International benchmarking study of Internet access (dial-up and broadband)

International benchmarking study of Internet access (dial-up and broadband) - 6 December 2002

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Chapter 4 Broadband take-up and availability

Introduction

4.1 This section provides a summary of the broadband options available to consumers in the benchmarked countries and compares take-up, availability and rollout plans. This is based on OECD data for the period June 2002 (except where stated), with some additional information from regulators and service providers.

Overview of broadband options

4.2 Table 4.1 provides an overview of the main options available to consumers regarding types of broadband product and providers.

Table 4.1: Summary of Broadband options

Country	Overview of services/providers
France	DSL: DSL products are mainly provided on the basis of France Telecom’s products. End users can either buy a full ADSL product from an ISP (who uses France Telecom wholesale inputs to provide service) or they can buy ADSL access from France Telecom with an ISP service bought separately (with the ISP providing transport based on France Telecom wholesale inputs). The former "resale" option (which is self-install) is more popular. Wanadoo, France Telecom’s ISP, has a large proportion of the ADSL market, estimated by the ART at 83% at the end of September 2002. LLU has yet to make much of an impact. Approximately 1100 unbundled loops are being used to provide DSL services to businesses at the beginning of October 2002.
	Cable modem: France Telecom owns and operates the second largest cable network and had approximately 20% market share at the end of June 2002. NOOS, the largest cable operator, had an estimated 55% market share at June 2002.

Germany	DSL: Deutsche Telekom is by far the biggest provider of DSL services. An end user purchases a DSL product directly from Deutsche Telecom ("T-DSL"), but must then purchase an ISP service as well to obtain internet access. T-online, Deutsche Telekom's ISP, provides service to a large percentage of those end users using T-DSL (approximately 85% of subscribers at Q1 2002). Other products are available from providers such as QSC, who provide DSL services over local loops both directly to end users and on a wholesale basis to other providers. Approximately 7-8% of DSL lines are provided via LLU or direct build.
	Cable modem: The development of cable modem services in Germany has been relatively slow. The failure so far of Deutsche Telekom to sell its cable assets is holding back the development of cable modem services.

Sweden	DSL: Telia is the largest provider of DSL services, with around 77% of subscribers at end June 2002.
	Cable modem: Telia owns one of the largest cable networks and had approximately 20% market share of cable modem subscribers at end of April 2002.
	Other: Ethernet LANs or so called "property networks" also represent a relatively large proportion of broadband connections (approximately 24% at the end of June 2002) and this has brought additional competition to the market.

UK	DSL: DSL products are mainly provided on the basis of BT's wholesale products. These are provided to all service providers on the same basis, and BT Openworld has approximately 50% market share. Kingston is the sole provider in the Hull area. LLU has yet to have a big impact. About 1600 local loops are being used to provide DSL service to business consumers as at October 2002.
	Cable modem: NTL and Telewest provide cable modem services that are available to approximately 45% of households. Between then they account for approximately 60% of the broadband market.

US	DSL: DSL services are provided by a variety of service providers. The largest providers are regional bell operating companies (RBOCs - local incumbents). New entrants (such as Covad, offering services over leased local loops) had a market share of around 7% at June 2002, down from 16% at the end of 2000 (several of the major new entrants are no longer offering service). DSL services are estimated to be available to approximately 50% of US homes at the end of 2001.
	Cable modem: the four largest cable companies are AT&T Broadband, Time Warner, Comcast and Cox. Together they account for around 72% of the cable modem market. Cable modem services are available to around 71% of US homes by 2002.

Source: OECD, Oftel, regulators and service providers.

Further information on wholesale products is given in chapter 5.

Take-up

4.3 Data on take up are presented as a percentage of population (using OECD population figures for 1999). In figure 4.1, broadband take up rates in each country is shown as at end 1999, 2000, 2001 and end of June 2002.

Figure 4.1: Broadband take-up per 100 population by country for end 1999, end 2000, end 2001 and mid 2002.

Source: OECD, companies

4.4 While current levels of broadband take-up are low (below 7% of population) in all of the countries benchmarked, take-up in the US and Sweden is markedly higher than in the other European countries. The increase in broadband take-up since the beginning of 2002 shows a wide variation: in Sweden and the US the increase corresponds to 1.3 percent of population and in Germany, the UK and France the increases are 0.8, 0.7 and 0.6 percent of population respectively.

4.5 An alternative way of viewing the data is shown in Figure 4.2. Here overall broadband penetration is shown over time, with more recent data for the UK, included.

Figure 4.2: Broadband take-up over time

4.6 This again illustrates that UK take-up is behind that in other countries, however, it appears to be catching up with France. It is noted that all countries tend to show a period of relatively slow take-up initially, followed by acceleration in the take-up rate. Broadband services were launched later in the UK than in other countries and this later start should be borne in mind in viewing this chart. For the European countries, the current ranking of countries by penetration rate mirrors the ranking of date of launch of DSL by the incumbent operator.

