By Oliver Johnson, CEO of analyst house Point Topic
The broadband market has fared reasonably well over the past three years, particularly given prevailing market conditions and certainly in comparison to other sectors.
In Europe, subscriber numbers have grown by 24 percent, which is in line with global growth of 27 percent.
By comparing current performance with expectations set in 2009 we can identify which countries have triumphed the broadband “crunch” by battling their way through to meet, or even exceed, expectations.
There has been exceptional overall growth of 59 percent in Eastern Europe during the past three years.
Hungary, Greece and Russia in particular have all exceeded growth expectations set in 2009.
In Russia (up 31.5 percent), it has been notoriously difficult to source accurate figures for broadband take-up.
However, new sources of information released since 2009 have not only forced up forecasts but also the actual number of broadband subscribers.
Fibre has been particularly impressive according to the numbers that operators are now reporting.
Even in the face of severe depression, broadband subscriptions in Greece (up 12 percent) are relatively cheap – their best tariffs are in the lowest 30 percent worldwide – and this will certainly have helped drive take-up.
Hungary (up 14 percent), meanwhile, benefits from a well-set regulator and has been at the forefront of upgrading its network and rolling out superfast services, which is reflected in a high average bandwidth on offer.
In contrast, growth was slower than expected in the Czech Republic, Romania and Poland, which have all slipped behind our 2009 forecasts.
Prices in the Czech Republic (down 12 percent) remain high relative to the global averages and, while there has been significant deployment of superfast services, they are starting to saturate the portion of the market that can afford the tariffs.
Consequently, we would expect to see some cost cutting, particularly for DSL tariffs on offer before too long.
Romania (down 10 percent) and Poland (down 7.5 percent) have different issues.
There are very competitive tariffs available in both markets but this hasn’t driven take-up as expected.
It is likely that the deployment footprint is at the root of this issue, where particular services aren’t available to significant sections of the market.
With significant central support and further roll out there should be pent-up demand waiting for the right combination of price, bandwidth and bundled services to be triggered.
Growth in Western Europe has been more modest at 14 percent, but this reflects the relative maturity of broadband within these markets.
Portugal (up 10 percent) was the best performer overall.
France (up nine percent) is often touted as a leader in Europe and continues to beat expectations.
With high broadband penetration it has also managed to get high IPTV adoption and widespread VoIP use.
However, standalone, broadband-only services are starting to disappear meaning consumers have less choice.
This is being counteracted for the moment as France offers the lowest price bundles, relative to average income in the country, of anywhere in the world.
At the other end of the scale are Italy and Finland (both down 12 percent).
Finland’s underperformance relative to our forecasts is a combination of geography and price.
DSL tariffs are expensive and the roll out of superfast services has been a little slow compared to other markets.
That said, there is good coverage and take-up in the urban areas and the problem then becomes, in a country with quite so much rural territory, how to effectively supply broadband to the remainder.
Slow take-up in Italy is, we believe, primarily due to deployment issues.
There is decent coverage for highly urbanised revenue rich areas but superfast in particular has made little inroad in suburban and rural locations.
Coupled with the price resistance we would expect to see in a recession, there are good reasons why Italy hasn’t grown as expected.
Shift in focus
Before 2008 the optimistic view was that FTTH would be the dominant technology being deployed, but during 2011 and early 2012 there were signals from the EC that recognised the costs and difficulties of driving this technology in conjunction with commercial organisations.
Without more revenue guarantees, and with infrastructure spend severely dented by the shortage of capital, the ISPs and privatised incumbents have carried the argument for more cost-effective solutions.
This has had a slowing effect on European growth compared to many other markets, particularly when coupled with the financial health and lack of confidence amongst consumers, and the relatively high penetration of broadband already.