Megabit pricing: the case for fibre

Broadband pricing research highlights that technology choice and competition drive consumer broadband costs

By - March 20, 2012
fibre-internet

The latest analysis from Point Topic’s broadband tariff survey shows significant variations in pricing between access technologies and across regions.

Large pricing differentials between the “superfast” fiber and cable offerings and the more pedestrian DSL services are down to the markets they’re aimed at.

“DSL services will often be priced as an entry level option and the bandwidth on offer will reflect that. Fiber and cable though are sold as high-speed, future proof, premium solutions and are pitched much more at the relatively affluent, regular broadband user,” Point-Topic said.

If we examine the regional, as opposed to technology variations, another story starts to emerge. DSL services have the largest variance and it is much tighter with the cable and fiber offerings. Latin America in particular has a high price per megabit in the DSL market.

Again, the fact that fiber offers more bandwidth in most markets than a cable connection is reflected in the relatively low cost of a megabit.

Cost of bandwidth

Cost of bandwidth

Fibre gaining momentum

Fiber has the most rapidly growing market share of any broadband access technology. “Consumers want it and operators want to sell it, which is resulting in some very low cost per megabit outcomes,” Point-Topic explained.

“It is interesting to see the variation here, from only $0.41 across the Asia Pacific but more than 5 times as expensive in North America.”

Cable and fiber increase their value for money, DSL refines its positioning

Over the last 12 months (to end 2011) most tariffs in most regions have been driving down the cost of a megabit.

Three exceptions here are: DSL which has seen a rise on average; FTTx in Eastern Europe; and some cable tariffs in MEA.

The shift in DSL is primarily due to the targeting of the services at the entry level, less affluent customer who require access for basic services and see cost as more of an issue than bandwidth.

Cable is subject to more competitive pressure from fiber as a more direct competitor. In most regions this has resulted in price drops and/or bandwidth increases,  but not everywhere.

“We are seeing the same effect with cable tariffs in [the Middle-East and Africa] as with fiber in Eastern Europe where relatively small changes in a limited number of tariffs have re-aligned the pricing per megabit. Earlier offerings have either been superceded or judged not sufficiently profitable and have been revised,” said Point-Topic.

Percentage change in cost per megabit

Percentage change in cost per megabit

Fiber continues to improve its story for consumers. Prices are dropping and bandwidth is increasing, although more slowly than forecast last decade.

The real cost of FTTP hit home at the same time as a global financial crises and the general model for deployment now depends on hybrid approaches that can leverage existing infrastructure as far as possible and offer a stepping stone to future gigabit-plus offerings on a widespread basis.

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