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Datamonitor: Broadband household penetration expected to ultimately settle at 60% in advanced markets (8/12/2005)

Consumer broadband adoption is currently increasing at its fastest rate in many markets across Western Europe, according to a report published by independent market analyst Datamonitor (DTM.L), 'Consumer broadband markets: approaching maturity?'. Datamonitor expects consumer broadband penetration to ultimately settle at around 60% in terms of household penetration in advanced markets. "The current situation in many markets can be best described as one of rapidly increasing penetration, where broadband has effectively entered its growth sweet spot", says Tim Gower, enterprise communications analyst at Datamonitor and author of the report. "With some markets potentially experiencing changes in the household penetration of broadband of up 10% in a calendar year, service providers must be well positioned to take advantage of the forthcoming penetration acceleration, prior to the inevitable slowdown."

Datamonitor's report highlights the current and future state of consumer broadband markets in Western Europe and North America, focusing on the likely service provider revenues in 16 countries.

Broadband is now central to many service providers' strategies. With the global telecommunications industry having to restructure, the revenue potential from broadband technology has become central to many service providers' strategies. Technologies such as broadband and managed services are helping them to counter a decline in traditional markets such as fixed-line voice revenues.

Aggressive marketing campaigns have served to raise consumer awareness and competitive pricing programs have meant the technology is now living up to the hype it received for so long. A dramatic increase in broadband coverage as well as improvements in voice, video and data applications have also helped to stimulate demand. Indeed, the sector's development can be appreciated by the fact that in many countries it is the fastest growing consumer technology of all time, outpacing the uptake of mobile phones and dial-up Internet access.

Digital subscriber line (DSL) is the technology leader

Various flavors of broadband access technology are on offer. DSL, cable, fixed wireless, satellite, broadband over powerline and fiber-to-the-home all offer different broadband alternatives.

DSL has developed into the dominant broadband access technology in terms of market share and has already achieved good penetration levels in most markets. With DSL systems, and ADSL (Asymmetric Digital Subscriber Line) in particular, generally at very affordable price levels, it may prove difficult for other technologies to compete unless they can offer significant additional benefits.

Demand varies across Western Europe

At present, the French, Norwegian and Dutch markets have the highest penetration of DSL in Europe. Effective regulation has encouraged extremely fierce price competition in these markets which has led to rapid consumer uptake. Incumbent operators in Portugal and Ireland, on the other hand, have been less effectively regulated and this situation has led to limited competition, high prices and a slower increase in DSL household penetration.

The UK is currently experiencing extremely strong growth in consumer broadband uptake. Driven in large part by DSL, and to a lesser extent cable, close to 8 million households in the UK will have a broadband connection by the end of 2005.

Penetration increases are not sustainable

With narrowband Internet penetration serving as a useful guide, there is good visibility into broadband penetration levels and there are clear signs that consumer broadband penetration should ultimately settle at around 60% in terms of household penetration in advanced markets. However, the pace at which consumer broadband markets develop and reach market maturity certainly generates some debate.

"At current rates of broadband adoption, there are on average a good eighteen months to two years of strong penetration increases across Western Europe before markets begin to mature", concludes Gower. "Although, there will be a variation in this process across markets, service providers must clearly ensure that they are in the best position to take advantage of the various country opportunities".

www.datamonitor.com