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Broadband Market To Double By 2005
By: MarkJ - 13 November, 2003 (1:32 PM)

The latest report from Arthur D. Little (ADL), a management and technology consulting firm, predicts that the global broadband market is set to more than double in size from $30 (USD) to 80 billion within the next five years:

ARTHUR D. LITTLE REPORT PREDICTS THAT THE GLOBAL BROADBAND MARKET WILL DOUBLE IN SIZE

A new report from Arthur D. Little (ADL), one of Europe’s premier management and technology consulting firms, predicts that the global broadband market is set to more than double in size from USD$30 to 80 billion within the next five years, with a compound annual growth rate (CAGR) of 22%. The highest growth rates are expected in Europe with a CAGR of 30%.

According to the Arthur D. Little Global Broadband Report, there are currently 57 million broadband subscriptions worldwide. North America remains the biggest broadband market, amounting to 45% of revenues, followed by Europe and Asia with 20% each. While the growth rate for broadband varies from region to region, this market has still managed to outperform the global telecommunications industry by a factor of 12 during the period from 2000 to 2003.

Today, the Average Revenue Per User (ARPU) in broadband is based largely on access fees for a basic service. In 2003, access fees are expected to account for about 85% of total revenues earned from broadband users. Arthur D. Little believes that this figure is slightly down on previous years as the share of revenues earned from premium content (7% in 2003; up from 3% in 2002) and equipment purchases / rental (8% in 2003; up from 7% in 2002) increases. Access therefore accounts for the overwhelming share of user-generated revenues.

The reliance on access revenues presents a number of significant challenges for operators comments Nick George, Head of Media with Arthur D. Little UK, “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.”

He continues, “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 onwards.”

The Arthur D. Little Global Broadband Report also predicts a number of opportunities arising for content providers. It states that currently usage levels in broadband households are typically about two hours a day – more than twice 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 expected that better encryption and digital rights management will facilitate the growth of the premium content market. Rather than providing like-for-like services, the report recommends that content providers should utilise usage-based pricing models tailored according to customers needs.

However George warns that non-telco aligned ISPs could be the big broadband losers unless they adopt a more pre-emptive stance, “At present, 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 the 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.”

The Arthur D. Little Global Broadband Report covers 22 countries in North America, South America, Europe and Asia. This group of countries represent 57% of GDP and over 90% of the global broadband market. The quantitative and qualitative results and conclusions in this report are based on market research, analysis and modeling by the Arthur D. Little and interviews and workshops with leading companies in this industry. For a summary of the report, please contact Dell Quinn at EuroPR Group via telephone: 0208 971 6413 or email:dquinn@europrgroup.com


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