In a new research note, New Street Research analyst Jonathan Chaplin says cable providers controlled 65 percent of the overall consumer internet access market at the end of 2016, possibly growing to as much as 72 percent by 2020.
It might not be unreasonable to predict a problem of high prices, were that situation to develop, all other things being equal. But all other things are highly unlikely to remain “equal.”
Sure, telco digital subscriber line has proven an inept competitor to cable TV internet access using the DOCSIS platform and the hybrid fiber coax physical platform. And, as Google Fiber and Verizon both have discovered, ubiquitous fiber-to-the-home, in a competitive market with two or three facilities-based providers, is difficult at best.
For the most part, successful fiber-to-home deployments with scale have happened in markets with significant government support, small compact markets and histories of close collaboration between government and private industry.
In most mid-sized or big markets (countries with large geographies), especially in markets with significant facilities-based competition, the financial return from such networks has been stubbornly difficult. That explains the past and current search for wireless platforms of various types, ranging from fixed wireless to mobile substitution, with some “exotic” platforms ranging from balloons to large fleets of low earth orbit satellites to unmanned aerial vehicles.
It is too early to know how important mobile and wireless substitution will be in a decade or more.
For starters, supplying “gigabit per second access” is better way to look at the problem, not physical media. Coming 5G mobile networks (using either mobile or fixed access) are likely going to change the competitiveness of telco platforms.
AT&T, for example, has suggested it can become a major competitor for consumer internet access in about five years.
Beyond that, it is unlikely that a big consumer market, with strategic implications for any provider of connectivity services, will remain unchallenged if a single provider in each market has market share of 70 percent.
On one hand, new competitors will be funded to enter such markets, using different platforms than either fiber to home or hybrid fiber coax. On the other hand, political pressure to encourage those entrants also will develop.
The point is that if cable operators are able to grab as much as 70 percent market share by 2020, new competition will arise. Entrepreneurs, investors and the government are going to find that opportunity too tempting and the risk of inaction too damaging to ignore.
If one assumes, to use just one example, that high speed internet access becomes the foundation for all access services (fixed or mobile), then telcos cannot afford to cede such leadership to cable companies.
The historic problem of matching revenu e with investment already is being worked on, with wireless alternatives of all sorts being a key part of the eventual solution.
The business model also will be changed as mobile services with gigabit bandwidth become ubiquitous, and as fixed network backhaul and transport become a bigger part of the fixed network revenue mix. That is precisely what Verizon believes will make “One Fiber” work, for example.
The value of fixed network assets will shift significantly to supplying backhaul for small cells that deliver high-bandwidth access to business and consumer accounts. At the same time, such backhaul facilities ownership should deliver meaningful advantage for owners of fixed network assets who also supply retail mobile access.
Up this point, cable operators have had a clear and substantial advantage over telco DSL platforms in providing access speed. So long as the only option for the big telcos was fiber to the home, that has seemed unlikely to change much.
What will be new, in the coming few years, is telco ability to mass deploy a couple of new platforms to compete with cable speed for the first time since the very early days of broadband access.
What comes over the next decade are other potential options that will further increase competitor ability to negate the historic cable advantage in internet access performance.
All that means it is unlikely the consumer internet access can for long remain a business with 70 percent market share by one of the platforms.
The cure for potential high prices is, in part, the threat or actuality of high prices. The high margin and high market share likewise will prove an irresistible lure for new competitors, and a strategic imperative for the leading mobile providers.
No comments:
Post a Comment