ISPs push speeds in the race to retain market share

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http://point-topic.com/content/dslanalysis/BBAtfq109.htm
Broadband is continuing to offer more for your dollar every quarter according to the latest analysis from Point Topic.

The latest tariffs collated and published by Point Topic* show that the services that operators are offering have slowly increased in speed and even in the face of an economic crises some are continuing to cut prices as well.

“Since the start of 2008 the watchword seems to have been consolidation. Even before the credit crunch many operators, particularly those offering DSL, were trying to stabilise their business models as their markets moved on to a phase where rapid growth could no longer be counted on to cover holes in their balance sheets,” says Fiona Vanier, Senior Analyst at Point Topic.

The race to cut prices slowed and operators looked for ways to reduce churn and shifted focus away slightly from straight new customer acquisition.

One effect of this has seen speeds on offer worldwide gradually increasing as the ISPs get to grips with their networks and consumers become better educated and therefore more demanding. As a result the US dollar price per megabit has dropped by 20% for fibre, 30% for cable and 37.5% for DSL in the 12 months Q108 to Q109.

Figure 1: Cost per Megabit of monthly rental worldwide broadband internet access - (US Dollars)

The exchange rate volatility in the period has played a part in these declines. While prices in local currencies have decreased in some cases there are externals including exchange rates which have had an influence.

“The fluctuating exchange rates of the last few quarters make it difficult to make effective comparisons,” says Vanier. “Examining the price changes in the local currency as well as converting to Purchasing Power Parity rates can give a better feel than straight conversion to US dollars,” she continues.

At PPP rates prices of entry level services have been steady for a while. Purchasing power parity takes account of changes in exchange rates and GDP relative to other countries. While this irons out some of the bumps that skew comparisons there are downsides like the time lag in the release of new PPP rates which come out once a year.

Figure 2: Internet access technologies worldwide, monthly rental at PPP rates in US Dollars

“There are a patchwork of interactions around the world. In markets where there is competition between technologies there is downward pressure on prices but ISPs are also starting to pitch to different markets and differentiate their offerings. DSL tends to be an entry level option for the day-to-day user, while cable companies are taking advantage of their speed edge over copper where they have the infrastructure and have upgraded their technology,” says Vanier.

“In developed markets where fibre has a heavy presence there is significant evidence of technology substitution. In Japan for example various flavours of fibre today account for over 50% of the access market, a dominant position achieved in 5 years at the expense primarily of DSL but cable is far from immune,” says Vanier.

“In other countries there are still land grabs, or subscriber grabs, going on which again will result in lower prices, sometimes at the cost of customer service and consumers in these markets often complain of high contention and high ping. These interactions blur the worldwide picture as does the current economic turmoil but even in these trying conditions the evidence is that broadband is still growing and deals are still getting better,” says Vanier.