Global Broadband- On a Fast Track

Lakshmi Ramamurthy, Research Analyst

Economic Research and Analytics Division,

Information and Communication Technologies

Industry

26th August 2008

2

Focus Points

Broadband Overview

Broadband Technologies

Global Broadband Penetration

Broadband Penetration - Developed V/S Developing Markets

Growth Opportunities

Emerging Broadband Markets

China

India

Mexico

Brazil

Russia

3

Broadband Overview

Broadband Value Chain

Value Chain

Service

ProvidersContent

Providers

NetworkProviders

Broadband Definition

Broadband Impact

Government Health Sector Education

TelemedicineOnline Tax FilingOnline Licensing

Online Distance Education

Business Entertainment

E-CommerceOutsourcing

E-Procurement

News, Sports, e-mails, Movies

Telecommunication in which high-speed

internet connection is available enabling

data transmission with a wide band of

frequencies and capable of achieving

data transfer rates of at least 256 Kbps.

4

Global Broadband Technologies

Cable Modem

21%

FTXX

12%

Others

2%

DSL

65%

Western

Europe

34%

North America

15%

South & East

Asia

25%

Asia Pacific

12%

Latin America

6%

Middle East &

Africa

4%

Eastern Europe

4%

Eastern Europe

1%Middle East &

Africa

1%

Latin America

6%

South & East

Asia

1%

Asia Pacific

14%

North America

59%

Western

Europe

18%

2008 Global Broadband Technology 2008 DSL Broadband Technology

2008 Cable Broadband Technology 2008 FTTX Broadband Technology

South & East

Asia

41%

Asia Pacific

44%

Eastern

Europe

6%

Western

Europe

3%North America

6%

5

Global Broadband Penetration

2008 Broadband Growth & Population Penetration

Q2 2

008 G

row

th

Population Penetration

0%

2%

4%

6%

8%

10%

12%

25%20%10% 15%5% 30%

Asia Pacific

South East Asia

Middle East & Africa

Latin America

Eastern Europe

Western Europe

North America

0

20

40

60

80

100

120

Western

Europe

North

America

South &

East Asia

Asia Pacific Latin

America

Eastern

Europe

Middle East

& Africa

Region

Subscriber (M

illions)

2008 Broadband Subscribers Regional Split

•367 million broadband subscribers in 2008- 351 million subscribers in 2007

•2007- 2008 growth rate 4.7 percent

•Western Europe – Largest broadband subscriber base

•North America second largest market followed by Asia-Pacific

•Smallest market shares- Latin America, Eastern Europe & Middle East

Global Broadband Facts

Broadband Population Penetration

•Western Europe & North America- Highest broadband population penetration

•Broadband growth rates- Highest in Middle East, Latin America & South East Asia

•Asia- Pacific Market experienced the lowest growth rate

6

Present & Future Broadband Scenario Developed V/S Developing Markets

Developing MarketsDeveloped Markets

•Present scenario- Broadband access through mobile and portable devices

•High broadband penetration

•Broadband markets approach saturation

•Very limited broadband network availability

•New entrants have high market share opportunities

•Completion- Very low & persists in urban areas

•Initial broadband access – Fixed line telephony

•Low broadband penetration

•Early phase broadband growth- strong future growth

•Broadband geographic coverage- over 80%

•Market control- Dominant players

•Competition- Strong for DSL, cable & 3G technologies

Developed MarketsDeveloping Markets

•Mobile broadband limited usage – high cost, traffic limitations & limited data available for subscribers

•VOIP, IPTV, ultra mobile PC’s – widespread use near future

•Demand broadband speed increases manifolds

•Due to high competition- low cost per- bit

•A digital gap exists – No of telecommunication, computer & broadband users

•Wired infrastructure will fall short to meet huge demand

•Long term demand- Household & rural sector

•VOIP will be a “killer application”

•FTTX technology will huge growth opportunities- as wireless broadband players require backhaul services

Present Scenario

Future Scenario

7

Broadband Penetration- Developed Markets

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Denmark

Netherlands

Iceland

Norw

ay

Switzerland

Finland

Korea

Sweden

Canada

UK

France

Germ

any

USA

Japan

Country

Bro

adband Penetration

0

10,000

20,000

30,000

40,000

50,000

60,000

GDP Per Capita (USD)

Broadband penetration (per 100 subscribers) GDP per capita

Countries with High Broadband Penetration

Countries with Highest Broadband Subscribers

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

USA

Japan

Germ

any

UK

France

Korea

Italy

Canada

Spain

Netherlands

Country

Bro

adband P

opulation

(Million)

