European CLECs spur DSL boom

The rise of CLECs in Europe is fueling a surge of DSL deployment there.

DSL shipments to Western Europe grew more than 6% sequentially in the first quarter (higher than the global increase), while shipments to North America sank 16% and are expected to continue to decline, according to Dittberner Associates.

Compared to their U.S. counterparts, European Union regulators have been much more steadfastly supportive of rules requiring incumbent carriers to lease parts of their networks to competitors. CLECs that launched residential broadband businesses through incumbent networks are now deploying their own DSLAMs en masse to increase margins by owning rather than leasing equipment.

“Suddenly there seems to be this stampede to move off the incumbents' wholesale, unbundled loops businesses to installed equipment and make better returns on the DSL customer,” said James Heath, an analyst for Dittberner. During the first quarter alone, 2 million DSL customers in Western Europe were moved from leased equipment to ports on competitive providers' own gear.

To some extent, the recent steps by European CLECs to transition customers onto their own infrastructure run contrary to the fears voiced to U.S. regulators — that unbundling removes CLECs' incentive to invest in their own technology. But Europeans faced different competitive dynamics. Because cable networks were not as widely deployed there, they relied more on CLECs for competition. “We had a built-in competitor, which in some ways was advantageous,” Heath said of the U.S. market.

Spurred by cable competition, American incumbents have been more aggressive in deploying fiber than some of their European counterparts. While AT&T and Verizon are working to bring fiber-based broadband to 50% and 62% of their subscribers, respectively, Belgium's Belgacom and Germany's Deutsche Telekom, for example, are bringing fiber to 46% and 28%.