Fixed Broadband Proves Immune to Economic Downturn … For Now

Global third-quarter broadband subscriber numbers for 2008 are in the house and so far, broadband services are proving immune to the global economic meltdown. Quarter-over-quarter growth was up slightly and in line with typical seasonality for the third quarter. Surprisingly, the only broadband type to experience a slowdown was FTTH, as demand in Japan slowed during the quarter. Other broadband services, such as voice-over-broadband and IPTV services, continue to experience strong demand, with only small pockets of slowdown. So overall, it would be considered a good quarter for broadband growth.

The question is (and the one that I am asked frequently) whether this will continue. I can say that after reading quarterly reports from no less than 200 operators, there was scarcely a mention of any capex reductions for the current year and little, if any, talk of changes to next year’s capital spending plans. That’s good news for the rest of 2008, but things may prove differently going forward into 2009.

I can speak from personal experience that consumer concerns about spending went from cautious to frightened overnight during early October. It was immediately noticeable everywhere — the gym, restaurants, shopping malls, etc. Everyone is looking for a deal and that includes their telecommunication services. In just a one-week period, three people I know dropped their telco broadband and voice package and signed up for a less costly triple-play bundle from their cable operator, again proving the value of the bundle.

As consumers become more conscientious of their spending, it will be critical for operators to offer the best solutions to meet their needs. Similar to retail stores and automobile manufacturers, it will be necessary to offer discounts, free services and rebates in order to not only keep up demand, but also (and perhaps more importantly) reduce churn.

Otherwise, providers of fixed broadband services may find an increasingly challenging environment, especially as mobile broadband services and devices proliferate.

Teresa Mastrangelo is principal analyst at broadbandtrends, a service of The Windsor Oaks Group LLC, which is an independent market research and consulting firm specializing in the coverage of network transformation activity related to broadband infrastructure and services, including IPTV, VoIP and NGN.