Gloomy outlook for the broadband industry?

October 16, 2008 at 3:37 pm Leave a comment

Charles Arthur of the Guardian and Ian Fogg of Jupiter Research have been posting their thoughts on how the UK broadband industry will fare in an economic downturn. On the face of it, they both make fairly gloomy reading – although the demand for basic consumer broadband will remain, the churn rate (users switching between suppliers, which drives much of the product innovation in the marketplace) will slow down as people move house less. (A house move is known to be a major trigger for people to re-assess their need for, and supplier of, domestic services). But suppliers may be unable to make the capital investment needed to deliver the next-generation services currently planned – BT’s 21CN is at risk, as is their recently-announced FTTC/FTTH initiative.

We’ll also see the end of loss-leader offers and unprofitable services will be replaced by more openly-priced straightforward offerings. In addition, the penny-watching consumer will be able to work out that a free laptop which is contingent on a 24-month mobile broadband contract at £45/month isn’t free at all, and isn’t even the cheapest way to buy the laptop – seeing the end of these complex offers.

My view is that we’ll see a return to basic value-for-money offerings, which will probably lead to more consolidation in the market as smaller providers find it more and more difficult to differentiate their services. Some of the larger operators will pick up some bargains in the shape of the customer base and/or the network assets of their smaller competitors.

Not good news for those whose livelihood is dependent on the continuous innovation and capital investment in the broadband industry.

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