London – June 16th 2010
Both fixed and mobile broadband markets will continue growing in revenues, up to $416bn in 2020, but operators face some hard decisions about future business models, according to a new study published by the Telco 2.0TM Initiative and co-authored by research & consulting firm Disruptive Analysis.
The new report, “Mobile, Fixed & Wholesale Broadband Business Models: Best Practice Innovation, ‘Telco 2.0' Opportunities, Forecasts and Future Scenarios” finds that telecom operators will benefit from both new types of broadband wholesale, and more sophisticated direct-to-user retail propositions and tariffs. Recent introductions of new tiered and capped wireless Internet data plans are early evidence of this trend.
Key findings from the report include:
- Global broadband access is forecast to increase from $274bn in 2010, to $416bn in 2020, an increase of 52% in revenue terms.
- More than half the revenue growth will come from wholesale and “two-sided” fees for improved access capacity and quality. This means revenue from parties other than the end-user themselves.
- By 2020, mobile broadband will be worth $138bn, or 32% of the total broadband access industry revenues.
- Three new revenue streams are identified: “Bulk Wholesale”, “Comes with Data”, “Slice and Dice”.
- New ‘upstream’ customers are forecast to generate over $90 billion in broadband revenues globally by 2020.
Today, many operators fear the supposed risks of becoming “dumb pipes”, but the study suggests the forecast market value means the term “happy pipe” is more appropriate for some. Certain telecom carriers will be able to add further value through enhanced “Telco 2.0” value-add services and platforms, but it is important to note that the basic carriage of data can itself be profitable and a source of substantial growth.
On the conventional retail broadband side, the big winners are fibre-based fixed services and mobile data plans for smartphones. Global ADSL and cable revenues will peak in mid-decade, and then decline with substitution from the progressive deployment of fibre. PC-based mobile broadband retail revenues will grow strongly in the short term, before being impacted by price competition and a shift from user-paid retail subscriptions to new wholesale-enabled models.
The ground-breaking study predicts that the wholesale market for broadband will evolve in three separate directions:
- “Bulk wholesale” is an evolution of today's approach to MVNOs and data roaming in mobile, or loop-unbundling and open fibre access in fixed markets. The report predicts an acceleration of this type of wholesale provision, as governments force greater openness on telecoms licencees, and operators look to alternative partnerships to supply new market niches with capacity. There is also a possibility for parties other than the end-user to pick up the bill for subscriptions – for example, some local authorities are now providing free broadband to disadvantaged communities.
- “Comes with data” business models have started to emerge recently, with devices such as the Amazon Kindle. Here, a product vendor or service provider contracts for data capacity with the broadband provider, and bundles it in a combined offer – the user does not have a subscription or direct relationship with the telco. The report expects this approach to be important for laptops, netbooks, tablets and various other new device categories.
- “Slice and dice” wholesale is more complex, and more controversial. This involves operators selling data capacity in fine-grained “parcels” to parties other than the user, who is typically also paying for some level of access. This type of “two-sided” business model could involve deals with consumer electronics vendors for extra high-quality streams over existing broadband lines, or to content/application providers where they pick up the bill for data transmission rather than the end-user.
The incremental revenue opportunity for new “slice and dice” wholesale business models in mobile broadband alone is forecast to be $21bn worldwide by 2020.
The report’s co-author and founder of Disruptive Analysis, Dean Bubley, said “Both fixed and mobile operators need to look beyond the traditional ‘end user subscription mindset’, and examine new and innovative wholesale opportunities. At the same time, they need to embrace radical evolution of their retail portfolios – for example, supporting prepaid fixed broadband, or offering innovative tiering and policy structures for mobile Internet access from smartphones and tablets. Whoever coined the term ‘dumb pipe’ has cost the industry billions in shareholder value through negative word-association; instead, “Happy Pipe” reflects optimism and some really interesting opportunities ”.
According to Chris Barraclough, co-author of the report and Managing Director of Telco 2.0, “Telco 2.0 is not about throwing away existing operator business models, but about evolving them to generate additional value. In new Telco 2.0 style ‘two-sided’ business models, there are ‘upstream’ and ‘downstream’ customers – upstream customers are typically enterprises or merchants seeking to reach their markets – the so-called ‘downstream’ customers.”
“As we show in this report, there are many creative ways that operators can add more value for existing downstream customers. However, it is also clear that those companies providing services over the Internet will increasingly seek to mash-up connectivity more tightly with their own offerings, for example by including connectivity as a part of their products. These new ‘upstream’ customers are alone forecast to generate over $90 billion in broadband revenues globally by 2020.”
The report, “Mobile, Fixed and Wholesale Broadband Business Models: Best Practice Innovation, ‘Telco 2.0' Opportunities, Forecasts and Future Scenarios” is available to buy from Disruptive Analysis and Telco 2.0. Details are available at New Mobile, Fixed and Wholesale Broadband Business Models and www.telco2.net