSL becoming capable of speeds as high as 100Mbps even if only over distances of several hundred meters – something that seemed unlikely just a few years ago.

The Broadband Forum, which also unveiled its numbers at the event, reported that deployment and uptake of what it calls “hybrid FTTx” (fibre in the access network with copper tails) is currently outpacing true FTTH. There are almost three times as many subscribers on hybrid FTTx connections, and that number is growing rapidly because this approach has been popular with incumbents.

Politicians have a great deal of influence in how things evolve from here, says the FTTH Council Europe. Individual member states are required to set out their plans for meeting the Digital Agenda targets, but so far they haven’t done a great job – at least not from the viewpoint of FTTH industry.

“Generally speaking, the national plans [for broadband] are a disaster,” said Holden. “Many countries don’t have national broadband plans and of those that do, they’re not aligned with the Digital Agenda targets. Many governments say they are going to use other technologies based on ‘up to’ speeds to meet the Digital Agenda targets, instead they should be realistic about what these technologies can actually do.”

The FTTH Council Europe is also keen to see the Digital Agenda targets strengthened by including a minimum upload speed. Many studies show that the world is not asymmetric – once good upload speeds become available, subscribers start to upload far more data. It seems unlikely that the Council’s suggestion will be adopted, however, as it would virtually guarantee that Europe misses the 100Mbps Digital Agenda target.

One of the big challenges, says Holden, is to convince governments that telecommunications should be viewed as a critical infrastructure, on a par with road, rail and airports. Like other big infrastructure projects, FTTH requires significant long term investment, and patient investors to match. That’s not something that publicly traded companies with shareholder pressure and short-term investment horizons are necessarily in a position to provide; and that’s why government understanding of the situation is vital.

“Maybe we should do more work with national governments; that’s certainly something for us to think about,” Holden mused.

Is Europe on track to meet the Digital Agenda targets? What needs to change to make sure we get there? Tell us what you think by adding your comments below.

Check out more from Pauline Rigby on Optical Reflection.