Evolution of the broadband market

In Germany broadband Internet is extremely important in economic and social terms. This is corroborated by the dynamics of development: the number of broadband connections jumped from 0.2 million in 2000 to 10.7 million in 2005. Broadband is a success story.

At the same time it is driving Germany's transition towards becoming an information society. The high distribution of broadband access is, after all, a prerequisite for the development of the entire broadband market. The question is: Will this trend remain as positive as it is today? Or will growth stall?

If one accepts the forecasts by broadband economics experts, the answer is clear³: The number of broadband connections will, according to their figures, expand from 10.7 million in 2005 to 21 million in 2010 - almost double the number of connections. Moreover, another expansion of more than 30% is forecast to occur between 2010 and 2015, thus bringing the number of connections to more than 27 million (Figure 2). This means that almost 70% of all German households would be connected to broadband Internet.

Figure 2:		Growth in broadband connections by 2015 (experts in broadband economics)4

There is one major factor behind this burgeoning growth: the increase in bandwidth. In other words more velocity, which is another way of saying an increase in the capacity of the broadband network. Without this, attractive applications such as Internet TV or Video on Demand would not be feasible. The customer perceives higher speed as meaning more convenience and a larger number of application opportunities. According to experts in broadband economics, this market driver will continue to play a key role. Bandwidth will continue to go up (Figure 3).

Figure 3:		Growth in broadband bandwidth by 2015 (experts in broadband economics)5

Whereas in 2005 76% of broadband users had Internet access connections of 1 mbps, this share will have been reduced to only 34% by 2010. On the other hand by 2010 more than 40% of access connections will have bandwidths of 6 mbps to considerably more than 50 mbps. This makes the trend quite unmistakable: the marked drop in the number of low-speed Internet access connections with a simultaneous and marked rise in the number of very high bandwidth connections.

The increased performance in terms of bandwidth can largely be traced to innovations in access technology. In this context VDSL technology above all deserves special mention. VDSL (Very High Speed Digital Subscriber Line) is currently the most powerful connection technology, delivering bandwidths of 25 mbps to more than 50 mbps. According to experts in broadband economics, in 2015 about every fourth Internet access connection will feature such high data velocities (Figure 4).

Figure 4:		Development of broadband access technology through 2015 (experts in broadband economics)6

These major growth rates in VDSL access connections will naturally result in a major reduction in the use of ADSL - today still the most widely used broadband access technology. ADSL will still be the number one in 2015, with a market share of more than 50%. Moderate growth is forecast for broadband access via TV cable and WiMax (Worldwide Interoperability for Microwave Access, i.e. regional broadband services via the radio). On the other hand, other access technologies such as satellite will remain insignificant.

The constantly growing bandwidth has brought with it a discussion about data tolls for Internet companies. For instance, in the United States a hefty debate is raging about why only Internet users have to pay for the higher bandwidths, but not the Internet providers. It is argued that companies make their profits from the sale of online products to Internet users. Accordingly, a content provider should also have to contribute to the costs of the infrastructure. This argument is not without its merits, because, after all, an increasing number of content providers are operating successful business models on the basis of a complex and cost-intensive broadband infrastructure.

At the moment the outcome of the debate is still open. In the context of "Deutschland Online 4", broadband experts were asked their opinion on data tolls. Almost 63% of the experts agreed to a high or very high extent with the statement that a data toll would serve to stimulate the further expansion and development of the Internet infrastructure.

A not insignificant 37% agreed to a high or very high extent with the statement that in the future providers of broadband content and services should pay the access providers for the preferential transmission of their content/services. Against this background it would appear feasible to make not only Internet users but also enterprises that market their content and services over the Internet contribute to the costs for developing and expanding the investment-intensive broadband infrastructure in Germany.