Telcos set for data revenue boost as fibre becomes “main story”

At first glance, the region’s mobile and fixed broadband markets, including New Zealand, look quite flat.

At first glance, the region’s mobile and fixed broadband markets, including New Zealand, look quite flat.

So much so that IT analyst firm Ovum is forecasting between 6% and 8% subscription growth over the next year.

But what the top-line numbers don’t reveal is that large segments of the population will be upgrading to 4G in developed markets, nor does it show how many first-time smartphone buyers will be coming online.

“In terms of broadband,” explains Charles Moon, analyst, Ovum, “fibre is the main story, as China in particular continues to see widespread rollouts across its major cities.”

According to Moon, many operators in Asia already enjoy having both fixed and mobile assets – such as Telstra, Singtel, KT, KDDI, and Indosat for example.

“The question in this region is whether operators will start offering quad-play or, failing that, more significant bundle discounts on their higher-margin mobile packages,” Moon speculates.

“Beyond the regulatory aspects, the main determinant of this is the competitive position of quad-players, and at the moment I don’t see a big incentive for operators to undermine their mobile margins.”

Service Innovation

Moon believes the most service innovation is coming from the fixed-line side, particularly from fibre operators looking to leverage their ultra-broadband networks.

A good example is the retail service provider My Republic in Singapore, and now in New Zealand, which offers super-cheap 1Gbps broadband at less than US$40/month, then provides add-ons such as low latency (for gamers) and the Teleport streaming service, which accesses content from Netflix and Pandora – OTT players whose content is not available to Internet users in the country.

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“This was exactly the type of operator the Singapore government had in mind during the development of the Next Gen NBN, and you can see the impact My Republic has had, with retail fibre prices dropping almost 90% since launch,” he adds.

Impact of LTE

Certainly LTE is having an impact in terms of usage as the demand for video remains, and providing faster pipes will allow people to consume more data.

But are operators able to charge more for the additional usage?

“I don’t think this is the case,” Moon claims. “Yes we have seen ARPU increase for various operators (LGU+ in Korea is probably the most prominent example) as they move to LTE, but the ARPU is coming from consumers upgrading to more expensive plans in order to get a free device rather than an appetite to pay more for data.”

According to Moon, China is widely expected to become the most aggressive country in the region to deploy fibre.

“Definitely China,” he adds. “Obviously in terms of scale it eclipses every other market in the region, but what is interesting is how aggressive the Chinese government has been with its targets around the Broadband China initiative.

“The government is looking to double the number of fixed broadband connections to 400 million by 2020 and offer secure speeds of at least 50Mbps and 12Mbps in urban and rural homes respectively.”

As a result, Moon believes this will be the main driver of fibre in the region, including New Zealand, over both the short and long term.