Broadband Service Providers Need Investment in Both Infrastructure and Innovative Services to Differentiate

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3Q 2019 | IN-5580

China has been the main driving force behind global fiber optic broadband market development as key telecom operators have been aggressively laying out fiber networks to residential broadband customers. According to Chinese telecom operators’ latest data, Fiber to the Home (FTTH) penetration has reached nearly 90% of the wired broadband subscriber base. China Telecom, China Mobile, and China Unicom are the key operators contributing to FTTH subscriber base and driving China to become the market with the highest fiber optic broadband penetration. Outside of China, Japan and South Korea are the markets with the highest fiber optic broadband penetration in Asia-Pacific.

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China FTTH Penetration Reaches Nearly 90%

NEWS


China has been the main driving force behind global fiber optic broadband market development as key telecom operators have been aggressively laying out fiber networks to residential broadband customers. According to Chinese telecom operators’ latest data, Fiber to the Home (FTTH) penetration has reached nearly 90% of the wired broadband subscriber base. China Telecom, China Mobile, and China Unicom are the key operators contributing to FTTH subscriber base and driving China to become the market with the highest fiber optic broadband penetration. Outside of China, Japan and South Korea are the markets with the highest fiber optic broadband penetration in Asia-Pacific.

Still Room for Fiber Optic Broadband Network Expansion

IMPACT


The worldwide fixed broadband market has been growing, and is on track to surpass a subscriber base of one billion in 2019. Fixed network operators are expanding their networks to cover underserved areas while upgrading infrastructure to provide better quality broadband access in areas that already have higher broadband penetration. Fixed wireless broadband networks are the other primary method of residential broadband access expansion in rural and unserved areas in many markets. Investment in high speed fiber optic broadband networks is expected to result in more than half of the global broadband subscriber base using fiber optic broadband access in 2019.

High fiber optic broadband home penetration in China is likely to slow down the fiber broadband adoption rate in Asia-Pacific since deployment cost can be a barrier for emerging markets across the region. Similarly, in other emerging markets in Latin America and the Middle East and Africa that have low Average Revenue Per User (ARPU), deployment cost is still a barrier for fiber optic market development.However, there is still room for fiber optic deployments in markets such as North America and, especially, Europe, where fiber optic broadband penetration makes up less than half of the total fixed broadband user base in many markets. Emerging applications such as 4K/8K video services, cloud gaming, and Virtual Reality (VR) create challenges to existing broadband networks especially in regard to latency and total bandwidth. Service providers will need to invest in upgrading broadband infrastructure to offer extensive gigabit speed services as bandwidth hungry applications continue to gain adoption.

Differentiation of Services to Ensure Long-Term Success

RECOMMENDATIONS


Heavy investment in expanding higher speed broadband network can generate higher ARPU for service providers. However, price pressure may increase as competition gets stiffer in many broadband markets. Service providers may experience thin profit margins when there is price competition to win larger subscriber bases. Broadband operators will need to find ways to improve profit margins while maintaining this base. Differentiation of services from competitors, additional services to drive higher ARPU, investment in advanced technologies to lower Operational Expenditure (OPEX), and reducing churn rate are necessary.

As the user base for video streaming services increases, so does the demand for higher bandwidth and better stability. FTTH deployments prove attractive here by providing super high bandwidth to consumers’ homes. As the majority of traffic in a broadband household is transferred through in-home Wi-Fi networks, reliable home Wi-Fi is an essential quality of service that consumers expect. The adoption of latency-sensitive applications such as VR and cloud gaming will further increase this demand.

Service providers have introduced whole home Wi-Fi systems, which include a minimum of two Wi-Fi mesh routers to support a reliable Wi-Fi signal throughout their customers’ homes. Such systems help improve revenue by upselling Wi-Fi mesh routers depending on the size of the house in order to achieve complete Wi-Fi coverage. They have also been proven to help service providers lower Capital Expenditure (CAPEX) by providing stable home Wi-Fi networks that result in less technical assistant hours for service providers. Integrating smart home features into broadband services is another strategy broadband operators can use to differentiate their services from their competitors’. Comcast’s approach to integrating third-party smart home devices across its next-generation routers provides smart home capabilities to its broadband customers, resulting in higher customer retention.High demand for whole home Wi-Fi coverage and performance creates a huge opportunity for chipset and device manufacturers to develop innovative solutions. Providing devices that support Wi-Fi 6 and higher Multiple Input, Multiple Output (MIMO) configuration and the integration of voice control features into Wi-Fi Customer Premises Equipment (CPE) will offer additional value to service providers and broadband users.  The right investment in network upgrades, advanced CPEs, and integrating home network management and smart home applications into broadband services will help service providers achieve long term success.

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