Future both bright and bleak for broadband providers

There's good news and bad news for Hong Kong's broadband access providers: they can expect plenty of subscriber growth, but also shrinking margins and unlikely profits, Gartner senior analyst Andrew Chetham says.

          There's good news and bad news for Hong Kong's broadband access providers: they can expect plenty of subscriber growth, but also shrinking margins and unlikely profits, Gartner senior analyst Andrew Chetham says.

          Drawing on the example of Korea's largest broadband access providers, such as Korea Telecom and Hanaro Telecom he says "none of them are profitable." Korea is the world's largest broadband market, with over five million accounts, according to Gartner. In the Asia-Pacific region, Taiwan and Hong Kong trail Korea in broadband use but remain ahead of other countries and territories.

          Chetham believes that access and content bundling is the way forward, already having been embraced by Pacific Century CyberWorks (PCCW) with its NOW.com.hk site, and I-Cable Communications with its own portal and sub-sites. "Content is the Holy Grail for broadband players, the distant pot of gold at the end of the rainbow," he says.

          Access providers are likely to aggregate content, in which they share revenue with the content providers, Chetham says. While currently most such agreements are 50-50, he believes they will increasingly favor the content producer, garnering as much as 85% of shared revenue for them.

          Despite the move toward content bundling, Chetham says that Korean providers were opening up their "walled gardens," or subscription services, in favour of free content or very low-priced content, unlike Hong Kong carriers, which are just now launching them. Because the Korean market is based on volume, keeping users away from content ultimately means a lower subscriber base, he says.

          The analyst also notes that bundled services, including VoDSL (voice over digital subscriber line), could offer providers an opportunity to increase revenue. "The future is going to be bundling services, there's no doubt about it," Chetham says.

          While current regulations in Hong Kong prohibit VoDSL except through licensed operators, both PCCW and i-Cable are authorised to offer such services, Chetham says. I-Cable has plans to roll out voice services in 2002. At present no voice-over-broadband service has been deployed in Asia, he says, adding that Korean telecom companies are expected to do so by the end of the year.

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