Broadband Network Case Studies & Reports
Europe Remains Behind in Broadband Game
The installed base of worldwide broadband subscribers will exceed 21 million by the end of 2001, and ultimately reach almost 84 million by the end of 2005, according to research from Cahners In-Stat Group.
The research found broadband’s phenomenal growth is a direct result of increasing reliance on the Internet as an information, communications, business and entertainment tool. At the same time, new bandwidth-intensive applications are being introduced that make the argument for broadband services very compelling.
Cable modems and DSL have the highest subscriber penetration rates, and In-Stat projects they will increase rapidly in the near future. Even though satellite broadband and fixed wireless access have shown promise, high equipment and operating costs will keep their penetration rates well behind cable modem and DSL access over the next several years.
As the rapid growth of broadband continues, anxious service providers are expanding current service areas and experimenting with new access technologies, the research found. They are also keeping a close watch on their competitors and trying to best position their technologies and service for the future. However, even with rapid subscriber growth, overall worldwide broadband Internet access remains limited. By the end of this year, only 11 percent of total U.S. households will subscribe to broadband services.
Other findings from In-Stat include:
- Total worldwide broadband service revenues will rise from $5.8 billion in 2000 to over $37 billion in 2005.
- From the end of 2000 until the end of 2002, total U.S. broadband subscribers will almost triple, rising from 6.8 million to over 19 million.
- North American cable modem subscribers will continue to outnumber DSL subscribers through 2004. However, by the end of 2002, total worldwide DSL subscribers will surpass total worldwide cable modem subscribers.
- Strong growth in Europe, parts of Asia and in the North American business sector will account for the lion’s share of new DSL subscribers.
Despite the predicted growth of broadband outside the United States, homes in North America are more than four times as likely to be surfing the Net with a high-speed connection in 2001 than in Europe, according to research from Strategy Analytics. Subscription to broadband Internet service in Europe will rise to only 3.3 percent of homes by the end of 2001, compared to 14.1 percent in North America.
The rapidly growing demand for broadband Internet services in the United States and Canada is being supported by higher PC usage and ownership. In addition, a stronger cable industry in North America is rapidly deploying cable modems, thereby encouraging the telco industry to respond by rolling out DSL services. In Europe, by contrast, the cable industry is relatively weak and has so far provided little competition to telcos.
The leading broadband market in Europe is Sweden, with 9.4 percent of homes connected to broadband this year, according to Strategy Analytics. In Britain, however, less than 1 percent of homes will have broadband this year. The willingness of incumbent operators to invest in broadband upgrading is the main reason for such national variations.
“Europe is falling rapidly behind North America in the race to deploy broadband Internet,” said David Mercer, vice president of consumer practice at Strategy Analytics. “The local loop unbundling issue has obscured the fact that broadband uptake must be encouraged initially at the telco/cable level.”
More than half (51 percent) of North American broadband subscribers will be using cable in 2005, compared to 40 percent with DSL and 9 percent using other technologies. In Europe, the shares will be cable (40 percent), DSL (51 percent) and other (9 percent).
A report from pan-European Internet research company, Van Dusseldorp & Partners and international media analysts Screen Digest found the current cable and DSL penetration among European households at 1.79 percent — up three times from 1999’s figure of 0.48 percent. The report predicts that by 2003, penetration will stand at over 21 percent — with more than 18 million subscribers — up more than 44 times than in 1999.
By 2002, most alternative European telecom operators should have begun to launch DSL in competition with the incumbents following the expected unbundling of the local loop, which allows access to telephone exchanges by other companies. The Van Dusseldorp report also anticipates that this period will see DSL overtake cable in most of the markets under consideration, capturing an estimated 70 percent of the 18.8 million cable and DSL subscribers by the year 2003.
