Bandwidth per bit prices drop by 40% for DSL customers

Cable and DSL fight back as fibre looms in their future.

Broadband operators, whether DSL or cable, are having to make big improvements to their offerings in the face of competition. This is clear from Point Topic’s most recent report, for Q2 2009, on quarterly tariff and speed data from ISPs around the world.

“If you want to convince the average customer they should take your broadband service over the competition you have two primary selling points, price and speed,” says Oliver Johnson, CEO at Point Topic. “If we look at the ‘entry level’ services on offer in these terms we can start to make some direct comparisons,”

Price competition at the entry level has been fierce but is starting to level of, as previously noted, however consumers are still getting more for their money.

Point Topic’s quarterly report shows that prices are not dropping as quickly as they were. But with upgraded infrastructure coming on stream, in the US and Europe in particular, both DSL and cable operators have been able to continue the improvements in the price per megabit that they offer. Residential consumers are paying 40% less than they were 18 months ago for each megabit of bandwidth over DSL and over 30% less for cable. This compares with a drop of just 17% for fibre.

Figure 1: Entry level price per megabit by technology – $USD

“Fibre has such an advantage over the other delivery technologies that those operators don’t have to worry much about DSL and cable as competitors, at least for the moment,” says Johnson
Hybrid solutions are the future for many consumers

Cable operators have increased the headline speed of their entry level services by 21% on a worldwide average in the last 18 months, compared to increases of 15% for fibre and 17% for DSL in the same period.

“New technology roll outs for both DSL and cable, primarily ADSL2+ and DOCSIS 3.0, allows operators to boost their speeds and they’ve done so proportionally more than those offering fibre,” says Johnson.

Figure 2: Entry level headline speeds – world average by technology

For lovers of coax and copper all is not lost. Hybrid networks have always been with us and will be for some time to come and the line between DSL or cable operators and those offering fibre is starting to blur.

Operators worldwide are rolling fibre further into the local loop, edging closer to the customer. Fibre direct to the premises will always have the edge for speed but in terms of deployment costs and the probability of recouping their investment other solutions are increasingly attractive to network providers.

Cable operators have a valuable advantage with the new DOCSIS 3.0 standard. “In the UK Virgin Media has upgraded almost its entire network to support DOCSIS 3.0 so now it can offer a 50Mbps service at a premium price, around $80 a month. Again in the UK, BT is following dozens of other telcos around the world by implementing FTTC [fibre-to-the-cabinet]. This will allow them to offer 40Mbps and up with VDSL providing the last few hundred metres of connection,” says Johnson

Although DSL is still the dominant access technology, with almost 65% of the world market against 21% for cable and 12% for fibre this is going to change in the next decade. As fibre rolls out, the evidence is consumers will take it above other access technologies. In some countries fibre has taken market leadership within five years where it is available, usually depending on hybrid FTTC or similar connections.

“We think that fibre all the way to the home [FTTH] will find it hard to make progress on economic grounds ,” explains Johnson. “Hybrid solutions will be popular with the major operators given the shorter period to achieve a suitable return on investment. And as long as they can deliver speeds which give users plenty of headroom then consumer pressure for more will be eased.”

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For background data and charts please contact:

Point Topic: Oliver Johnson

Email: oliver {at} point-topic(.)com

Tel. +44 (0) 20 3301 3303

About Point Topic

http://www.point-topic.com

Point Topic is an analyst company focusing entirely on broadband. Point Topic’s international services have a global reputation for providing the most up-to-date and authoritative user statistics, supplier profiles and applications reports on DSL, FTTx, cable and other broadband services worldwide.

Point Topic, reg. in England 3503830. 61 Gray’s Inn Road, London WC1X 8TL.