Factors - High Penetration

•High broadband penetration observed in Asian Markets - South Korea and Japan

•Western European countries - largest share of broadband subscribers

•North America holds the second place in terms of broadband penetration

•USA has the highest broadband subscribers

Present Scenario

•Government policy initiative

•High wage rates

•Huge infrastructure investments

•High competition among operators

•Affordable prices

•Bundled services (Laptop, Mobile & Broadband) – e.g. Orange in Europe

8

Fastest Growing Broadband Markets

North America

16%South & East

Asia

32%

Asia Pacific

8%

Latin America

9%

Eastern Europe

7%

Middle East &

Africa

5%Western

Europe

23%

2008 Net Additions Regional Share Countries :Fastest Growing Subscribers 2008

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Subcribers

Added (Millions)

China

USA

Germ

any

UK

India

Turkey

Brazil

Mexico

Japan

CountryPotential Growth Countries

High potential growth Markets – China, India, Mexico, Brazil & Russia

Reasons For High growth:

•Population & Economic Stability

•High GDP growth & Government Positive Initiatives

•Growing middle class income

•Increasing PC & mobile uptake

•Growing competition among operators & incumbents

•Untapped rural & household segments

•Wide use of cable TV’s

•Increasing telecommunication deregulation

Other Potential Growth Factors

9

• The Broadband penetration in China started in 2001

•The penetration rate per 100 inhabitants- 0.03 (2001)

•The penetration rate per 100 inhabitants- 7 (2007)

•Expected penetration rate per 100 inhabitants- 29.8 (2015)

China

0

20

40

60

80

100

120

140

160

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Year

Penetration (Per 100 Person)

Telephone Computer Broadband

ICT Indicators (China), 1990-2015

E-government & 2008 Olympics

Objective

•Digital government

•Increase uptake of ICT products & services

•Broadband Olympics – provide high speed internet &

broadband connections

10

China – Broadband Trends Overview

•Largest population in the world

•Broadband household penetration – low

•Household broadband- huge opportunity

•ADSL -dominant broadband technology followed by cable modem

•High penetration rates experienced due to the 2008 Beijing Olympics

•Increasing PC and Internet use in business increased penetration among corporate

•Satellite technology is upcoming in China

•Rural China - opportunity service providers

•Instant messages and online gaming-popular applications provided by the service providers

Growth Areas

•2008 Olympics

•Increasing PC & internet users

•Second tier cities

•Increasing broadband content & application

•Alternative broadband access terminals- set-top boxes

Bottlenecks

•Broadband market- state owned monopoly

•Low PC penetration in suburban areas

•Present network infrastructure- hampers high quality broadband service

•Access to emerging broadband technology - low

Present Broadband Trends

11

India

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Year

Penetration (Per 100 Person)

Telephone Computers Broadband

• The Broadband penetration in India started in 2002

•The penetration rate per 100 inhabitants- 0.01 (2001)

•The penetration rate per 100 inhabitants- 0.07 (2007)

•Expected penetration rate per 100 inhabitants- 1.2 (2015)

ICT Indicators (India), 1990-2015

Broadband Policy 2004

To improve quality of life through applications:

•Tele-education

•Tele-medicine

•E-governance

•Entertainment

•Employment generation

12

India – Broadband Trends Overview

Growth Areas

•Increase Broadband- Through cable TV

•Low cost broadband services by competitors

•Strong government policy- USO fund to increase penetration in rural India

•Low cost PC

Bottlenecks

•Low PC penetration

•Lack of content- Regional languages

•No tax benefits for broadband providers-

•Access technology – Poor

•Broadband Services- Are not completely regularized

Present Broadband Trends

•Second largest population in the world

•Residential customers - ADSL & cable modem

•Business customers - ADSL, Cable & satellite technologies

•Broadband sage- higher income strata

•Operators have stiff price competition to capture lower income strata

•Price competition - enable penetration among residential customers

•Business customers demand high speed and customized broadband solutions

•The pricing model is very different from rest of the countries- this captures more subscribers

•Business use of broadband is high as India offshore market booms

13

Mexico

0

20

40

60

80

100

120

140

160

180

200

Telephones Computers Broadband

Penetration

• The Broadband penetration in Mexico started in 2000

•The penetration rate per 100 inhabitants- 0.02 (2001)

•The penetration rate per 100 inhabitants- 4 (2007)

•Expected penetration rate per 100 inhabitants- 18 (2007)

