The exponential growth in IP traffic, driven by new devices and applications, has made it imperative for operators to invest in fixed broadband networks. But, with prices stagnating, how quickly can they monetise these high-capacity networks?
Though mobile broadband is the most dynamic telecom market segment, fixed broadband uptake is growing at a healthy pace, with a seven percent annual increase over the past three years and reaching 11 percent penetration by end of last year. With the number of the subscribers forecast to reach one billion by the end of this decade, the case for investment in broadband infrastructure – whether upgrades of copper or deployment of pure fibre – is more compelling than ever for telecom operators.
“Fixed broadband usage along with subscriber numbers are growing consistently at strong levels both globally and especially locally. This trend is accelerated in countries which possess two key drivers – access to reliable, ultra-fast fibre networks and new HD and 4K content consumption habits by consumers. The advent of fibre to the home has opened new media consumption trends and both individual consumers and families are drawing down on this by subscribing to fast, reliable and consistent home broadband services,” says Jonathan James Haysom, VP-Home Product Marketing, Etisalat. from Etisalat.
Matthew Smith, Head of Engagement Line Smart Networks, Ericsson, agrees that the fixed broadband growth spurred by the capacity demands driven by insatiable consumer usage of video on a myriad of smart devices, and the storage and fast access to cloud content. “This is fueling new fibre rollout, including government driven intiatives like National Broadband Networks. Fixed broadband traffic is currently around 60 Exabytes per month, growing at 20% CAGR over next five years.”
Mohamed Salama, Head of Regional Business Center, Fixed Networks, Nokia MEA, adds establishing a fixed network that can meet the increasing and evolving data capacity requirements for both residential and business subscribers continues to be the leading trend in the region. “Many governments in the region are investing heavily in broadband infrastructure including fibre-optic rollouts and improved mobile broadband networks,” he says.
According to the FTTH Council Europe, the UAE has the highest FTTH penetration globally (around 75 percent) – even ahead of Korea, followed closely by Qatar with 64 percent penetration. Since 2010, fibre broadband has become the fastest growing technology in the UAE. Jordan is deploying a fibre network and has been working towards a national broadband network since 2003. In Oman, there has been recent and renewed push towards improving fixed broadband infrastructure, particularly fibre based networks.
“The fixed broadband market is at different levels of maturity in various GCC countries. In the UAE for example, where there is more than 2.5 million kilometers of fiber laid out, fixed broadband accounts for majority of the internet traffic. Businesses too leverage the advanced fiber-based fixed connectivity for Internet and internal business connectivity needs as well. In other markets such as Kuwait, where fiber rollouts have been slower- much of the internet traffic is carried on mobile networks. So it is difficult to generalize a particular trend and one needs to takes a nuanced country-wise view,” says Paul Black, Director of Telecoms and Media, IDC.
According to the latest figures available from International Telecom Union (ITU), the prices of fixed broadband plans dropped sharply between 2008 and 2011, especially in developing countries, and have been stagnating since then. This presents telecom operators with a daunting challenge – how to manage growing traffic and spur new revenue steams at the same time?
“Operators with intense FTTH/B roll-out and penetration targets can leverage bundle packages including broadband and IPTV services to foster the adoption of fibre and improve loyalty rates. Most of the operators with such bundled offers typically do not allow the consumer to purchase the service as a stand-alone, driving the adoption of multi-pay bundle services,” says Joe Abi Akl, Senior Associate at Booz Allen Hamilton MENA.
He adds that operators should aim to monetize fixed broadband by offering discounts or by focusing on value-added services for consumers (IPTV, online gaming, etc.) and for enterprises (cloud services, IT services, etc.).
Salama from Nokia says for operators, monetization is closely tied to the assets they have and their ability to deploy and deliver ultra-broadband services over those assets – either on their own or via profitable partnerships. “On the business side, it is largely driven by the quality of service provided, how much data capacity can be accessed and if it is symmetrical or not.”
Haysom from Etisalat offers a different perspective: “Fixed broadband has many virtues. Firstly, it doesn’t have many external factors which can affect its performance. Secondly, it is very efficient in delivering rich, ultra-high definition media services. The key then is to deliver services and features, which can leverage these qualities.
“The key then is to deliver services and features which can leverage these qualities. Full service operators who deliver fixed voice, broadband Internet and TV entertainment services are able to monetize the networks in a far greater capacity than carriers who don’t. Leveraging the network’s marginal utility and delivering quality services which subscribers both want and demand is key to monetising fixed broadband.”
The global average price of a basic fixed broadband plan is 1.7 times higher than the average price of a comparable mobile broadband plan. With 4G delivering real-world performance, and impending 5G promising a giant leap in throughput, the vexing question before the industry is whether mobile broadband can replace fixed broadband.
“I can’t foresee a future where fixed broadband is no longer applicable or relevant. Its usage will become more discreet as we move towards a heterogeneous network (het-net) future to deliver 5G services. Phones and networks in a 5G future become more intelligent and will combine many of these services concurrently to deliver the bandwidth and reliability consumers seek. Many carriers are re-investing in Wi-Fi, fibre access as well as mobile to ensure a consistent and reliable 5G future,” says Haysom.
Salama echoes a similar opinion: “We don’t see wireless replacing fixed but rather complementing it. Often, people only think of fibre deployments as only addressing household and industry connectivity to ultra-broadband access. However, 5G roll out will require the low latency and high capacity fibre can provide. Expanding fibre to the most economical point will be important for operators preparing their networks for big data, data centre connectivity and mobile backhauling of macro cells and a huge number of small cells.”
Besides, IoT applications may also require fibre broadband and network capacity may be critical to the success of smart cities. Considering that Cisco predicts consumers will use four-times the amount of data than businesses by 2019 and Gartner says the typical family home could have as many as 500 networked devices by 2022, it is imperative for operators in invest in high-capacity networks, and fixed broadband seems to the only choice before them.