Forrester Research: Spanish Broadband Competition Takes Off
Broadband adoption in Spain in 2005 will be driven by a massive increase in broadband investments and competition as well as new triple-play offers, according to Forrester Research, Inc. (NASDAQ: FORR). But Forrester believes that broadband growth in Spain will slow down by the end of the decade due to low home PC penetration and low overall online penetration. The result: Broadband will be in 38% of all Spanish homes in 2010; ADSL will remain the dominant access technology, capturing three-quarters of the 2010 market.
Forrester reports that more than 22% of Spanish households had broadband by the end of 2004. This represents almost three-quarters of Spanish online households and exceeds the Western European average of 20%. Spain¿s fast broadband uptake has so far been triggered by wealthy early adopters. However, with only 31% of Spanish homes online last year ¿ well below the European average of 51% ¿ and high broadband prices, Forrester predicts that broadband uptake will diminish beyond the early-adopter stage.
Lars Godell, Principal Analyst, Telecom Markets at Forrester Research says: ¿Telefó nica is trying to stimulate PC penetration and broadband adoption by giving away free PCs with broadband subscriptions. But Spain will continue to lag for the rest of the decade despite these efforts ¿ by 2010, 48% of households will be online, compared with 62% in Western Europe as a whole.¿
Key Characteristics Of The Spanish Broadband Market
The Spanish broadband market grew quickly during the past two years ¿ by 202% in 2003 and by 64% in 2004. Early broadband adopters fell for the fact that it is always on and frees up the phone line, allowing massive downloads. The Spanish market is characterized by:
- Price-driven consumers. In May 2004, 18% of Spanish online consumers considered switching their ISP, in line with their European peers. Their top reason for switching? More than half said they could get the same service for less, and almost 40% indicated they wanted a faster connection.
- Limited infrastructure competition ¿ so far. Some 700,000 households (nearly 23%) use cable to access the Internet, but almost 78% use ADSL, which has far better geographical coverage.
- Slowly declining prices. In relative terms, Spain is the most expensive broadband country in Europe, with a broadband price premium over dial-up of 173%, compared with a European average of 74%. But prices in Spain are slowly declining.*
- Fragmented competition with super-optimistic expansion plans. With 55% of the retail market, Telefó nica has managed to retain its dominant position. But the competitive pressure is about to explode, through massive marketing and networking investments by local challengers like Jazztel and the local subsidiaries of France Télécom and Deutsche Telekom.
- The competition betting on bundles to challenge Telefó nica. A plethora of broadband ISPs are trying to attract wealthy Spanish early adopters by bundling services. To keep up the pressure on its competitors, Telefó nica wants to spend ¿9 billion on fixed and mobile broadband over the next three years.
Spanish Broadband Users Have More Fun
So what characterizes the ¿Spanish broadband user¿? Forrester¿s Consumer Technographics® European Studies show that Spanish broadband users: are predominantly young males; fit the early-adopter profile; are on average 33 years old; are better paid than non-broadband users; and download ¿ a lot. Almost 60% of Spanish broadband users download music regularly, compared with 40% in Europe as a whole.
To conclude, Godell comments on the broadband technology that will dominate in Spain: ¿xDSL will remain the most popular broadband technology, capturing three-quarters of the residential broadband market for the rest of the decade. Although cable will continue to grow modestly in absolute numbers, Forrester believes that it will lose market share to alternative access technologies like fiber, fixed wireless, WiMAX, satellite, and powerline.¿
* ONO recently increased broadband speeds from 600 Kbps to 3 Mbps for the same price; Telefó nica responded with a limited-time offer of ¿29 per month for a download speed of 512 Kbps, which previously cost ¿39; and Tele2 offers 512 Kbps broadband and free fixed-line voice for ¿34 per month.