2008 USA - Telecoms, Wireless and Broadband

BuddeComm’s USA Annual Publication, 2008 USA – Telecoms, Wireless and Broadband, profiles the fixed-line, wireless (mobile) and broadband markets in the USA. It also examines the convergence of these technologies with each other and with digital media such as digital TV and the emergence of new telecommunication services such as VoIP and IPTV.

These markets continued their trends towards a triple play model during 2007 and early 2008. In particular, the telcos started making genuine strides towards their vision of triple play, by aggressively accelerating their deployment of optic fibre networks across their footprint. Their sense of urgency was highlighted by the rate of wireline losses; both Verizon and AT&T Inc posted fixed-line losses of around 10% for 2007. The main beneficiaries of the telcos’ significant churn rates, were the cable companies, whose VoIP services enjoyed rapid subscriber gains.

The Internet economy continued its meteoric rise, with sites such as Facebook becoming $100 billion companies virtually overnight, highlighting the enormous scale of network economies that can be harnessed by the Internet’s expansive reach. Online advertising and e-commerce are becoming an increasingly significant share of the overall advertising and retail markets. Microsoft’s bid for Yahoo!, if successful, would give the merged entity, together with Google, a combined 50% of the $20 billion per annum online advertising market.

This report provides overviews, analyses and detailed statistics on the US fixed-line, wireless and broadband markets including their sub-markets such as DSL, cable, FttH, wireless broadband, utilities broadband, the Internet, VoIP and IPTV.

Key highlights:

·         During 2007 total revenue for the telecommunications industry grew by around 8% to reach over $1 trillion. Telecom service revenues reached $458 billion, of which wireless service revenue accounted for approximately 31%.

·         The number of traditional fixed-line customers continued to drop sharply during 2007, with Verizon and AT&T both reporting declines of around 10% in residential wireline accounts. The growth in VoIP was a major contributor to this decline, in particular cable VoIP, with subscriber growth rates around 75%.

·         Thus the RBOCs continued to focus on their fibre deployments in response to increasing competition from the MSOs’ VoIP and triple play offerings. State-by-state video franchising reform continued apace, thus facilitating the deployment by the RBOCs of IPTV on their expanding fibre networks. By late 2007 FttH deployments in the US were growing at over 110% per annum.

·         Total broadband subscribers continued to grow solidly, although in terms of broadband penetration, the US continued to edge towards the bottom half of the OECD tables. For more information, see chapter 5.2.2, page 50.

·         Broadband DSL subscriber growth continued to outpace cable subscriber growth, though cable still leads in terms of market share. However, with the telcos aggressively deploying fibre networks, they will soon overtake the cable companies in terms of broadband market share.

·         WiFi was becoming increasingly commonplace in the USA during 2007, with a burgeoning hotspot network, laptops being automatically equipped with WiFi cards and WiFi moving beyond the laptop; nevertheless doubts were being raised over the viability of municipal WiFi programs following the difficulties experienced in cities such as San Francisco, Chicago and Philadelphia.

·         On the regulatory front, after a series of complaints were filed with the FCC by public interest groups, the Commission demonstrated some support for the principles of net neutrality in late 2007 by launching an inquiry into network management practices by broadband providers. For more information, see chapter 2, page 3.

·         The US wireless industry continued to enjoy considerable growth through 2007 reaching approximately 83% subscriber penetration by early 2008. Significantly, the percentage of wireless-only households exceeded, for the first time, the percentage of wireline-only households.

·         The wireless industry was characterised in 2007 by a number of acquisitions by major carriers of smaller regional and rural carriers. The acquisitions are seen as a means by which major carriers can increase their subscriber numbers and network footprints as wireless penetration reaches saturation point. For more information, see chapter 8.1.2, page 142.

·         Wireless data revenues continued to enjoy strong growth in 2007, underpinned by robust wireless data revenue growth. Thus while overall voice ARPU decreased during the third quarter of 2007, data ARPU sustained a steady incline. By late 2007 data service revenues accounted for approximately 18% of total wireless service revenues, up from around 4% in 2004. Significantly, the majority of wireless data revenues were being generated by non-messaging applications and services such as music downloads, mobile TV, video blogs and Internet-accessed entertainment services.

·         During 2007 the MVNO market witnessed a number of high-profile exits, causing a cloud of uncertainty to hang over the sector. A number of causes which may explain the trend include over-reliance on a content-focussed business-model and/or distribution issues with MVNOs failing to secure channel deals with large retailers. For more information, see chapter 8.3.1, page 160

·         The selection of 4G wireless technologies became more compelling in late 2007, with Sprint Nextel on the verge of an extensive WiMAX deployment and Verizon Wireless announcing its decision to start LTE trials in late 2008. These open access platforms both offer significant scope for increased convergence among services and devices.

·         In the broadcasting sector, with mandatory analogue switch-off scheduled in February 2009, the transition to digital TV gathered pace in 2007. This drove the growth of VoD services in particular. For instance, by 2007 it was estimated that approximately 45% of all cable subscribers utilised VoD. For more information, see chapter 7.6, page 121.

·         During 2007 the major satellite providers, DirecTV and the DISH Network, continued to make gains at cable’s expense, due in part to their competitive pricing plans and comparative advertising campaigns against their cable competitors. However, with the market moving towards a triple play model in the longer term, satellite will struggle to maintain these gains as it cannot match the cable companies’ broadband networks. For more information, see chapter 7.8.3, page 132.

Forecast wireless subscribers, penetration and revenue growth – 2008 - 2013

(Source: BuddeComm forecasts)