Increasing Broadband Internet Penetration
In the OIC Member Countries
38
Figure 10: Economies of scale in the wireless industry
Source: Bank of America Merrill Lynch; Telecom Advisory Services analysisLarge mobile broadband operators enjoy significant cost-per-subscriber advantage over
operators half their size. These economies of scale are driven primarily by the large fixed
component of local radio network deployment and infrastructure costs. Furthermore,
aggregate macro-scale in mobile services could be related to the fact that they are a single
product industry, which is governed by volume. In addition, it is also possible that economies
of multi-plant operation (multiple call centers, regional customer service, maintenance and
logistics) are also at work. In addition to operating expenditures, capital expenditures are also
affected by economies of scale. In fact, capital expenditures per wireless minute of use
decrease with size of the subscriber base. Scale effects of capital spending are also coming into
play with infrastructure upgrades (3G and 4G). For an industry that is capital intensive as
wireless, the extent of capex scale effects underlines the unsustainability of multiple (more
than three) redundant networks.
A broadband operator with presence in multiple countries can generate cost reductions by
consolidating functions such as billing, network engineering, product development, and
achieving better terms in purchasing equipment and terminals. When this occurs, the global
operator can “jump” a scale curve and benefit from lower unit costs (see figure 11).
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
0 10,000,000 20,000,000 30,000,000 40,000,000
Opex/Month perSub (2007)
Total Subscribers (2007)