Broadband Market: Comparing Us & Europe
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April 2008 N° 8
Vision
The Quantifica Newsletter
Comparing broadband in the EU 15 and the United States Asmaa Zaher, Analyst Data used to write this article come from the Quantifica database at www.quantifica.fr.
While broadband penetration levels in the United-States near European averages, America’s tariffs are much higher than Europe’s. Analysis and explanation…
The US broadband market is dominated by cable technology … Graph 1 : Broadband penetration rates in 2007 per technology 31,88% 26,22%
24,93%
23,27% 23,02% 20,04%
Finlande Royaume Uni
France
ADSL
In 2007, broadband penetration in the United States totaled 23.3%, equivalent to the EU15 average. What qualifies as broadband varies from country to country. While broadband in the United States is defined as a line exceeding 200 Kbps in at least one direction (upstream or downstream), in Europe a broadband line implies downstream access as of 512 Kbps. Cable access continues to account for more than half (52%) of broadband access via cable networks versus 42% for ADSL and 6% for other technologies. As a result, ADSL penetration comes to a mere 9,7%, due to the failure of unbundling regulation and its highly complex implementation. This weakness stems from the failure of regulatory unbundling
USA
Cable
UE 15
Italie
18,57%
Espagne
Autres
regarding the effective scope of the Federation Communication Commission’s (FCC) definition of network elements to be included in unbundling and which leave the final decision across each zone to the local regulatory agencies and the incumbent. This complexity serves as a barrier to entry for new operators, thereby impeding the right conditions for competition. As a result, a number of states have an established market duopoly, whereby the cable operator and the ADSL supplier (an ISP) are both offshoots of the local incumbent. Finally, in many rural areas, the number of suppliers providing ADSL services is limited to one.
Page 1
www.quantifica.fr
April 2008 N° 8
…with limited price competition.
Graph 2 : ADSL market share of incumbents and new entrants at end-2006 96%
70%
New entrant market shares
74% 67%
48%
Incumbent market share 32%
France
United Kingdom
Spain
Italy
Finland
While in the United-States, regional incumbents control 96% of ADSL plans, in the United Kingdom, the incumbent posts only 32% of the overall lines. In the United Kingdom, however, alternative operators can access the incumbent’s network, BT,
USA
via the bit stream to sell their own offers. In short, across the US, the number of unbundled lines totals 1.3 million, or 9.9%, which is relatively low compared to other European countries (cf. Graph 3).
Graph 3 : Percentage of unbundled lines in overall number of market lines at end- 2006 37,1% 29,5%
15,6%
14,5%
13,8% 9,9%
Germany
France
Italy
In either Germany or France, the number of unbundled lines respectively totals 37.1% and 29.5% of ADSL lines. The same figure in the US is a mere 14.5%. To speed up unbundling, the FCC has loosened regulation in terms of shared
USA
Spain
United Kingdom
infrastructure and is encouraging the emergence of new technologies. For the time being, however, the barrier to entry on the American broadband market impacts US prices which remain high compared to European levels.
Page 2
www.quantifica.fr
April 2008 N° 8
Graph 4 : « Triple play » monthly tariff plans (VAT incl.) Prices at March 1: 2008
$107,99 $99,99
$99,00 $89,95
$61,98
$60,37
$59,70 $46,48
ATT US
Verizon Comcast US US
Time Telefonica Warner Spain US
Triple play offers in the United-States are much higher than in Europe. An American subscriber pays an average $100, whereas Europeans pay 50% less. A triple play
Alice Italy
Virgin Media United Kingdom
Free France
offer in France, for example, costs $46.5 (the benchmark’s cheapest offer: includes VAT and the dollar/euro exchange rate totaled 1€= 1.55 $ and 1£ = 1.99 $).
QUANTIFICA QUANTIFICA (formerly, OMSYC, World Observatory of Communication Systems) is an independent
research and analysis center, launched in 1988. With our Data-on-Demand database you can create your own tools, by personalising data from a selection of more than 1500 variables and 240 000 available items from the world of electronic service communications and media markets. Our clients include regulatory authorities, operators as well as investment banks and auditing firms. CONTACT: Sara CLIGNET +(33) (0)1.55.04.87.30 / [email protected] QUANTIFICA – 32, rue des Jeûneurs – 75002 – PARIS - FRANCE
Page 3
www.quantifica.fr
Vision
The Quantifica Newsletter
Comparing broadband in the EU 15 and the United States Asmaa Zaher, Analyst Data used to write this article come from the Quantifica database at www.quantifica.fr.
