In the UK, analysts say broadband speeds are rising and prices are falling, but what about future higher-speed network plans? As BT strengthens its partnership with Huawei for its fibre rollout, questions are raised about how future-proof fibre really is
Broadband prices in the UK remained somewhat stable during the recession, but have fallen in the past six months, according to latest research from Analysys Mason. The company said the average price paid for a fixed broadband service bundle (a single-, double- or triple-play package) has declined by about €5 between the fourth quarter of 2009 and the second quarter of 2010 to €40.7 per month.
According to Martin Scott, senior analyst at Analysys Mason, competition from mobile broadband services contributed to the downward pressure on fixed broadband tariffs during the first half of 2010.
"Having said that, the premium that providers charge for mobile broadband services is also eroding. Prepaid mobile broadband services with usage caps of 3 GB or more (which are sufficient for light users) now undercut entry-level fixed broadband service propositions in terms of price in most Western European countries," said Scott.
By contrast, broadband access speeds have increased: "Almost 20% of the tariffs we tracked during the second quarter of 2010 offered downstream bandwidths of 30 Mbps or greater (although the proportion of subscribers that actually take these ultra-fast services is likely to be much lower than 20%). Consequently, the average price per megabit per second has declined from €7.5 in the fourth quarter of 2009 to just €5.8 in the second quarter of 2010," Scott added.
Much higher speeds than this are only likely to be possible when the UK gets more fibre, but a separate report from Analysys Mason has raised some concerns over the future viability of fibre for markets in Europe.
According to principal analyst Rupert Wood, while regulatory hurdles are still often cited as the main obstacles to widespread fibre rollout, "a more intractable problem" is that wireless devices and services will continue to capture consumer telecoms "because it is in this area that there is the greatest rate of innovation," said Wood.
According to Wood, the increasing availability and growth of smartphones and wireless services "makes it harder for wireline operators because overall consumer spend on telecoms has long since ceased to grow in developed economies. Even though many cable operators have been offering superfast fixed broadband connectivity for some time in Europe and North America, take-up of such services remains troublingly low."
The vague promise of future services may appeal to some early FTTH adopters, he added. "However, it will become increasingly ineffective as a selling point unless the rate of innovation in devices and services that are uniquely suitable for FTTH gets some new impetus from vendors and service providers. The future cannot be simply plotted against increasing fixed-line bandwidth."
Wood said the indications from telcos are that FTTH capex will be "grossly disproportionate" to that of cheaper alternatives such as VDSL, and this is problematic as consumers' willingness to pay a premium for additional bandwidth is low, particularly in Europe.
He commented that current levels of commitment to FTTH look "unsustainable and fundamentally unreasonable", especially when VDSL networks will pass far more households.
"We therefore expect telcos that have opted for FTTH rollout beyond proof-of-concept trials and greenfield sites to back away from further commitment and, in some cases, reduce the scale of their FTTH roll-out plans. We would expect them to opt instead for a more cautious VDSL-based approach," he added.
The UK has been one of the slowest of the developed markets to roll out broadband, although Virgin Media has now upgraded its backbone network with fibre and BT has also announced plans to continue with its fibre plans.
This week Huawei also announced that it had strengthened its strategic partnership with BT by providing a number of access products to support BT Openreach's deployment of the company's new national fibre network.
BT has said it is planning to spend an extra £1 billion on its next-generation broadband network to bring superfast broadband to two-thirds of UK households by 2015, but it is still hedging its best by saying this is subject to an acceptable environment for investment. The company's current fibre spending plan is £2.5 billion.