DSL Finding a Home in Europe

Among North American residential broadband customers, cable access has been the popular way to speed up their Internet access, but DSL is making some progress in Europe, the Yankee Group found.

ADSL subscriptions outstripped those for cable modem services in 2001 for the first time among European residential users, the Yankee Group reports. By 2006, the Yankee Group predicts that broadband will penetrate 20 percent of all households, serving more than 31 million customers. ADSL will account for 80 percent of total consumer broadband access revenue.

Jonathan Doran, author of the Yankee Group report, said that projected growth in the European broadband market depends upon a number of key drivers, including the continued rollout of DSL by incumbent telcos and the aggressive response of cable operators in developing broadband services to compete directly with ADSL. Other major growth boosters will include competitive pricing, greater availability of self-installation packages and wider government support of national broadband initiatives.

Other factors could also constrain the potential development of residential broadband in Europe. These include cutbacks to roll-out plans because of growing financial difficulties. A lack of real competition following the failure of local loop unbundling may keep prices high, deterring large numbers of potential customers from adopting broadband.

“Most significantly, the industry has yet to convince consumers of the broadband value proposition, given the wide availability of low-cost narrowband services and the continuing dearth of compelling broadband content,” Doran said. (For more information, read “Broadband Lacks a European Audience.”)

DSL has an even bigger market opportunity in Europe among business subscriptions. A separate Yankee Group report found that business DSL subscriptions in Europe will be worth a projected €8.7 billion ($7.9 billion) by 2006, compared with €8.1 billion ($7 billion) for residential ADSL services. Business subscribers will account for just 20 percent of the total customer base in Europe in 2006, but average revenue per user for businesses will remain considerably higher than for residential services. Business DSL revenue will rise even further as businesses migrate to higher bandwidths and packages with service-level guarantees.

While leased-line prices remain high, the arrival of cheaper symmetrical DSL (SDSL) will help bridge the growing connectivity gap that exists among many small-to-medium enterprises, largely due to cost issues, the report found.

ADSL also had about 49 percent of the total broadband market in Asia in 2000, and the Yankee Group expects its momentum will increase going forward, reaching a total of 27 million subscribers by 2004.

The number of DSL lines in service in North America totaled 4,750,252 at the end of the third quarter of 2001, according to TeleChoice, Inc. The United States had 3,821,640 of the DSL lines, an increase of 487,149 subscribers from the end of second quarter 2001. The installed base of Canadian providers grew by 147,669 subscribers over the quarter, an increase of 19 percent from the end of the second quarter.

“Considering the prevailing economic conditions, deployments were relatively robust,” said Pat Hurley, TeleChoice DSL analyst. “While not matching the pace of installations seen in late 2000, it is good to see an increase in new subscribers compared to the first two quarters of the year. Service providers have been improving their provisioning processes, moving towards an almost 100 percent rate of self-installs for residential customers. Significantly, they have finally begun offering some value-added services like home networking support to entice those customers previously on the fence about moving from dial-up to broadband.”

DSL providers and equipment makers have plenty of incentives for bringing DSL to emerging markets. The collapse of several DSL providers and an enormous buildup by ILECs has created a market awash in excess equipment, the Yankee Group found.

“While the U.S. market continues to be one of the most important regions for DSL equipment providers, the oversupply in the market has compelled vendors to look for fertile grounds all over the world,” said Matt Davis, program manager for the Yankee Group’s E-Networks & Broadband Access research. “The European, Latin American, and Asia-Pacific regions have stimulated DSL shipments, and development is occurring in different regions on different timetables.”