Germany’s early adoption of DSL, partly due to lack of investments in the German cable infrastructure, means that it now leads the market in Europe. The report estimates that by the end of 2000,there were approximately 400,000 DSL subscribers and only 1,000 cable Internet subscribers, compared to the next largest market, France, which has 60,000 DSL and 122,000 cable Internet subscribers. Britain has only 30,000 DSL subscribers, putting it at No. 9 in the European DSL league table. Ireland and Portugal are the only European countries to have no DSL subscribers. The German market will have increased to 5 million DSL subscribers by 2003, while France, the Netherlands and Britain are predicted to have 1 million subscribers each. This will bring the total European market up to 18.8 million cable and DSL subscribers, 13.3 million of which will be DSL compared to 5.5 million cable.
|Household Penetration of Broadband|
|Note: Individual countries include Cable and DSL only
Total Europe and North America include all broadband technologies
Prices, Availability Holding Back Broadband
Only 18 percent of U.S. households currently subscribe to broadband Internet services such as cable modems or DSL, according to TNS Intersearch, but an additional 13 percent said they plan to subscribe within the next six months — a potential jump of 72 percent.
When asked why they have yet to subscribe to these new services, respondents indicated high prices and low availability as the primary factors. Twenty-two percent said that cable modems and DSL were too expensive while 15 percent said these services were not available in their area.
“Clearly, the appeal of these broadband services is becoming more widespread,” said Brenda McFarland, senior vice president of TNS Intersearch. “While the Internet delivery method of choice continues to be the dial-up modem at 50 percent, we are seeing that once the prices of these broadband services come down and they become more accessible, a large portion of Internet subscribers will choose those services.”
Beyond broadband access, a study by Boston Research Group and BroadJump, Inc. examined consumer preference and purchasing behavior for premium broadband services. A survey of 1,000 residential users (600 broadband and 400 dial-up) found that the enhanced services most desirable among broadband respondents are virus protection (indicated by 68 percent of the respondents) and firewall applications (67 percent). approximately half of the respondents also indicated an interest in Internet telephony, instant messaging and streaming audio.
More importantly for service providers for the services. More than 60 percent of the broadband respondents said they would pay on a pay-per-use basis rather than a subscription basis.
“While the level of interest across all services was noteworthy, the willingness to pay a premium for specific services suggests that respondents viewed these as a natural extension of a service provider’s offerings,” said Paul Flaxman, vice president of the Boston Research Group. “As general market acceptance of these services increases, a significant revenue stream is likely to follow.”
Almost 75 percent of all the survey’s respondents preferred a service provider that offers enhanced services over broadband. The respondents also indicated that the availability of specific enhanced services as a critical factor in selecting and staying with their broadband service provider. According to the survey, the availability of enhanced services increases the likelihood that a subscriber will switch to a new method of Internet access (for example, from DSL to cable). It also increases the likelihood that subscribers will switch access providers but keep the same access type (for example, switching from one dial-up ISP to another).
|Reasons for Not Subscribing to Internet Access by Technology|
|Not available in my area||6%||15%||5%||6%||8%|
|Don’t have necessary equipment||9%||4%||13%||0%||0%|
|Too complicated/hard to use||6%||5%||3%||8%||3%|
|Source: TNS Intersearch|
Home Broadband Networks Could Lift Telecom Market
Of the 30 million U.S. households predicted to have broadband service by 2004, 17 million will have a home network, according to Parks Associates, which also found the home networking market will present new opportunities and unique challenges to service providers.
Parks Associates’ report, “The Broadband Networked Home: Profiles of an Emerging Market,” found the consumer segment interested in broadband networks already places strong emphasis on product reliability and interoperability. Most consumers in a household with a broadband network are inclined to endorse reliability over price; so a service provider and its products must inspire confidence to be successful, even if it means a slightly higher price tag. People in this segment would also rather install the product themselves than pay a professional, which should help keep costs down.
“Being unaware of what consumers consider important will significantly undermine a service provider’s ability to sell not only broadband and home networking technology, but the next generation of value-added services,” said Michael Greeson, senior analyst with Parks Associates. “Too often, residential service providers proceed with a very limited awareness of what the consumer actually wants. This should not be happening, especially since residential broadband consumers have a very clear idea of what services they would like to see from providers and how much they are willing to pay for those services.”
|Source: IGI Consulting Group|
One analyst even suggests that if the providers of broadband and home networks can come up with some imagination and make attractive offers, the rapid expansion of the networked, high-speed home could lead the telecom industry out of its current slowdown.
