FUNDAMENTAL CHANGES

Telecom Markets and Economic Strength

The use of fixed line and mobile cellular telecom networks differs among markets in patterns that track with GDP, disposable income and other factors. One indicator, teledensity, or the number of subscribers per 100 population, is useful for comparing countries. For example, Australia, Western Europe, the US, Canada, Hong Kong, Israel, Japan, Korea, New Zealand, Singapore, Taiwan and several other countries have teledensity greater than 40, and can be grouped into “developed telecom markets.” Using this criterion for separating worldwide markets into two broad segments, different trends can be seen for main lines and mobile cellular subscribers. In the chart above, the numbers of DSL and FTTx subscribers appear small, but their growth trajectory is stronger in terms of year-over-year percent change. The different indicators should not be interpreted as fully exclusive, or non-overlapping. That is, there are many customers that subscribe to more than one service, such as a fixed main line, a mobile cellular service, and a CATV service. The reason for plotting these indicators in this fashion is to show the trajectory and to highlight the relatively early status of FTTx.

 

Main Lines Decreasing in Major Markets


In some of the world’s advanced economies, fixed line telephony has been at a high level of household penetration for decades. In the US, for example, 93% of households were local exchange carrier (LEC) subscribers in 2005. This percentage has actually decreased from a level of 96% in 2000. This situation is not unusual: advanced economies in Western Europe and North Asia are also exhibiting a decrease in fixed line telephone subscribers, from levels with more than 90% of households subscribing. For some LECs, the number of main line subscribers is decreasing at rates as much as 5% per year. This erosion is due to several phenomena:

 

  • Residential customers discontinue use of additional lines, because they have broadband Internet service and no longer need a dedicated line for dial-up modem, or they no longer need a line for fax, or they no longer opt for additional lines for family members, who may rely more on cellular phones.
  • Some customers cancel or decline fixed line service, relying solely on mobile cellular service (“cutting the cord”).
  • Some users subscribe to services from companies that may not be included in the main line data, such as voice-over-IP providers or CATV operators.

Mobile Growth is Strong but Slowing

The number of mobile cellular subscribers, on the other hand, is still increasing at double-digit annual growth rates, especially in developing markets. In the first half of 2007, for example, the number of mobile cellular subscribers in India has been increasing at rates of 6 million to 8 million new subscribers per month. The table on page 5 shows that mobile cellular subscribers increased with a CAGR of 42% in developing markets from 2000 to 2005. This growth rate will inevitably slow down in the next five years – it has to or mobile cellular subscribers would exceed world population!

Broadband Services Still in Early Stages

The annual increase in new DSL subscribers also is slowing down, from annual growth rates more than 100% in 2000 and 2001, to 40% in 2005 and 30% in 2006. FTTx is an even newer phenomenon than mobile cellular, and subscriber levels have been more than doubling on a worldwide basis in recent years. This growth also will slow down, because factors such as the cost and the rate of FTTx network construction will limit the number of new homes passed each year to a maximum figure in the tens of millions on a worldwide basis.