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Global
News
December
10, 2003
Global broadband market to double
in size
UNITED
KINGDOM -- A new report from Arthur D. Little (ADL),
one of Europe's premier management and technology consulting
firms, predicted that the global broadband market is
set to more than double in size from US$ 30 billion
to US$ 80 billion within the next five years, with a
CAGR of 22 percent. The highest growth rates are likely
in Europe with a CAGR of 30 percent.
According
to the report, there are currently 57 million broadband
subscriptions worldwide. North America remains the biggest
broadband market, amounting to 45 percent of revenues,
followed by Europe and Asia with 20 percent each. While
the growth rate for broadband varies from region to
region, this market has still managed to outperform
the global telecom industry by a factor of 12 during
the period from 2000 to 2003.
Access
fees for a basic service largely accounts for the ARPU
in broadband. In 2003, access fees are likely to account
for about 85 percent of total revenues earned from broadband
users. Arthur believes that this figure is slightly
down on previous years as the share of revenues earned
from premium content (7 percent in 2003; up from 3 percent
in 2002) and equipment purchases/rental (8 percent in
2003; up from 7 percent in 2002) increases. Access accounts
for the overwhelming share of user-generated revenues.
Nick
George, head of media with Arthur D. Little, UK, pointed
out that the reliance on access revenues presents a
number of significant challenges for operators. He said:
"A reduction in the price of bandwidth is anticipated
in virtually all markets between 2003 and 2008. Declining
access prices, combined with increasing penetration,
make it difficult for operators to recoup the cost of
customer acquisition, especially since consumers continue
to display a demand for higher bandwidth applications
like video, games and music file-sharing. These require
operators to continue to invest in upgrading their networks
to maintain reasonable service levels.
"However
we still believe that despite these challenges, telco
and cable-based network service providers (NSPs) are
closest to achieving profitability. In Asia Pacific,
the leading operators are starting to report profitability;
and the majority of US and European NSPs expect to do
so from about 2006 onward."
The
Arthur D. Little Global Broadband Report also predicted
a number of opportunities arising for content providers.
It stated that currently usage levels in broadband households
were typically about two hours a day -- more than twice
the narrowband usage levels, and approaching TV viewing
levels (typically, about three-and-a-half hours a day).
Although subscription rates for broadband content service
are still low, it is likely that better encryption and
digital rights management will facilitate growth of
the premium content market. Rather than providing like-for-like
services, the report recommended that content providers
should utilise usage-based pricing models tailored according
to customers needs.
However,
George warned that non-telco aligned ISPs could be the
big broadband losers unless they adopt a more pre-emptive
stance. He noted: "At present, the non-telco aligned
ISPs have struggled to capture customers in sufficient
volumes to build critical mass as currently, their product
offering and pricing are heavily influenced by NSPs.
To survive in future, they need to push national and
international regulators strongly for broader or cheaper
wholesale access. They must develop smart pricing strategies
and exploit new revenue sources, in particular variable
pricing or quality of service premiums. Other opportunities
are bundling services such as IP telephony, home networking
and security services."
Contact:
Arthur D. Little Ltd.
Tel: +44-207-408-5400
george.nick@adlittle.com
www.adlittle.com
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