While broadband penetration levels in the United-States near European averages, America’s tariffs are much higher than Europe’s. Analysis and explanation…
The US broadband market is dominated by cable technology … Graph 1 : Broadband penetration rates in 2007 per technology 31,88% 26,22%
24,93%
23,27% 23,02% 20,04%
Finlande Royaume Uni
France
ADSL
In 2007, broadband penetration in the United States totaled 23.3%, equivalent to the EU15 average. What qualifies as broadband varies from country to country. While broadband in the United States is defined as a line exceeding 200 Kbps in at least one direction (upstream or downstream), in Europe a broadband line implies downstream access as of 512 Kbps. Cable access continues to account for more than half (52%) of broadband access via cable networks versus 42% for ADSL and 6% for other technologies. As a result, ADSL penetration comes to a mere 9,7%, due to the failure of unbundling regulation and its highly complex implementation. This weakness stems from the failure of regulatory unbundling
USA
Cable
UE 15
Italie
18,57%
Espagne
Autres
regarding the effective scope of the Federation Communication Commission’s (FCC) definition of network elements to be included in unbundling and which leave the final decision across each zone to the local regulatory agencies and the incumbent. This complexity serves as a barrier to entry for new operators, thereby impeding the right conditions for competition. As a result, a number of states have an established market duopoly, whereby the cable operator and the ADSL supplier (an ISP) are both offshoots of the local incumbent. Finally, in many rural areas, the number of suppliers providing ADSL services is limited to one.
Page 1
www.quantifica.fr
April 2008 N° 8
…with limited price competition.
Graph 2 : ADSL market share of incumbents and new entrants at end-2006 96%
70%
New entrant market shares
74% 67%
48%
Incumbent market share 32%
France
United Kingdom
Spain
Italy
Finland
While in the United-States, regional incumbents control 96% of ADSL plans, in the United Kingdom, the incumbent posts only 32% of the overall lines. In the United Kingdom, however, alternative operators can access the incumbent’s network, BT,
USA
via the bit stream to sell their own offers. In short, across the US, the number of unbundled lines totals 1.3 million, or 9.9%, which is relatively low compared to other European countries (cf. Graph 3).
Graph 3 : Percentage of unbundled lines in overall number of market lines at end- 2006 37,1% 29,5%
15,6%
14,5%
13,8% 9,9%
Germany
France
Italy
In either Germany or France, the number of unbundled lines respectively totals 37.1% and 29.5% of ADSL lines. The same figure in the US is a mere 14.5%. To speed up unbundling, the FCC has loosened regulation in terms of shared
USA
Spain
United Kingdom
infrastructure and is encouraging the emergence of new technologies. For the time being, however, the barrier to entry on the American broadband market impacts US prices which remain high compared to European levels.
Page 2
www.quantifica.fr
April 2008 N° 8
Graph 4 : « Triple play » monthly tariff plans (VAT incl.) Prices at March 1: 2008
$107,99 $99,99
$99,00 $89,95
$61,98
$60,37
$59,70 $46,48
ATT US
Verizon Comcast US US
Time Telefonica Warner Spain US
Triple play offers in the United-States are much higher than in Europe. An American subscriber pays an average $100, whereas Europeans pay 50% less. A triple play
Alice Italy
Virgin Media United Kingdom
Free France
offer in France, for example, costs $46.5 (the benchmark’s cheapest offer: includes VAT and the dollar/euro exchange rate totaled 1€= 1.55 $ and 1£ = 1.99 $).
QUANTIFICA QUANTIFICA (formerly, OMSYC, World Observatory of Communication Systems) is an independent
research and analysis center, launched in 1988. With our Data-on-Demand database you can create your own tools, by personalising data from a selection of more than 1500 variables and 240 000 available items from the world of electronic service communications and media markets. Our clients include regulatory authorities, operators as well as investment banks and auditing firms. CONTACT: Sara CLIGNET +(33) (0)1.55.04.87.30 / [email protected] QUANTIFICA – 32, rue des Jeûneurs – 75002 – PARIS - FRANCE
Page 3
www.quantifica.fr
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