Table 4.2: Broadband growth rates

	Quarter 1 (Jan 2002 – Mar 2002)	Quarter 2 (Mar 2002 – Jun 2002)
France	21%	29%
Germany	23%	9%
Sweden	19%	3%
UK	45%	47%

Source: OECD data and companies

4.7 Table 4.2 shows that percentage growth in subscriber numbers is slowing down in Sweden and Germany, while remaining high elsewhere. There is not enough data to carry out the same comparison for the US, however, the average quarterly growth rate over the first half of 2002 was14% (overall growth over the first half was 29%).

Subscriber numbers by type of provider

4.8 Table 4.3 shows a comparison of the number of subscribers to broadband products (note the figures are approximate and may not always relate to precisely the same point in time).

Table 4.3 - Take up of broadband services in France, Germany and the UK (June 2002)

	France	Germany	Sweden	UK	US
ADSL provided by service provider (SP) using incumbent network (Q2 2002)	732,000	2,400,000	344,000	290,000	4,950,000
% of consumers using SP of the incumbent for ADSL services	83% (approx.)	85% (approx.)	77% (approx.)	50% (approx.)	N/A
DSL provided over LLU or own build	750	100,000	5,063	600	N/A
Total DSL end users per 100 population	1.24	3.04	3.88	0.49	1.81
Cable modem subscribers	233,500	39,100	127,400	447,000	9,100,000
Cable modem subscribers per 100 population	0.4	0.05	1.69	0.75	3.34
Alternative technologies	0	50,000	128,000	4600	1,769,000
Total broadband subscribers	966,000	2,587,000	599,000	741,500	14,060,000
Total broadband subscribers per 100 population	1.64	3.15	6.80	1.26	5.84

Source: OECD, regulators and companies

4.9 The subscriber numbers are also illustrated graphically in figures 4.3 and 4.4, focussing on subscriber numbers per 100 population and on the way the market is split between: DSL provided by the incumbent's service provider; DSL provided by other service providers using the incumbent's wholesale DSL products; cable modem services; and other broadband services (provided over unbundled local loops or own build).

Figure 4.3 - Subscriber numbers per 100 population

Figure 4.4 - Split of market by different types of provider (approx)

4.10 The figures illustrate the broadband markets in France, and particularly Germany, are dominated by the incumbent's SP. This is not the case in the UK.

4.11 The UK market is more competitive both in terms of infrastructure competition (from cable modems) and service provider competition (BTOpenworld's market share of the ADSL market is lower than Wanadoo's, T-Online's and Telia’s).

4.12 While Germany has a significantly higher number of broadband subscribers, not all of these have unmetered access (approximately 40% use a metered package or a package with a limited number of included hours).

Availability and roll-out

4.13 Comparisons can also be made of the extent to which services are available. Figures are shown in table 4.3 for DSL coverage as at end 2001 together with forecasts for the future.

4.14 The figures in the table show that roll out in the UK is ahead of the US and behind Sweden, Germany and France. These figures should be treated with caution, as they are not provided on a comparable basis. Limited information is available for Sweden.

Table 4.4: DSL coverage

DSL coverage	2000	2001	2002	2003
France (% of lines)*	32	76	86	91
Germany (% of lines)	60	80	90
Sweden (% of lines)		70	75
United Kingdom (% of lines)	50	60	66
United States (% of lines)**	36	50	62	65

Source: OECD, companies *These figures are higher than those given by alternative sources. **some carriers may have higher availability in their own service areas such as Bell South with 70%.

4.15 For some countries these figures are not representative of the actual number of households that can receive services. Due to technical limitations of ADSL, for example distance from the exchange and age and condition of lines, not all people living within an upgraded exchange area can receive DSL services. For example, in the UK 66% of people live in areas with upgraded exchanges, but approximately 5% of people in each exchange area cannot get the service. This means that ADSL is currently available to 63% of UK households. The figures for France in table 4.4 are higher than estimates from some other sources (other sources suggest that availability in France is similar to that in the UK). Differences in estimates may in part be due to differences in the extent to which technical limitations affect actual availability. Figures for the US, however, appear to have been adjusted to show actual availability.

4.16 Less information is available on the availability of cable modem services. Figures for network coverage of cable companies provide an indication of the potential availability, but current availability may be very different to this. The following figures provide an indicative comparison:

in France 32 percent of households passed. Cable modem services became available in 1997 and cable modems are available to approximately 15 million inhabitants or 25% of households at June 2002;
in Germany 86 percent of households passed. By mid 2002 cable modem services were available to approximately 4 percent of households;
in Sweden 65 percent of households passed. Approximately 40% of the cable network has been upgraded;
in the UK 51 percent of households passed. Cable modem services were available to around 45 percent of households as at June 2002; and
in the US 96 percent of households passed. Cable modem services were available to around 71 percent of households by 2002.

Conclusions

4.17 UK take-up for broadband is behind that in the other countries benchmarked, although this is at least partly explained by the later launch date in the UK. However, the percentage growth in subscriber numbers in the UK was higher over the first half of 2002 than in any of the other benchmarked countries and the UK broadband market is more competitive in terms of service providers and infrastructure competition than France and Germany. These factors along with competitive broadband prices present a positive picture for broadband development in the UK.

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