Broadband Take-Up Will Depend On Companies’ Strategies, Says McKinsey
Around one quarter of homes across France, Germany, Italy, the Netherlands, Sweden and the UK will have a broadband connection by 2005, according to the latest projections from the McKinsey Quarterly. This is some 28 million households and could rise to around 70 million, or 60% of homes, by 2010.
McKinsey acknowledges that these projections are less optimistic than other forecasts which were put together during ‘the first flush of broadband fever’. In the UK only around 3% of households are connected to the internet via broadband, according to research from NetValue and reported in April.
McKinsey says that its projections take account dynamic factors influencing the consumer’s decision to subscribe – namely, an awareness of broadband’s benefits, the extent and start-up dates of networks and the price of a connection.
The report is at pains to point out that broadband operators’ strategies, prices, marketing and timing will all critically alter the way that the broadband take-up in these countries develops and the projections here could be very different from the eventual picture of 2010.
“Of course, some companies can’t afford to slash prices, say, or to extend coverage, and the rules on competition may prevent them from doing so in any case. But other parties involved with broadband could surely promote it through their own actions. Governments, for example, could subsidise prices,” the report suggests. “The content providers Â- media and entertainment companies, for instance, and even financial service providers Â- could offer cheap broadband access packages in return for a privileged position in the portal of the access provider.”
Each of these countries falls into one of three tiers of broadband development, says McKinsey. The Netherlands and Sweden Â- in the ‘early’ tier Â- will enjoy the highest rate of take-up over the next decade because competition among access providers will lead to high coverage of broadband services at low prices. Broadband uptake already has an established momentum in this tier, so even ssizeable changes in, for example, the price and coverage strategies of the main players would have little impact on overall uptake in the long term.
The ‘midterm’ tier, comprising the United Kingdom and Germany, will have a middling level of coverage and competition, so it will see a middling level of uptake.
Italy and France, meanwhile, fall into the ‘late’ tier. They have low broadband coverage, little competition, and therefore high prices. The result is a slow start. Changes in the players’ strategies will have little effect on eventual uptake until the second half of the decade, says the report.
Of the five competing broadband access technologies – Digital Subscriber Line (DSL), cable modem, fibre, fixed wireless, and two-way (low-orbit) satellite – DSL is expected to dominate everywhere except the Netherlands
Nevertheless, companies still have time to influence the market share of each access technology, says McKinsey. Extending cable networks by an extra 50% and offering 25% price subsidies would ensure that cable won the broadband battle in the UK, for example.