JULY 21, 2009 -- The economic downturn and rising competition from cable and telco companies combined to make 2008 a year of uncertainty for the North American residential broadband services market, notes market analysis firm Frost & Sullivan (search Lightwave for Frost & Sullivan). New lows in housing dipped to new lows resulted in increased vacancy rates, affecting broadband usage. Access lines are dropping swiftly, says the firm, but revenues are offset by high-speed Internet subscribers as well as video. Strained by the impact of the overall economic conditions and market maturity, the residential broadband market growth rate is on a decline.
In its "North American Residential Broadband Services Markets Tracker," Frost & Sullivan finds that the market earned of more than $36.7 billion in revenues and estimates 78.9 million subscribers in 2008.
"The saturated market has encouraged cable, telco, and satellite operators to concentrate on customer value, and heavy emphasis is placed on retaining existing customers and obtaining new ones," says research analyst Gina Villanueva. "Providers are strengthening their retention efforts by invigorating customer value through service bundling to create an alluring price for consumers and generate a higher attach rate for the provider's services."
Bundling packages enable companies to acquire access line subscribers. Besides bundling, providers are promoting two-year price guarantees, and some are offering lifetime price guarantees. They are rejuvenating customer service and training employees to efficiently resolve queries. Cable and telco operators are reducing contract rates with customers to provide optimized services without frustrating their subscribers.
Vendors are also unleashing enhanced products to reinforce their hold on the customer base. Furthermore, operators are optimizing their networks to speeds up to 100 Mbps, creating a variety of options for broadband Internet packages. Though slower net additions to both cable and telco operators are expected during 2009, subscribers will benefit from higher speeds, more robust features, and lower prices, says the firm's report, helping to oil the wheels of the market and guarantee a steady revenue stream for participants.
Cable still holds its position as the technology leader in the broadband segment, although its market share declined due to the advanced technologies for telcos, such as FTTX, which has increased its market size during the past two years. For 4Q08, Verizon posted the highest net additions compared to that of all other providers in North America.
At a technology level, DSL providers' growth rates will witness a downslide year-over-year as subscribers migrate to higher-bandwidth fiber technologies. Satellite is a growing market in small towns, rural markets, and cities where terrestrial broadband is nonexistent.
Fiber technology is the weapon used by traditional telecommunication providers to counter cable operators' deployment of their next-generation DOCSIS 3.0. The Canadian market is a growing market, offering huge potential. Similar to the U.S., Canadian telco operators have unleashed their fiber-optic networks to compete with cable providers that offer speeds up to 100 Mbps downstream.