As fixed broadband heads towards market saturation in Europe, mobile broadband services are continuing to ‘steam ahead’ in some countries. The rapid take-up of mobile broadband services is slowing the growth in fixed broadband penetration. For the second year in a row, Finland has experienced a decline in fixed broadband penetration.
Across Europe as a whole, growth in the take-up of fixed broadband services has been slowing, as fixed broadband nears market saturation. According to the European Commission, the overall fixed broadband penetration rate (as a proportion of the population) increased by only 1.7 percentage points in 2010 – the slowest growth rate since 2002 – to reach 26.6%.
While this fixed broadband penetration rate may appear relatively low, it must be remembered that it relates to overall population and not the percentage of households using a fixed broadband connection (which is substantially higher at 60.8%). In Sweden, Denmark and Finland, the percentages of households using a broadband connection were 82.6%, 80.1% and 75.8%, respectively at the end of 2010. As fixed broadband saturation nears, some fixed network operators are wisely looking to superfast broadband services as a means to increase fixed revenues as well as to resist any substitution of their services by mobile broadband services.
Compared with fixed broadband services, it is still relatively early days for mobile broadband. Average penetration of mobile broadband dongles and datacards reached 7.2% across EU countries in January 2011. Mobile broadband services have strong potential for further growth in many countries, particularly where operators provide affordable pricing, extensive coverage and high quality of service.
In 2010, the average penetration rate of mobile broadband dongles and datacards increased by 2.0 percentage points. It is dangerous to draw too many conclusions from this average figure, as it masks substantial differences between countries. For example, the penetration rate of mobile broadband dongles and datacards in Finland, Hungary, Poland and Sweden increased by 13.6, 5.0, 4.8 and 4.5 percentage points. In sharp contrast, the increases in the UK, Germany and France were significantly below the EU average. In part, this is due to operator actions to avoid network congestion problems, such as reducing monthly data allowances, combined with a failure to address quality of service and coverage issues.
As shown in the figure, below, mobile broadband penetration exceeded 10% in seven countries in January 2011: Finland, Austria, Sweden, Denmark, Ireland, Portugal and Italy. In Finland, mobile broadband penetration (as a proportion of the population) has now overtaken fixed broadband penetration (as a proportion of the population), and Austria is not far behind.
Analysis of the EU fixed broadband and mobile broadband penetration data reveals that the growth in fixed broadband penetration has slowed in markets that have experienced strong growth in mobile broadband penetration, as shown in the figure below. The figure shows a plot of the two-year increase (from January 2009 to January 2011) in fixed broadband penetration against the corresponding two-year increase in the penetration of mobile broadband dongles and datacards, for a range of EU countries. There is a clear negative correlation. Markets that have experienced strong growth in mobile broadband penetration – noticeably Finland, Sweden and Denmark, have experienced low (or, in the case of Finland, negative) growth in fixed broadband penetration.
In his previous article, Alastair Brydon reported that Finland experienced a decline in fixed broadband penetration of 1.3 percentage points, from 30.7% at the end of 2008 to 29.4% at the end of 2009. In the year to January 2011, Finland experienced a further decline – of 0.3 percentage points – in fixed broadband penetration, to reach 29.1%.
So, it is clear that, to a certain extent, fixed broadband services are being substituted by mobile broadband services, and this effect is most pronounced where mobile broadband services are affordable and of high quality, and where coverage is extensive. The combination of extensive deployment of LTE networks and further improvements in tariffs (enhanced affordability with higher usage allowances) may encourage further substitution of fixed broadband services in some countries over the next few years.
The fact that several markets have managed to achieve high penetrations of both fixed and mobile broadband services suggests that most users regard mobile broadband services as complements to fixed broadband services. For example, despite Denmark having a relatively high penetration of mobile broadband dongles and datacards (14.4% in January 2011), Denmark also had a very high fixed broadband penetration (of 38.8%). Denmark’s fixed broadband penetration is significantly higher than virtually all other EU countries.
I, therefore, do not expect to see any major decline in fixed broadband penetration, nor do I expect to see any strong growth either. Fixed network operators will increasingly face the challenges of a saturating market, and will need to drive ahead with investment in superfast broadband services to help counter pricing pressures and competition from mobile broadband services. In comparison, mobile broadband penetration will continue to increase across all EU member states, although there will be substantial differences in growth between markets. Countries such as Finland, where mobile broadband services are affordable, coverage is extensive and operators are investing strongly in LTE services, will inevitably achieve much stronger growth than markets such as the UK, where operators are applying a number of tactics (such as reduced data allowances) to constrain mobile traffic growth and are not pursuing early LTE deployment.