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Fiber driving down “cost per megabit” broadband, DSL prices in free-fall

Point Topic is one of the independent research companies that has been counting broadband lines for about the past 7 years, and has a pretty good hand

By PETER WHITE

Published: 3 February, 2011

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Point Topic is one of the independent research companies that has been counting broadband lines for about the past 7 years, and has a pretty good handle on the way pricing has changed. It now says that consumers actually pay about 50% of what they paid for broadband back in 2008. This has come about due to competitive pricing pressures on DSL suppliers which have tried to bring down their overall service price, rather than compete on megabit per second pricing. But that may not be enough going forwards.

Fiber is winning the battle for “megabit per second pricing” so it is increasingly becoming the access option for high bandwidth applications, and at the same time is forcing down DSL pricing. Point Topic has released all this in a survey of broadband tariffs around the world which shows a continued decrease in the cost of a megabit per second of performance.

“DSL prices in particular are being squeezed. Competition between operators and access technologies is driving the search for more markets and DSL is well placed to capture customers who don’t need full speed 24/7 bandwidth,” said Oliver Johnson, CEO of Point Topic.

But with the arrival of OTT video services that is about to change as more and more customers begin to take up applications that involve continuous video applications.

Johnson added: “Many users do not use their broadband for more than a couple of hours a day and when they do it’s often for applications that use relatively little bandwidth. They care much less about the cost per megabit, where fiber has the edge, than about the upfront and monthly charges and DSL wins that battle hands down.”

Point Topic reckons that fiber to the building is a popular way of providing broadband and this is becoming an increasingly common model in many markets, with blocks of flats sharing a single fiber connection and the bandwidth delivered over a LAN to individual units.

This is particularly common in countries like Japan, Korea and in the near future Australia, where the population is highly concentrated end-to-end fiber and there we are seeing DSL get replaced by fiber. It’s this kind of pressure that is driving down prices but in Asia Pacific broadband costs have actually increased over the last two years.

“Subscriber behavior is changing,” warns Johnson, “The increasing popularity of high bandwidth applications, particularly video, mean that low cost per megabit carries more weight than low subscription costs. Operators are seeking ways of fulfilling existing needs and scrambling to create new ones.”

“The developing broadband markets will continue to see rapid growth particularly in DSL subscriptions in 2011. However, the advent and spread of connected TV is going to be the real news in the mature markets. Enabling consumers to watch streaming video on their TV sets will drive bandwidth demand up significantly and where fiber is available we’ll see appreciable growth in its market share,” said Johnson. Point Topic collates data on 3000 broadband tariffs from around the world.

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