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February 07, 2013

Fixed Broadband Revenue Grows 7 Percent: How Much Will That Help?

By Gary Kim, Contributing Editor

Global fixed broadband services generated $188 billion worth of service revenue in 2012 – a 7-percent increase from 2011, according to ABI Research (News - Alert).

Fixed broadband service revenue will grow to $251 billion by 2018, ABI Research also predicts.

If one assumes 2012 global fixed network revenue as about $1 trillion, then broadband would represent about 19 percent of total fixed network revenue.

Assume video entertainment revenue such as IPTV (News - Alert) represents about 8 percent of telco revenue, on a global basis. That implies that 70 percent of global telco revenue still is being earned from voice services.

And if you assume global fixed network growth in developed and developing regions will be flat to negative, there’s a big revenue problem developing that everybody already recognizes: that replacing perhaps half of the voice revenue over perhaps a decade is the main challenge facing executives at many firms.

That might imply replacing about $350 billion. If ABI Research estimates prove accurate, broadband access will grow by about $63 billion between 2011 and 2018. For the sake of argument, assume fixed network broadband continues to grow at that same volume for the next five years, implying a decade-long increase of about $126 billion.

That roughly suggests the revenue shortfall fixed network operators will face is about $224 billion in current voice revenue that will be lost over 10 years.

In 2012, fiber-optic broadband service revenue had its strongest year-over-year growth of 24 percent, while DSL services grew 2 percent and cable broadband grew 6 percent.

In 2018, fiber to the home revenue should reach $81.6 billion – almost one third of global broadband service revenue, ABI Research says.

That’s helpful, but only modestly, as optical revenue cannibalizes cable modem and digital subscriber line revenue, for the most part.

The other issue is average revenue per user. Globally, broadband average revenue per user has continued to decline across all broadband platforms, says Jake Saunders, ABI Research VP.

The fixed broadband market in United States increased to $43 billion in 2012 from $41 billion in 2011. Fiber-optic broadband represents about 7 percent of total broadband revenue in United States.

ABI Research forecast that United States fiber to the home revenue will reach $4 billion at the end of 2013,” said Khin Sandi Lynn, ABI Research analyst.

All of that is helpful, in one sense, as optical fiber represents a chance for fixed network service providers to build services on the one dimension – raw bandwidth – that satellite, mobile and fixed wireless suppliers will ultimately not be able to match. 

But generally speaking, optical fiber deployments cannot drive enough revenue to replace lost voice revenue, since fiber service purchases offset other revenue currently earned from cable modem, DSL, satellite or fixed wireless services.

It is nearly a zero-sum game.




Edited by Braden Becker
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