The popularity of mobile broadband access via USB modems has taken both fixed and mobile operators by surprise. Fixed operators are – justifiably – concerned because they stand to lose market share in the area that has been their engine of growth. Mobile broadband already accounts for nearly 20% of broadband subscriptions in some European markets and in one, Austria, it has reached 30%. Usage profiles suggest that the addressable market for substitutive mobile broadband is currently about 40% of the fixed broadband market. While the rise of streamed video radically alters the usage profile of a large segment of users, the reality is that for some major fixed ISPs the median data usage is only 1GB per month, roughly the same as mean mobile broadband usage.
A major concern for mobile operators is of course that competition in mobile broadband has driven retail prices down to a level far below cost and that this will slow the growth of mobile broadband. However, the longer-term dynamics of per-subscriber network costs work in favour of mobile as it evolves towards LTE and on to more aggregated IP backhaul infrastructures, and the more these dynamics work in mobile’s favour the more they work against fixed, where a slowing or even diminishing customer base would raise per-subscriber network costs.
Analysys Mason forecasts that nearly a quarter of broadband-equipped sites will be mobile-only by 2013, and that about 55% of broadband-equipped sites will have access to at least one mobile broadband subscription.
Figure 1: Broadband-equipped sites in Europe, split into fixed-only, fixed and mobile, and mobile-only, 2006–2013 [Source: Analysys Mason, 2008]
Fixed broadband is beginning to lose its edge to mobile, and fixed operators need to rethink their strategy. For fixed service providers, the pertinent question is, “Where do fixed networks provide a unique advantage?”. The choice between fixed and mobile varieties of broadband makes the potential purchaser ask, “What services am I buying this for?”, and therefore at a retail level, fixed service providers will need to sell broadband-based services based on the unique capabilities of fixed networks. At a wholesale level, operators need to provide services that enable as much rich multimedia content to traverse their networks as possible in order to differentiate fixed as far as possible from mobile.
However, as fixed networks’ advantage is eroded by higher capacity, data-centric mobile networks, the question is then where best to invest in the longer term in order to maintain the uniqueness of their capabilities.
The obvious response is investment in NGA, but the threat of mobile broadband does not necessarily improve the business case for NGA: it merely makes doing nothing less comfortable. For sure FTTx will enable fixed service providers to offer services beyond the capability of mobile networks, but because these services encroach upon broadcasting they will rarely be unique advantages. The risk for fixed players is that they are panicked into going down a route of diminishing returns, investing heavily in an essentially defensive business case with absolutely no guarantee of ever getting a return because of:
- low consumer interest and spiralling per-subscriber costs to recover
- a poor economic climate for capturing discretionary spend
- the value-eroding influence of over-the-top video services
- persistent regulatory uncertainty.
Fixed operators need to extend the question of where fixed networks provide a unique advantage, beyond the retail sphere and into the range of wholesale network services they offer both to fixed – and crucially to mobile – operators. For the next three years or so, until LTE is widespread, the inclusion of DSL to their service mix may be useful tool for mobile operators to limit in-home usage of mobile broadband, and fixed operators should refine their wholesale offers to serve the fixed–mobile broadband bundle. In the long-term, the (perhaps unstoppable) trend is that mobile will take more of the end-user edge, but it is an equally long-term trend that the capacity advantage of fixed means it has new opportunities all the way to the last mile. There are opportunities for the fixed-line player – if it has made the right strategic investments, in all-IP/Ethernet metro networks, in managed network services for mobile operators and, across the core, in IT platform provision for service providers, both network-based and over-the-top. These opportunities are all the greater as the next generations of RAN build coupled with stagnant ARPU and a worsening economic climate impose cost controls on mobile operators. It is in these network and IT areas that fixed operators may be harnessing long-term growth trends rather than resisting long-term decline.
