Increasing Broadband Internet Penetration
In the OIC Member Countries
36
Portugal) have chosen to deploy fiber to the household, while others (Germany, United
Kingdom, Belgium) tend to rely on hybrid networks combining fiber to the node and legacy
copper networks. These networks can adopt VDSL vectoring technology capable of delivering
speeds of up to 1 Gbps. On the other hand, cable TV operators have been deploying DOCSIS 3.1
architectures capable of delivering up to 1 Gbps of download speed.
In the case of mobile technology, 4G/LTE is the technology of choice. The global user base of
subscribers that have already adopted 4G has reached 1.453 billion by 2Q2016, connecting
approximately 1 in 5 mobile users worldwide (19.5%)21. LTE subscribers are forecast to reach
3.3 billion by 201822. In terms of future migration, some operators are already trialing 5G
technology, which will be able to deliver download speeds of up 10 Gbps. Commercial
deployment of 5G is expected to begin by 2020 in developed countries.
Competition from Over The Top platformsWhile pressured to increase capital spending for deploying high-capacity networks, broadband
service providers are facing increased competition from Over The Top platforms with
potential for capturing a growing share of traditional telecommunications operators’ revenue
streams. For example, Skype (owned by Microsoft) already represents, at 214 billion annual
minutes, the largest international telecommunications carrier23. Similarly, WhatsApp (owned
by Facebook) is expected to continue capturing a share of mobile voice networks. A 10%
reduction in the volume of voice calls in Western Europe is expected between 2016 and 2021,
largely driven by substitution to WhatsApp24.
The net effect of OTT players is an erosion of price realization, whereby operators need to cut
prices in order to match the offerings of “asset light” competitors, whose business model is not
predicated on selling telco minutes but monetizing advertising revenues.
Revenue stagnationThe intensity of competition among broadband service providers and between
telecommunications and OTT players is putting pressure on the telecommunications industry
revenues. An estimation of total telecommunications industry revenues between 2000 and
2014 indicates a stagnation after 2011 (see figure 9).
21 Global Mobile Suppliers Association (2016). Evolution to LTE report. October 26.
22 IDATE. Digiworld Yearbook 2016. Montpelier.
23 Telegeography (2014). Skype traffic continues to thrive. January 15.
24 Analysys Mason (2016). Top ten predictions for 2017. December 21.