2011 Europe - Digital Economy and Digital Media Market

European demand for bundled services stimulates network upgrades

During the next few years subscriptions to bundled services will dominate consumer relations with telcos. The convergence of services has been mirrored by operators establishing themselves in sectors other than their core ones, with the result that quad play (generally including mobile telephony) has become common, though generally the dynamics of individual markets have determined the proportional dominance of double play, triple play and quad play offers.

Almost two-thirds of households take both fixed-line and mobile telephony, while almost 45% subscribe to a bundled package from a single provider. In addition, about 55% of households have a broadband connection: the growth in broadband adoption has been crucial for the take-up of bundled services and the development of the region’s digital economy. Overall, broadband access increased 7% in 2010, with the strongest development in countries such as Latvia, Romania, Portugal, Finland, Lithuania, the Netherlands and Greece. Similar growth is expected for 2011 and 2012 in markets with lower broadband penetration.

Broadband is still dominated by DSL, which accounts for about 62% of connections in the region, while cable broadband (with an average of 17% of connections) is more common in a number of markets such as Hungary. FttX is a growing sector, accounting for only 2% of connections on average but expected to dominate most markets by 2020 as DSL subscribers migrate to fibre.

What will characterise these networks in coming years is higher capacity as telcos strive to keep pace both with consumer demand for bandwidth and with ambitious government broadband strategies. These initially focussed on universal availability but have increasingly called for improved quality of connection to facilitate the growth of national digital economies. As such, the cable sector – which continues to undergo consolidation with larger players acquiring smaller operators and so benefitting from improved scale and geographic reach – has largely been upgraded with DOCSIS3.0.

This standard commonly provides up to 100Mb/s though a number of operators have commercialized faster services, and trials are underway in the UK with a 1.5Gb/s service. DSL providers are similarly moving towards FttX/VDSL architecture or FttH. By 2020 FttH will be the key standard, allowing governments to pursue trans-sector policies which promote e-health, tele-education, smart grid architectures and a plethora of initiatives which rely on telecom networks as national infrastructure.

The bundling of services has transformed the telecoms and TV broadcasting industries, bringing players in both sectors together as direct competitors in the market. The process has required a significant realignment of the organisations involved. The market for digital media services in Europe is vast, and so the sector will continue to attract considerable investment.

By the end of 2012, digital terrestrial TV (DTTV) will be available in almost all homes as the most EU countries will have switched from analogue broadcasting. By the end of 2011, 20 European countries will be fully digitised, while at least three have deferred ASO to 2014. Some analogue services will remain in tandem, depending on the business plans of individual operators.

A key benefit of ASO is the release of sub-GHz spectrum – the digital dividend – which in most markets has been assigned to mobile broadband services. With this spectrum assignment in place, the wider availability of 4G (LTE and WiMAX) will deepen the range and capabilities of the region’s digital economy, secure new revenue streams for players, and provide new service benefits for consumers and governments alike.

Data in this report is the latest available at the time of preparation and may not be for the current year.