Broadband slow down makes for tough sell

The fast, early growth in broadband revenue will slow down over the next few years, as broadband penetration nears its limits, according to a new study.

Market Clarity's research, 'The Australian Internet Market Tracker: History and Forecast 2000-2011', shows Australia's population of 3.52 million broadband services in 2006 would grow to about than 6.8 million by 2011.

Intense competition between providers would likely squeeze revenue growth, so that while user numbers would nearly double in that period, revenue would only rise to $3.24 billion by June 2011, said Shara Evans, CEO of Market Clarity.

"As services and margins decline, providers will need to pay more attention to retaining customers and offering them high-margin value-added services," she said.
Evans said between 2005 to 2006 broadband generated about 3.5 times as much revenue as dial-up services in Australia. However, by the end of the decade, broadband revenue growth would be in the tens of millions rather than the hundreds of millions.

With a broadband market expected to pass 6.8 million business and residential customers by June 2011, Evans said, the remaining market growth would be very small.
This is likely to bring about escalation of 'churn wars' between ISPs and put ongoing pressure on consumer service prices, she said.

"Providers who can genuinely differentiate their services will have the best chance of growth," Evans said. "In the consumer market, this may mean offering the best performance for content like music and videos, or it may be through services such as VoIP."

Business providers, who can differentiate themselves with network performance and service quality, may be better placed to protect their margins, but the business broadband market is dwarfed by the consumer market.

Evans expects ADSL to remain the dominant broadband technology in Australia for the foreseeable future, accounting for nearly 5 million of the 6.8 million services in operation by June 2011.

The remaining customers would be spread between Cable (HFC) users, wireless customers and satellite broadband. Other access technologies such as fibre-to-the-home and broadband-over-powerlines will struggle to attract a significant share of the market except in areas where ADSL is not available.

'The Australian Internet Market Tracker: History and Forecast 2000-2011' reports are available from Market Clarity at www.marketclarity.com.au/research/internet-market-tracker.cfm