Gigabits are go? Tariff count takes off in 2015

There are more gigabit tariffs on offer around the world than ever before and increasing numbers are appearing each quarter.

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As gigabit capable networks spread through many markets it is natural that ISPs start to offer relevant tariffs.

The growth in business only tariffs is indicative of the threat to traditional leased line markets from the increased symmetric bandwidths on offer.  With better latency, jitter, continuity and overall quality of supply; modern networks are eroding the USPs of leased lines for business as well as leading edge users.

There is still uncertainty around the ultimate demand for gigabit bandwidths; particularly symmetric in the residential market.

Input from the UK

There have been a number of studies that project what appear to be pretty low numbers for bandwidth demand in the 2020’s. Most notably in the UK, the BSG predicted a median requirement of 50Mbps for a high use household in 2023.  http://www.broadbanduk.org/wp-content/uploads/2013/11/BSG-Domestic-demand-for-bandwidth.pdf

Many people feel this is very low, although it’s worth nothing that they did a study (with a different methodology) in 2006 that wasn’t too far off the mark in its predictions – http://www.broadbanduk.org/2006/05/12/bsg-today-publishes-green-paper-on-predicting-uk-future-residential-bandwidth-requirements/.

BT have also released some data recently on the higher bandwidth customers in the UK.  Specifically, a chart of the average monthly usage. http://www.homeandwork.openreach.co.uk/fibre-index/

We took the data and added some simple excel trend lines.  We’ve used the 190GB/month stated from the BT page above in Summer 2015 as the basis and applied the index as seen below.

If you go to the outside of the envelope, say a 25% Quarterly CGR, you end up at 40TB/month in 2020.  An order of magnitude higher than we expect but not outside the potential delivery envelope of the technologies involved.  This note isn’t an exercise in predicting the actual load in 2020 but much more to understand if the general approach from the supply market will be able to service what we expect to see.

We’re assuming the bulk of TV/video consumed today is HD and projections only take account of 4K in terms of the data delta with that accompanies a new video technology over time.  Other applications add to the load too but as ever it’s video that dominates.

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Demand in 2020 heads to just over 2 Terabytes a month, from just over 50 Gigabytes per month in winter 2012, assuming exponential growth is the best fit.  Other regressions and projections can result in lower outcomes in 2020 as can be seen.

It’s worth noting that the average monthly use in the UK is therefore projected to exceed Comcast’s latest traffic cap late in 2016 and possibly sooner depending on the impact of 4K in the coming quarters.

We do see continued enthusiasm from investors in the UK and Europe for broadband; the higher the bandwidths the better apparently.

Repeated successful rounds of fund raising from a number of ‘alternative’ UK players strongly suggests there’s evidence of a working business model and returns on investment, even if they aren’t sharing all that data with us yet.  You can see more on our in depth UK work in the ‘Free Analysis’ as well as for subscribers.

What are the gigabit totals?

The first thing is to say that we don’t know.  Very few operators release their subscriber data broken down by tariff tier.

We can see some generalisations and aggregations in reports from the FCC, EC and local NRAs but nothing that explicitly enables us to state a number from reported data.

We do know:

  1. We are seeing more gigabit tariffs on offer in more markets than ever before – it looks like the start of the mass market to us
  2. The cost is dropping, see below. It can be too easy sometimes to see what you want to see in a chart but all the evidence points to falling prices and increasing competition in the gigabit business and residential market
  3. We know from past instances and technology roll outs how the shape of a market can be generalised in terms of time to market share and adoption patterns from tariff tier data that we have seen.

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It’s worth noting in this chart there was a very small sample (less than 10) of gigabit tariffs in the calculation prior to 2012.  In Q3 2015 we had 149 residential and/or business tariffs in our database.

We believe gigabit subscriptions to day number in the low millions worldwide but that is about to change.

Today the global total is under 10 million subscriptions on a gigabit connection (not including leased lines) but more than 1 million.

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Where we will be in 2020 isn’t that certain.  The biggest variable is going to be price and that’s going to depend in part on the strength of demand.

If, as we expect, bandwidth consumption continues to increase as indicated above then we’ll see at least 100 million subscribers to gigabit labelled services in 2020.  This could well be higher but so much depends on some of the large markets, China primarily, where small changes to supply and demand have a significant influence on the overall totals.

We’ll be releasing more in depth forecasts on the UK and we some of the European markets early next year (2016).

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Get access to the full report

More information on the global tariffs can be found in Point Topic’s Broadband Operators & Tariffs service, the full report has been published on the subscriber site. For further information please contact priya.minhas@point-topic.com. We’ll be releasing more in depth forecasts on the UK and we some of the European markets early next year (2016).

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