The global marketplace for broadband services is dynamic and growing

At the end of 2011, approximately 660 million households subscribed to an Internet service, and about 580 million, 32% of all global households, received broadband service. The populous countries in Western Europe have high broadband penetration – but predictably, they are showing signs of slowing growth.

  • Germany is Western Europe’s largest broadband market with over 26 million homes subscribing to broadband services.
  • France has over 22 million broadband subscribers. The growth of broadband in France can be credited to a greater demand for high-bandwidth applications, the growth of fiber-based services, and governmental actions to promote broadband growth.
  • Broadband penetration among U.K. homes was 74% at the end of 2011.
  • The global recession and Italy’s lagging economy have had a significant and negative effect on Italy’s telecom sector. By 2011, approximately one-half of Italian homes subscribed to broadband service.
  • Broadband penetration in Spain grew to 65% of households by the end of 2011.

GLOBAL TRENDS

Market Saturation
In many Western European countries, operators feel the squeeze of market saturation as household penetration rates for broadband approach or exceed 75%. In these markets, where most new additions are at the expense of other broadband providers, operators focus on retention strategies that incorporate benefits beyond mere price reductions.

These providers have initiated bundling to lure and keep customers, focusing on deploying services with an eye towards capturing customers and maximizing the ARPU that broadband services offer.

Trends Impacting Global Broadband Markets

  • Saturation & shrinking of DSL services in mature markets
  • Impact of PC adoption on broadband growth in emerging markets
  • Growth of usage-based business models
  • Growth of wireless broadband
  • Emergence of cloud-based services

The Shrinking of DSL in Mature Markets
DSLbased services are often the quickest to reach consumers since they rely on copper phone lines that are already installed in many homes. However, the growth of DOCSIS 3.0-based cable services and fiber-based services in mature markets is leading to a rapid transition of power among operators. Incumbents that have held power for years are finding a dwindling DSL subscriber base. This loss of subscribers is forcing many to invest in FTTx services in order to compete with cable operators.

The Critical Importance of PC Adoption
Emerging countries considering technology or broadband growth initiatives should include programs for computer adoption as a facet of their future growth plans in order to quickly move their population forward.

Usage Based Broadband Business Models
As broadband providers see revenue-per-bit continue to fall and the volume of usage continue to increase, many have come to the realization that flat-rate pricing will not be viable in the long term. Operators in most mature broadband markets will likely be forced to adopt broadband caps and to eventually charge for overages.

The Growth of Wireless Broadband
In the short term, wireless broadband will have a cooling effect on the wireline broadband market. In the longer term, as the numbers of wireless users increase, as wireline services move to 1 Gbps and beyond, and as wireline providers offer cloud-based services that leverage the high speeds of their networks, wireline services will again become the dominant connection medium.

The Future Growth of Cloud Based Services
Over the next several years, new companies will emerge that rely on a cloud-based delivery model for their service. Higher-speed services will allow for the rapid growth of virtualized, cloud-based services. New business models will emerge, and broadband providers will have a vested interest in capitalizing on popular services.

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FUTURE INVESTMENTS AND EMERGING MARKETS
The compound annual growth rate of broadband subscribers in Western Europe over the next five years will be noticeably lower than that in Eastern and Central Europe. As growth in these western nations levels out, operators will need to develop popular differentiating options such as cloud-based services and second-screen synergies to stay competitive.

There are also multiple emerging markets where broadband penetration is just taking hold. Most of Eastern Europe is in the process of telecom transition, moving from outdated and limited systems to newer, faster technologies. While the slowdown in the global economy served to slow investments and consumer uptake of such services, Eastern Europe continues to be a source of growth potential in broadband.

Large multinational operators are investing in or acquiring communication providers in Eastern Europe in order to leverage the growth that they cannot achieve in their home markets. Very soon these markets will also be open to new value-added services, so any new solution should be developed and evaluated with global markets in mind.

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