Saturday, November 11, 2006

American DSL Providers Add 1,179,000 New Subscribers

U.S. telecom providers have had yet another good three months in the broadband internet market, adding a combined total of 1,179,000 new DSL customers in the third quarter. That represents a 17% increase in subscriber growth, compared to Q2.

Ken Twist, the vices president of technology consulting at Ovum-RHK, said that these results were “encouraging” for the big Bell companies. He noted, however, that “the telcos could use a little momentum, because it also appears that the [cable companies] may have [had] a good quarter, based on the Comcast results.”

America’s top cable provider, Comcast, added 536,000 new high-speed internet customers in the third quarter, as its heavy marketing and bundling efforts continue to attract a strong stream of new customers. The cable giant’s digital phone service is also proving popular, adding an impressive 483,000 new subscribers in the most recent three-month period.

Service Providers' Challenges and Expectations Regarding Fixed WiMAX

The primary challenge all operators face is satisfying the growing expectations of users for ever more capable, easier-to-use and more universally available communications and broadband services. Whether the customer is a corporation or an individual user, the challenge is to make capital-intensive buying decisions to deploy wireless networks that will meet not just current demand cost-effectively but the needs of targeted customers for a reasonable return on investment.

DSL operators need to provide increased bandwidth, coverage and packaging of services including wireless mobility. Although a subset of customers will be satisfied with the features of basic DSL combined with regular phone service, increasingly users are migrating to mobile service as their primary or only phone service. DSL providers can package cellular phone service, but since this is a profit-share with the wireless carriers, it delivers lower profits and is subject to migration to competitive broadband services. The definition of what makes up a competitive broadband offering is shifting: a still small subset of broadband users require higher bandwidths than DSL typically can offer. This usage pattern is expected to grow as DVB, IPTV and multi-cast video services become increasingly popular. A DSL operator faces the challenge of providing service to outlying areas that can be cost prohibitive for DSL extension.

Operators face increased competition from wireless mobile broadband. WiMAX and cellular broadband provide a pathway to "personal broadband." The ultimate vision is for the ability to always be connected with a sufficient level of broadband service and simplified billing. Deploying and managing diverse wireless networks that deliver increased numbers of media and other services is complex. Both corporate and individual users have shown a willingness to pay for simplicity over more complex or multiple services. Several well understood factors fit into this equation, including ease of use and productivity: less time spent dealing with buying, paying for and learning how to use services and devices results in greater commercial benefits and user satisfaction.

Multiple-service packaging and user satisfaction are the goals of providers because it is relatively easy to switch broadband services from DSL, cable or wireless broadband. When services include common interfaces and simplified billing, their "stickiness" increases. Customer turnover helps determine profitability of all communications services today. A provider does not realize profitability from new customers until they have stayed with a service for more than a year.

Implications for WiMAX

WiMAX ushers in the opportunity for DSL, cable, and cellular operators to provide a single, extensible IP/SIP platform for delivery of wireless communications that include triple play IPTV, Internet access, and VoIP phone service. As WiMAX evolves to full 4G mobility, it will be capable of providing a full set of services when combined with local area DSL, cable, or fiber optics.

User satisfaction and evolving usage factors compel the industry to consider deployment of networks that can evolve over several years. Increasingly, the decisions for 4G wireless broadband come down in favor of the mix, if not the exact prescription of platforms based on MIMO-OFDMA. WiMAX is the first major effort to develop a framework for the long-term evolution of 4G technologies.

DSL usage patterns have hit a level of saturation: the easier deployments have been reached and packaging of services now becomes increasingly an issue in the marketing and provisioning of service. Although higher bandwidths have been achieved in areas with good conditions for transmission, DSL has been unable to reach into outlying areas or provide a degree of mobility beyond that provided by Wi-Fi. DSL sales are being affected by migration to wireless cellular and will increasingly be impacted by higher bandwidth requirements that favor cable and fiber optics.

WiMAX operators providing DSL replacement will face the same challenges as current ISPs providing broadband Internet access. It is therefore important to review the kind of usage pattern that is eating up operators' bandwidth. Users don't care about the technology; they care that the application runs smoothly and provides a satisfying online experience - whether as a productivity tool or for entertainment. Each operator has a different set of customers, either business or residential/SOHO. Therefore, WiMAX must offer a tier of services to satisfy multiple classes of users.

Continued



DSL Providers