Feeds

Cheap DSL will hurt providers: report

Caught in a Trap - any turning back?

  • alert
  • submit to reddit

The smart choice: opportunity from uncertainty

A broadband strategy based on cut-rate prices could hurt the commercial viability of broadband providers, a new report says.

Cheap broadband availability, specifically DSL, would trip up broadband providers in the same way that it impeded the viability of dot-com companies, since cheap or free services aren't viable in the long-term, a new report released by consultancy company Ovum says.

The report said that DSL broadband operators around the world are at risk of falling into the same competition trap as Japan and South Korea by basing their marketing strategies on cheap pricing.

Stiff competition among operators in Japan and Korea has led to prices being cut to unsustainable levels. Operators in these countries now have to sell extremely generous service offerings at slashed prices of less than EUR10 per Mbps. This is in contrast to countries such as the US, Germany or France, where the same level of service would cost EUR35, EUR61 and EUR85 per Mbps respectively.

"The cost structure in Asia Pacific may be different from Europe and North America, but it is highly unlikely it can support such price cuts," says Michael Philpott, senior analyst with Ovum. "Sooner or later, Japanese and South Korean operators will have to change their business strategy if they are to survive."

Philpott also warned against giving away advanced DSL broadband services, which could provide valuable revenue streams to providers. "They should remember that offering multiple 'free services' was one of the downfalls of the high-tech bubble," Philpott continued.

But the report notes that as competition in the broadband sector takes hold, operators in other countries are in danger of falling in the price-war trap. In the US, DSL operators are under increasing pressure from cable players and have been dropping their broadband prices and offering free advanced ISP services such as parental control and home networking.

In countries where competition is less of an issue, DSL providers often come under political pressure to provide cheap broadband, the report said. Many countries use their neighbours as their benchmark for the availability of broadband and governments press providers to make cheap broadband widely available. "If government pressure is matched by funding or better regulations then it won't work against the operators," said Philpott speaking to ElectricNews.Net.

The report suggests that operators create a tiered charging structure to prevent the commoditisation of broadband, whereby different tariffs would be created for different types of users.

"Currently 5 percent of broadband users utilise 50 percent of resources," said Philpott. "It would be fairer if tariffs were tiered to take usage into account."

© ENN

Eight steps to building an HP BladeSystem

More from The Register

next story
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
Major problems beset UK ISP filth filters: But it's OK, nobody uses them
It's almost as though pr0n was actually rather popular
Microsoft unsheathes cheap Android-killer: Behold, the Lumia 530
Say it with us: I'm King of the Landfill-ill-ill-ill
All those new '5G standards'? Here's the science they rely on
Radio professor tells us how wireless will get faster in the real world
Apple orders huge MOUNTAIN of 80 MILLION 'Air' iPhone 6s
Bigger, harder trouser bulges foretold for fanbois
Oh girl, you jus' didn't: Level 3 slaps Verizon in Netflix throttle blowup
Just hook us up to more 10Gbps ports, backbone biz yells in tit-for-tat spat
GoTenna: How does this 'magic' work?
An ideal product if you believe the Earth is flat
Telstra to KILL 2G network by end of 2016
GSM now stands for Grave-Seeking-Mobile network
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.