We've long feared that the continued trend of offering cheap broadband services, especially in the ADSL market, could lead to trouble, yet happily our fears have yet to be realised. Sadly a new report by Ovum has once again raised this concern:

The report said that DSL broadband operators around the world are at risk of falling into the same competition trap as Japan and South Korea by basing their marketing strategies on cheap pricing.

Stiff competition among operators in Japan and Korea has led to prices being cut to unsustainable levels. Operators in these countries now have to sell extremely generous service offerings at slashed prices of less than EUR10 per Mbps. This is in contrast to countries such as the US, Germany or France, where the same level of service would cost EUR35, EUR61 and EUR85 per Mbps respectively.

"The cost structure in Asia Pacific may be different from Europe and North America, but it is highly unlikely it can support such price cuts," says Michael Philpott, senior analyst with Ovum. "Sooner or later, Japanese and South Korean operators will have to change their business strategy if they are to survive."

It’s probably fair to say that the UK market isn’t in any immediate danger, although unlike unmetered dialup, the problems are more likely to become apparent over the long-term.

ADSL, as with other services (cable etc.) is a largely fixed-cost platform, thus giving ISPs greater control over their price and services. This doesn’t make them immune to problems, yet should make it easier for managers to spot future concerns ahead of their occurrence.

Mind you, if other countries didn’t adjust in time then what hope does the UK have? Comments please. More @ ElectricNews .