Broadband has been often daemonized for being a service with strong financial burdens and a cumbersome return on investment for fixed operators. Broadband users keep asking for more bandwidth (which they often get at the same price) to imrpove their access to third party’s content. This increases the pressure to fixed operators to enhance access offerings, but it does nothing to drastically improve the revenues.
Luckily, that’s not all. Traditionally fixed and mobile telephony were regarded as complimentary and not competitive markets. There are a number of evidence that validate that, most important I believe, is the segmentation of electronic services market by European Commission that separates mobile and fixed telephony and broadband. However, things are changing rapidly and only if we include mobile operators in the market perspective could we evaluate appropriately broadband impact to fixed operators’ business.
As technology matures more and more fixed-mobile converged (FMC) services become available to the mass market and the enterprise that requires smooth collaboration of fixed and wireless access (thus, implying a closer integration between fixed and mobile operators services). The quickest and cleanest way for a mobile operator to provide FMC service is to enhance access to the end user (which they do by integrating 3G technology – e.g. femtocell which uses licenced spectrum thus protecting their market). On the other hand fixed operators lack the level of population and area coverage of the mobile operators but extent their reach by deploying wireless (wifi) access that is backhauled via fiber (or copper) to their network. As both types of operators address the same customer group and use colliding strategies fixed and mobile operators are in for a big fight.
Who may or may not get through this is another issue, what is important however is that the fixed-to-mobile substitution trends that gave a clear head to mobile at the early days of the market did not materialize. Studies show that the primary reason for that was a) the lack of coverage of mobile networks in their respective residence and b) the superiority of fixed broadband to the mobile equivalent.
Surprisingly (or not so much), fixed telephony users do not switch to mobile carriers primarily due to their valuation for high-speed broadband. That of course conflicts with the impression of (bizzarely) the big telcos that higher access speeds are not needed. The fact is that broadband becomes a strong competitive advantage for fixed telcos vis a vis mobile carriers in the FMC market both in terms of a) product value and b) customer retention. Fixed broadband access to the user (much cheaper compared to 3G broadband) is exactly what mobile operators are looking for to enhance their products. That is why despite the availability of clean and independent ways to enhance access to the user we see all more often mobile carriers buyout and/or collaborate with fixed operators.
If we look at the Greek mobile market, which leads in Europe in terms of penetration, Wind acquired Tellas, Cosmote merged with OTE Group and finally Vodafone is closely collaborating with HoL in broadband and other marketing offerings, facilitating, for all three mobile players, access to the incumbent’s copper and fiber infrastructures.