ICT Indicators (Mexico), 1990-2015

E- Mexico

•This policy incorporates: e-Government, e-Education, e-

•Commerce and e-Health strategies Vision 2025

•Encompass & integrate -society through ICT and provide

equal opportunities to every citizens

14

Mexico– Broadband Trends Overview

Growth Areas

•Cable operators to provide broadband services

•Low speed internet access plan- increase adoption

•Wi-max & Wi-Fi technology – reduce cost

•Triple Play regulation to increase penetration & lower cost

Bottlenecks

•Delay in regulation on triple play & WiMax to affect penetration

•Low PC penetration in suburban areas

•Income Inequality

•High price & low quality broadband services

Present Broadband Trends

•Over 3.4 million residential & business users in 2007

•Both residential & business customers use ADSL & cable technologies

•SME demand ADSL technology

•TeleMex the market leader in broadband service

•TeleMex offers local and long distance call as additional package

•Government, retail, Transportation & tourism industry -demand broadband

•The service providers are expected to lower prices to attract more residential customers

•Cable operators to expand services to rural areas and isolated areas as satellite broadband is too expensive

15

Brazil

2004 = 0.5

2015 = 1.2

2008 = 0.8

2012 = 1.0

0

10

20

30

40

50

0 50 100 150 200

Telephone Penetration (Per 100 Inhabitants)

Co

mp

ute

r P

en

etr

ati

on

(Pe

r 1

00

In

ha

bit

an

ts)

Brazil

• The Broadband penetration in Brazil started in 2000

•The penetration rate per 100 inhabitants- 0.06 (2001)

•The penetration rate per 100 inhabitants- 4 (2007)

•Expected penetration rate per 100 inhabitants- 18 (2007)

ICT Indicators (Brazil), 1990-2015

•E-government

•Digital government

•Increase uptake of ICT products & services

•Broadband Olympics – provide high speed internet

& broadband connections

16

Brazil – Broadband Trends Overview

Growth Areas

•Telecom companies changing tariff structures

•Development of broadband portals by internet service providers

•High competition and varying price plans

•Triple play-offer low broadband cost

•Sales promotion- to increase subscription

•Music & games application have high demand

•Wi-Max & Wi-Fi technology – reduce cost

Bottlenecks

•Income Inequality

•High price & low quality broadband services

•Broadband users at work reluctant to subscribe broadband at home

Present Broadband Trends

•Over 1.8 million residential & business users in 2007

•Residential customers - ADSL & cable modem

•Penetration is saturated among high income group

•Pricing strategy - low speed and low price- capture middle income group

•Service providers - expanding operations in new cities to increase their revenue

•Business customers user ADSL, Cable & satellite technologies

•Broadband penetration among SME is very high- penetration among large firms is saturated

•High competition among service providers for medium income group and SME

17

Russia

0

20

40

60

80

100

120

140

160

180

200

Telephone Computers Broadband

Penetration

• The Broadband penetration in Russia started in 2002

•The penetration rate per 100 inhabitants- 0.01 (2001)

•The penetration rate per 100 inhabitants- 2.03 (2007)

•Expected penetration rate per 100 inhabitants- 6.21 (2007)

ICT Indicators (Russia), 1990-2015

E-Russia (2002-2010)

Objective

•Increase economic efficiency

•Provide technological advantage for the development

•To provide boost broadband & internet usage

•Improve telecommunications infrastructure

18

Russia – Broadband Trends Overview

Growth Areas

•E-Russia

•Increasing PC & internet users

•Suburb Russia

•Increasing disposable income

•Increasing uptake- low price

Bottlenecks

•Broadband market- state owned monopoly

•High price

•Limited access infrastructure

•High cost deployment limits geographical spread

Present Broadband Trends

•Broadband services are widespread in urban Russia

•Broadband household penetration

•Business customers demand high speed and customized solutions

•The number of broadband service providers to increase by 2009

•Increasing PC penetration – schools & government departments

•Increasing PC and Internet use among business

•Satellite technology is upcoming in Russia expected to capture the rural market

19

Growth Opportunities

3G technology & IPTV

Retail, Health Care &

ManufacturingSMEs

Growth Opportunities

WiMAX VOIP

Satellite Broadband

Rural Area

Triple Play

20

Planned Topics for Upcoming Year and Consulting Capabilities

• ListICT IndustryICT Industry

Political and Policy Analysis

Economic Analysis

Social and Infrastructure Analysis

Economic Research and Analytics

Consulting Capabilities

Economic Research and Analytics

Consulting Capabilities

Statistical Data Analysis

Multi Country Analysis

Trade and Investment Analysis

Outsourcing

Econometric Modeling

Country Risk Analysis

PESTLE Analysis

Other Studies

Published Studies

• Russia

• Germany

• Poland

• Czech Republic

• Hungary

• Japan

Upcoming Studies

• South Korea

• China

• Brazil

• India

21

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