Market Overview
Broadband telecommunications is a new generation of Internet-based communications service. Some of the key drivers for its adoption by consumers are:-
▪ High speed access (greater than 1Mbit/s)
▪ “Always on” – there is no requirement to dial up to make a connection
▪ Predictable monthly connection charges
▪ More flexible telephony.
Faster bandwidth will become increasingly important as Internet-based entertainment content continues to grow, and consumers demand more interactive content including live audio and video. These new types of content require significantly greater bandwidth, and are also time critical. New generations of Internet-based telephony will also require fast guaranteed bandwidth.
The “always on” feature is also important. Traditionally, consumers wishing to connect to the Internet have had to “dial up” and establish a connection with a modem. This process can be take a significant amount of time, especially if either the phone system or the service provider’s lines are busy. With broadband this frustrating delay is eliminated.
For these reasons there is an accelerating demand for Broadband; the market has entered a phase of rapid growth with the number of DSL Broadband connections worldwide having grown at a rate of c.78% over the past twelve months. Over 100 million lines were installed as by the end of 2003. (Source: Point Topic, January 2004).
Mobile phone usage took 5.5 years to grow from 10m to 100m users worldwide: broadband has achieved the same growth in 3.5 years.
As none of the major markets are yet approaching saturation point this rapid growth is expected to continue for the foreseeable future.
“Broadband is arriving at a time when the revolutionary potential of the Internet has still yet to be tapped”, commented Tim Kelly, Head of the ITU’s Strategy and Policy Unit recently. (Source, Reuters)
The key element for the provision of Broadband is the technology to carry the
service over the “last mile” to the subscriber’s home or business. This element
is the most costly, but also potentially the most lucrative, since it confers
“ownership” of the customer.
Whilst broadband is usually associated with provision of services to homes, and
this is indeed by far the largest revenue segment, these technologies are also
used to supply corporate firms.
To satisfy accelerating demand a number of broadband technologies have emerged.
In addition to PLC, these include:-
▪ Fibre-to-the Home (FTTH)
▪ DSL
▪ Cable TV,
▪ Wireless
▪ Satellite
A critical factor is the cost of infrastructure. Whilst Fibre
To The Home (FTTH)
theoretically gives the best performance, the cost of installing fibre to every
home has ruled out this option for all but a small percentage of the population
in the foreseeable future. Attention has therefore focused on reusing existing
infrastructure, or on the use of radio or satellite technologies, which do not
require cable infrastructures.
Technologies are therefore closely linked with infrastructures and with the
strategies of the owners of those infrastructures.
Second generation ‘new’ carriers and medium sized fibre wholesale/retail
carriers are effectively blocked from providing low cost competitive services
due to the current telecom networks “Last Mile” being owned and operated by the
incumbent telecom provider.
These incumbent telecom providers defend their monopolies and defy regulators through a range of delay and obstructionist strategies causing new carriers to incur additional costs, achieve slower market penetration and to lower their revenue returns.
The largest number of global broadband connections are provided by DSL (Digital Subscriber Loop) – a technology which reuses traditional copper telephone lines, owned by incumbent telecom providers such as British Telecom, Deutsche Telekom, France Telecom and Telefonica.
DSL connections account for approximately 60% of global broadband connections, amounting to some 47m lines, as of June 2003. DSL is also growing faster than Cable outside of the US (Source: Point Topic Sept. 2003).
Within the last few years there have been regulatory moves towards “local loop unbundling” – forcing incumbents to open up their local exchanges to third party providers, giving rise to a new generation of “retail” DSL suppliers, buying from the “wholesale” incumbents.
Incumbent telcos (ILECs) are however widely predicted to dominate the “last mile”, due to their inbuilt advantages:-
▪ Brand recognition and huge customer base
▪ Ability to operate as both retailer and wholesaler
▪ Control of pricing and provisioning exchange in the local exchange
▪ Slow unbundling in some countries will give incumbents a head start The rollout of DSL technology has been constrained by a number of factors.
