Research Notes

Who decides what the future broadband market will look like?

The telcos, the politicians, or the customers…

Around the world there is a great deal of discussion about the future broadband market and how it will develop. Basically the discussion is about which type of broadband customers need and which access technology they will use: copper, coax, fibre or mobile technologies?

Some claim that we cannot live without fibre and that customers’ future consumption of HDTV, fast upload speed requirements etc., will result in all customers needing fibre to the home in the future and that alternative technologies will fall short, when customers start using new future services.

On the other hand, there are those that believe that the future will be wireless and that we will see a development parallel to the development we have experienced on the fixed line market, where customers have unplugged their household fixed line telephone and are instead using their individual personal mobile phone.

Some people believe that a great deal of the future broadband market will also be personal and mobile.

Strand Consult believes that it will be the customers that are right at the end of the day. It will be the customers that choose technology and that will be voting with their wallets each time they choose one provider, rather than 10 others.

We do not believe that the political system should choose which access technology should dominate in the future. We believe it should be the market and consumers that choose providers and technology, depending on what best suits them, their needs and especially their wallets.

If we examine how the market is developing around the world, there is no doubt that customers want individual mobile broadband solutions and that an increasing number of customers are already discontinuing their existing ADSL connections and switching to mobile solutions instead.

In countries like Norway, Finland, Sweden and now also Denmark, the number of ADSL connections is decreasing. In a country like Austria, over 35% of all broadband connections are now mobile and the number for Slovakia is 30%.

If you examine the Nordic countries, 15% of all Danish broadband connections are mobile, 20% of the Swedish and Finnish are mobile and 13% of the Norwegian broadband connections are mobile. The market shares that mobile operators have gained by offering mobile broadband have appeared within the last 12 months – and it has been 12 months where we have seen a continual growth in sales.

In 2008, each time one Dane chose fibre, five chose mobile broadband and we are currently seeing monthly sales of between 18000 and 20.000 mobile broadband connections in Denmark – that has a population of 5.5 million. In the Nordic countries we are looking at 100.000 new connections a month in a region with 24 million people and sales of approximately 350.000 mobile phones a month.

In many countries the fibre industry is lobbying for state subsidies to roll out fibre and it does seem like the fibre market players believe that the state should prioritise broadband via fibre higher than other types of technologies (copper, coax, mobile etc). We would like to ask why fibre should have special treatment compared to other broadband technologies? Why should companies focusing on broadband via WCDMA/LTE be punished for choosing fibre in the sky, rather than fibre in the ground?

What significance should the choice made by customers have on the market? Just because five times more customers choose mobile broadband instead of fibre, should one initiate help packages for fibre companies using taxpayers’ money? Shouldn’t the customers’ choice of technology and provider have a say in the matter? Perhaps the fibre companies believe that the old copper-based fixed line companies should eventually have financial help, because customers are discontinuing their fixed line telephones and are using mobile phones instead?

At Strand Consult we cannot understand why fibre projects should have pocket money and unemployment benefits. What are the reasons for society needing to support a number of companies that are focusing on one certain technology?

Where will the state find money to finance fibre networks? Will it be schools, hospitals, nursing homes or other areas that they will have to cut down on, or should we simply raise taxes across Europe, thereby enabling the state to become a partner in a fibre project that customers are not purchasing – and on a market where the massive competition on prices is resulting in prices decreasing at a frightening pace.

Strand Consult believes that fibre is a good solution, but also that it is an expensive and inflexible product, that customers time and time again are bypassing and instead choosing wireless technologies. In our crystal ball it is obvious that the development we have seen in the fixed line area is repeating itself in the broadband area. Customers want individual broadband solutions that can be used any time and any place.

Perhaps we are wrong! On the other hand there is very little doubt about what customers want. And it is the same trend we are seeing in large parts of the world.
More information: Successfull strategies for the mobile broadband market

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