“While high-speed access has long been a top desire of anyone who has waited for a page to load off of a dial-up modem, the demand for networks and residential gateways is a relatively new phenomenon,” said Clifford Holliday, an author and analyst for IGI Consulting, Inc., and president of B&C; Consulting Services. “This new demand is largely an artifact of the rapidly increasing number of multiple computer homes, and by the work-at-home trend. We now are in a situation with 40 percent to 50 percent of all new computers going to a home that already has a computer. Add to that the fact that 30 percent of our work force now works at home, at least part of the time, and the need for networks and gateways becomes obvious.”
Residential gateways will allow home users to share their high-speed line, as well as printers, hard drives and other peripherals. Despite the current downturn, Verizon reported ADSL sales of more than 180,000, Holliday said. But service providers have yet to realize they can offer value chain offers to their customers, by combining high-speed access, with home network and gateway installations.
Broadband Access Takes to the Rooftops
Forget about access to cable networks and laying cables, fixed wireless high-speed Internet access offers broadband without the last-mile bottlenecks. That’s part of the reason Frost & Sullivan projects the fixed wireless industry to surpass $28.5 billion in revenue by 2007.
According to Frost & Sullivan’s “North American Broadband Wireless Access Services Market,” fixed wireless access service has matured to a point where commercial deployment is a reality. It also predicts revenue in the industry to climb to $842.3 million in 2000.
“Fixed wireless technology is one of the few technologies that can go from an Internet service provider’s fiber, all the way to the door, and is seamless across the entire metropolitan area,” said Frost & Sullivan industry analyst Michelle Gao. “It’s an ideal technology to bridge the gap between the fiber backbone and end users.”
The biggest potential barrier is getting the wireless signal to the end user. There are a limited number of buildings that can be used as wireless access points, putting roof space at a premium. According to Frost & Sullivan, successful service providers will quickly identify their customers and supply service through quality transmission channels.
“Obtaining access to strategic rooftop locations is very critical to broadband fixed wireless operators,” Gao said. “There is only a certain amount of equipment wireless operators can put on the top of each building without interfering in their transmissions.”
Line of sight issues can also limit the size of the addressable market, especially residential, and small and medium-size businesses, whose physical locations are usually surrounded by trees and other objects.
“Recent technological developments claim to be able to capture signals as they bounce off buildings and other objects, and redirects them to transceivers, but these technologies are still in the field-trial stage,” Gao said.
The immediate goal for broadband fixed wireless service providers will be addressing the business market. In 2000, more than 99 percent of broadband fixed wireless service revenues are generated from business end users. However, there will be more services offered to the residential market by service providers in the next few years, and residential users will go up the demand curve after broadband wireless technology matures and economies of scale can be realized.
According to a yet-to-be-released report based on a survey by internet.com Corp.’s ISP-Planet website and Edgix, fixed wireless technology can be deployed at much better profit margins than either DSL or cable modem high-speed access. Among the ISPs that responded to the survey, 30 percent currently offer fixed wireless broadband technology, and 43 percent plan to offer it. (Internet.com is the publisher of this site.)
The number of fixed wireless subscribers will grow to 3.86 million by 2003, a 1,500 percent increase from the 230,000 users projected at the end of 2000, according to eMarketer. By 2003, eMarketer forecasts that small and medium-sized businesses will represent 80 percent of the total fixed wireless market, where in 1999, business share was at 66 percent.
“Where DSL and cable modem access had once been touted as the most efficient means of broadband access, the speed and cost-effectiveness fixed wireless provides places them in prime position to gain market share,” said Brian Gilman, senior analyst at eMarketer. “While fixed wireless services will be targeted to the business market, many residential users will be swayed by the system’s easy access and pricing models.”