The technology has an exchange line limitation, which precludes offering service to
any customer whose line is more than approximately 2.5 miles from the local
exchange. Since it also requires new equipment to be installed, installations
have tended to be concentrated in areas of high population density, where
revenue opportunities are highest, and exchange lines are shorter.
In many countries DSL technology is simply not available.
In regions such as Eastern Europe or Southern Africa, where telephone
penetration is much lower than Western Europe, its advantages as a vehicle to
provide broadband are correspondingly less. In South Africa, for example,
telephone penetration is only 11.36%, and mobile telephony is rapidly
outstripping fixed lines at 20%. (Source: ITU)
The cost of implementing new fixed line telephony services, based on copper
pairs or cable tv networks, is costly and prohibitive, requiring extensive
infrastructure build. Alternative architectures such as mobile and PLT have
minimal infrastructure requirements and once the infrastructure is in place only
require end points to be deployed. In the case of PLC, the power distribution
infrastructure already exists; infrastructure requirements are limited to the
headend together with network conditioning and characterisation.
Cable TV is the second largest means of delivering broadband services, and
together with DSL accounts for nearly all of the broadband market.
Globally, Broadband Cable accounts for about 39% of broadband connections,
amounting to 30m lines, as of June 2003. (Point Topic, September 2003)
This technology utilises analogue Hybrid-Fibre-Coax (HFC) cable TV networks as
the infrastructure to deliver the services, and is offered by Cable TV
companies.
The relative success of Cable vs. DSL varies widely by country. Cable’s
penetration rates are limited by the extent of the underlying Cable
Infrastructure. Where this is relatively high (e.g. Benelux), then
Broadband Cable has been correspondingly successful.
The U.S. and Canada are unique in not only having more cable than DSL but also
faster Cable growth rates. The trade organisation Cablelabs (www.cablelabs.com)
has been active in developing technical standards to promote the adoption of
cable as a medium for delivering broadband services.
Elsewhere, growth rates for DSL are higher.
The other technologies on offer are wireless and satellite. Together these
account for less than 1% of broadband connections.
Satellite technology is useful for one-to-many applications, such as
broadcasting, but has economic and technical limitations for two-way
applications. It is useful as a niche technology, for some business
applications and possibly for remote rural areas, but as such it compliments,
rather than competes with mainstream technologies.
Wireless technologies were initially thought to be promising but have not
achieved market traction due to technical, environmental and regulatory issues.
As a “Last Mile” solution wireless has both infrastructure cost and
environmental constraints.
The construction of transmitters is subject a number of obstacles including:-
▪ finding suitable locations
▪ acquiring land
▪ obtaining planning permission
▪ constructing towers
Even the positioning of equipment on the end customer premise is often subject to planning permission and local by-laws. The environmental impact is significant and there is growing concern about the health risks associated with radio signals and the physical impact that towers have on the local environment.
Both DSL and Cable have utilised an existing analogue infrastructure to provide
broadband without the need for new cabling.
PLT exploits the Powerline infrastructure (standard electricity cables supplying
homes and businesses) to provide a very effective solution for the delivery of
broadband services. The electricity network has unrivalled ubiquity, with
higher potential coverage than any competing technology, which confers
significant advantages:-
▪ Attractive economics – no new cables are needed.
▪ Rapid market response – installation is fast.
▪ It provides multiple services with the same technology platform (voice,
data, video).
▪ It is a fixed wire technology – does not require expensive licences to be purchased or amortised.
These features, which are attractive in Western Europe, are even more attractive in any context where conventional telephone penetration is low. For this reason the technology is expected to be especially successful in Eastern Europe and Southern Africa.
PLT technology has now matured to the point where it is technically proven, and is now ready for commercial exploitation.
It has been forecast that PLT could increase European Broadband penetration by up to 20m additional connections in 2005. (Source: PUA)