Fixed broadband: down but not out

Michael Philpott, Principal Analyst, Ovum

AUSTRALIA: Ovum’s new broadband forecast shows an increase in growth rate for mobile broadband subscriptions – good news certainly for mobile operators. By the end of 2015 mobile broadband will swamp fixed broadband subscriptions by more than 300 percent.

A startling statistic, but not one that should overly concern fixed broadband operators. Fixed broadband is not as susceptible to fixed-to-mobile substitution as fixed voice was, and growth opportunities are still possible in the fixed broadband market.

Mobile broadband outstrips fixed broadband, but does not replace it
By 2015 there will be approximately 3.2 billion mobile broadband subscriptions worldwide, a huge figure when compared to the 785 million fixed broadband subscriptions at the same point in time. Although such significant growth cannot fail to impact the fixed broadband market, this should certainly not be seen as a doom scenario.

During the next five years the global fixed broadband market will continue to grow by a CAGR of 7 percent. By 2015, on a worldwide basis, 36 percent of homes will have a fixed broadband subscription. Twenty-five percent of these homes will be served by optical fiber technology, and a further 18 percent by hybrid-fiber coax (HFC).

HFC networks are increasingly being upgraded to DOCSIS 3.0 technology, and thus an increasing portion of such customers will also be able to receive advanced, high-bandwidth services into the home. By 2015 most developed countries will see fixed broadband household penetration of over 60 percent, and the vast majority will not see any decline due to mobile substitution during this time period.

Emerging markets will also still see growth
Emerging markets are more susceptible to mobile broadband substitution. However, on the whole this is not existing fixed broadband customers migrating to mobile broadband services, but people who have never had a fixed broadband connection moving straight to mobile broadband. At least from a digital inclusion point of view, this trend should be viewed as a positive, as mobile broadband is enabling more people to get online for the first time.

From a fixed broadband perspective, this does stem potential growth. In emerging markets, fixed broadband household penetration is on average more likely to be below 30 percent by 2015, compared to being above 60 percent for the more developed markets.

In countries such as India, it will be below 10 percent. However, even for fixed broadband operators such countries still represent good growth potential. Regions such as South and Central America, Eastern Europe, and Middle East and Africa all have a greater CAGR over the next five years than developed markets, which have now largely reached saturation point.

Future may be wireless, but fixed broadband will play a key role
Even though fixed broadband is now seen as a mature market, its story is far from over. Devices are increasingly becoming wireless, and mobile broadband technology is developing fast, but it is unlikely, at least in the next decade, that it will catch the more advanced fixed broadband technologies in terms of capability or cost of delivery.

It simply won’t make technological or financial sense therefore for operators to cut the fixed broadband connection to the home, even if inside the home many of the devices are in fact wireless in nature.

Indeed, all around the world, developed and emerging markets alike are exploring and deploying new FTTH/B networks, with many countries seeing such investment as being a critical factor to their future social and economic success. If such investment and deployments continue to come to fruition, and an increasing number of homes become connected to this new optical fiber based network, then the world could see a new surge in fixed broadband subscriptions.

Ovum will continue to explore the topic of broadband fixed-to-mobile substitution and convergence in a series of reports that are due to be published in September 2010.