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Broadband access and services are the new battlegrounds for Internet service providers (ISPs), telecommunications providers and cable television companies. Those that control the high-speed pipes may ultimately control the customer by offering a bundle of voice, video and data services.
Digital subscriber line (DSL) and cable modem technologies are currently locked in a battle for broadband access supremacy, with fixed-wireless and other alternative connectivity technologies on the outside looking in, but showing great promise in the years to come.
Boston-based The Yankee Group’s (www.yankeegroup.com) Analyst and Director of Broadband Access Technologies, Matt Davis, describes the state of the broadband access market and his vision of the industry in the years to come.
BW: How fast do you see broadband subscriber numbers rising in the next five years, and what will be the driving forces and potential obstacles?
Davis: We have forecasted, and continue to forecast that growth will be slow and steady. Broadband availability has reached 75 percent or so of U.S. homes, so we’ve passed the lack of infrastructure barrier. The next barrier we have is pricing. We believe that broadband pricing has to come down to be closer to a $30 price point. We’ve seen service providers, both from the cable and DSL side, exploring tiered pricing, trying to bring customers in on a lower package at a lesser price, and ultimately migrate them up in price and functionality.
BW: What technologies will drive the increased availability of broadband?
Davis: When we tracked early cable and DSL deployments, they were in the 30 NFL cities. Then they moved into the tier 2 cities and began to expand a little bit after that. With the telecom downturn, the push to get broadband deeper into rural areas has pretty much stopped. To get past the 75 percent to 80 percent penetration, up to say 95 percent or 98 percent, is going to be a hard road. However, that 20 percent gap spawns opportunities for technologies like satellite, fixed wireless and fiber to the home. I think we are going to see greater pressure coming from alternative access technologies.
BW: Of the alternative technologies you mention, which ones do you see making the most progress in the next couple of years?
Davis: I think in terms of numbers, it will be satellite. I think fixed-wireless will also have a lot of interesting applications: hot spots, wireless LANs and point-to-point backhaul. However, I think the technology still has to mature. There are a lot of barriers for fixed-wireless deployments: expensive customer premise equipment and difficult installations. I know they’ve overcome some of those barriers with non line-of-sight and roaming technologies.
BW: How will the fall of T–1 prices affect the adoption of other broadband access technologies?
Davis: We’ve reduced our small- and medium-sized business DSL outlook two years in a row because of the resiliency of T–1s. The unchannelized T–1, at $300 or so per month, has proven to be very successful. That certainly has constrained the growth of DSL, and with CLECs and DLECs falling off, the only game in town is the ILECs, and the ILECs have chosen to continue to push T–1s. I mean why wouldn’t they?
BW: How is the move to bundled services affecting the broadband access market?
Davis: The biggest macro trend I am tracking right now is the increased importance of broadband in service package bundles. In the past, broadband access services have been peripheral business lines. Cable MSOs’ core business was cable television, and telcos had local voice. The broadband battlefield is going to have increasingly high stakes because if you lose a customer’s broadband business, you will not only lose the $40 per month broadband fees, you will lose the whole customer, and all of that revenue.