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Summary

The consumer fixed broadband market will continue to show growth in both subscriptions and revenues over the next five years. With continued investment in next-generation access (NGA) technology, the shift to higher-speed services will accelerate, and by 2020 81% of broadband subscriptions will be for services over 10Mbps. Although there is little evidence that this shift is leading to any substantial or continued growth in broadband ARPU, increased speed is important for the overall customer experience, which has a direct impact on customer churn.

Fixed broadband continues to grow – at least until 2020

Although broadband fixed-mobile substitution has a significant impact in some parts of the world, overall the consumer fixed broadband market continues to grow in terms of subscriptions, speed, and revenues. Over the next five years, consumer fixed broadband subscriptions will grow by a CAGR of 4% and global household penetration will reach the 40% mark by 2019. Revenues will grow pretty much in line with the rate of subscriptions and total $237bn in 2020.

However, as we approach 2020, growth is definitely slowing. With many markets now saturated and the introduction of new mobile broadband standards that can compete more directly with fixed access, the era of year-on-year fixed broadband growth is likely to be over by 2025.

Investment in NGA will pay dividends

Over the next five years, there will be rapid take-up of high-speed subscriptions as the reach of NGA DSL, cable, and fiber spreads. The proportion of subscribers on services of 10Mbps or less will fall from 40% to 19% between 2015 and 2020. Conversely, the proportion of subscribers on services of 100Mbps or more will jump from 7% to 17% in the same time period.

Ovum’s Broadband Experience Scorecard shows there is a direct link between lower broadband speeds and customer churn. Customers on speeds of less than 10Mbps tend to be far less satisfied and therefore more likely to churn than those on 10Mbps or above. By 2020, with the greater availability of more advanced services and applications such as UHD TV and virtual reality, customer expectations will be far greater.

However, service providers and regulators should be wary not to inflate numbers simply to look good in regional benchmarks. With “up to” broadband tariffs still common, it is easy to paint a rosy picture, far from the truth of what end users are really experiencing. In the Scorecard survey, a massive 33% of respondents claimed that they were receiving a lower broadband speed than what they had expected when they first signed up to a service.

ARPU growth still a challenge

With the continued decline in fixed voice revenues, it is good news for operators that broadband access continues to show growth. However, revenue growth is largely still being driven by the rise in subscriptions. Even when consumers clamor for higher speeds, intense competition often means that operators are having to offer more for less, or at least the same. The result is that true and sustained ARPU growth for many in the fixed broadband world remains elusive.

Appendix

Further reading

Consumer Broadband Subscription and Revenue Forecast: 2015–20, TE0003-000903 (February 2016)

Author

Michael Philpott, Practice Leader, Consumer Services

michael.philpott@ovum.com

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