Broadband grew 92 percent in Europe in 2002. In 2008, 30 percent of homes will have broadband — 57 percent of all online households — according to a new report by Forrester Research B.V. (Nasdaq: FORR). Over the next 18 months, Forrester advises access providers to shift their focus from volume to profit growth by expanding tiered services, abandoning their portals, and rethinking billing.
“Europe’s broadband riches will be unevenly split along a clear north/south divide, with 2008 penetration varying from 5 percent in Greece to 45 percent in Norway,” said Forrester Senior Analyst Lars Godell. “Scandinavia and the Netherlands will dominate the ratings; German-speaking Europe, Belgium, Finland, and the UK will form a second tier; and Southern Europe and Ireland will continue to lag.
“High overall online penetration and low broadband price premiums over dialup will drive Scandinavia and the Netherlands beyond 40 percent penetration in 2008. With 2008 penetration rates between 30 percent and 35 percent, German-speaking Europe, Belgium, Finland, and the UK form a second tier due to varying mixes of lower overall online penetration and higher broadband premiums. 2008 broadband penetration in France, Greece, Ireland, Italy, Portugal, and Spain will vary between 5 percent in Greece and 24 percent in Italy — unsurprising, given these countries’ lower overall levels of Internet usage.”
Forrester asserts that ADSL will be the dominant platform because it reaches at least twice as many households as cable, and because its main backers — incumbent telcos — benefit from superior financial positions, scale, scope, and brand strength. In 2008, ADSL will claim 71 percent of European broadband connections, dwarfing alternatives.
“Cash shortages will kill cable¿s momentum; fiber’s business case remains daunting; and alternative technologies — like fixed wireless and two-way satellite — are too little, too late,” Godell added. “Cable’s 36 percent coverage will never be able to match ADSL’s 80 percent-plus without big investment. But with some of Europe¿s biggest cablecos — UPC, NTL, and Telewest — all having gone through bankruptcy and debt restructuring, there’s no cash to expand coverage, upgrade networks, or splurge on marketing to convert homes passed to subscribers. As a result, cable’s market share will drop from 53 percent in 2000 to 22 percent in 2008.
“With European telcos’ balance sheets stretched and hundreds of billions of euros needed to make fiber to each home a reality, fiber to single, detached homes will remain a pipe dream in this decade. Finally, fixed wireless and two-way satellite can serve niches in rural markets where ADSL and cable don’t go. Combined with fiber, alternatives will serve only 7 percent of broadband households in 2008, largely delivered by incumbents like France Télécom and using satellite to fill in gaps. And powerline? Persistent delays, quality problems, and absent vendor backing will relegate it to pet-project status at cash-flush utilities like RWE and nothing more.”