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Over the last twelve months, clear signs have emerged that broadband connection growth is slowing down in all of the leading AP markets: Japan, South Korea, Hong Kong, Taiwan, Singapore and even Australia. Operators need to start rethinking their strategies to address the changes. Australia, 6 November 2006 -- David Kennedy, Research Director at Ovum, comments: As the market for broadband connections matures, operators in the region must find new sources of revenue growth and must also trim their cost bases. That isn't happening yet. Though connection growth has been strong in leading AP markets for years, competition and market saturation have been driving down ARPUs in most places. And customers' appetite for bandwidth continues to grow, placing upward pressure on costs. There are two main strategies to grow revenue. There are 'media strategies' to bundle and integrate additional content and information-based services into the broadband access offer, increasing cross- and up-selling. Then there are 'technology strategies' designed to encourage entry-level broadband subscribers to move to higher speed services, boosting access revenues. On the demand side, cost drivers are becoming stronger. Traffic is growing, driven especially by P2P file-sharing and (occasionally) malicious traffic as well. And today's newer customers have lower technical knowledge and willingness to pay today than a new customer did two years ago. These factors will push up network and customer support costs if not carefully managed. Operators can respond to these trends in a number of ways: Consider your media strategy. Success factors for media strategies are the capacity to bundle media, mobile and fixed services, and the ability to source attractive content exclusively. These capabilities are built on a large customer base, depth of technological skill, and the ability to build partnerships with the rest of the media value chain. Incumbents are most likely to possess these attributes. Technology strategies are built on constant technology improvement, and are often adopted by the incumbent's competitors. There is still scope for this strategy to develop in several markets where penetration of fast broadband is still low. But experience shows that competition drives these prices down quickly, leaving the operator right back where they started. They will ultimately need to broaden their repertoire, improving their innovation capabilities, segmenting and prioritising their markets better, and developing their own partnerships. As penetration levels rise, the customer base is becoming more diverse. Light users, heavy users, and users in between need tailored approaches and packages. Successful segmentation of the customer base, with offers and support designed for each segment, will be crucial to long-term profitability. Think about traffic management. Some operators in the region are already prioritising some forms of traffic over others to bring bandwidth demand closer to bandwidth supply, to segment demand more efficiently, and to create new bundling and pricing options. Operators who do this will be a stronger financial position. Prepare to 'bite the bullet' on pricing. Better traffic management is the short-term solution, and anecdotal evidence suggests it is already popular. But some form of usage-based pricing will be required in the long term. The transition to a usage based pricing strategy approach is still at a very early stage in most of the AP region, and will generate customer resistance if mishandled. Develop new customer support strategies. Fast growth has a price. The late adopters are not as profitable as the early adopters, so operators need to provide technical and other support as efficiently as possible to make these customers profitable. Best practice involves integrated customer relationship management and web based and interactive voice recognition (IVR) support. There are some leading examples in the AP region, but there is still a task ahead for many operators. About Ovum Plc: Ovum's primary activity is providing value-added advisory services and consulting to retained and project clients. The Company acts as a well-respected and trusted source of industry data, knowledge and expertise on the commercial impact of technology, regulatory and market changes. Ovum engages in continuous research and industry analysis to determine market dynamics in its specialist sectors. Ovum has developed long-standing relationships with many of its corporate clients, which include major international blue-chip companies such as Alcatel, AT&T, BT, Cable & Wireless, Cisco Systems, Deutsche Telecom, Fujitsu, HP, IBM, Microsoft, Telstra and Vodafone. Media Contacts: Tanisha Kuckreja Tel: +61 3 9601 6723 Email: Submitted by Tanisha, ovum on Monday, 6 November 2006 at 1:00 PM Category: Others & Oddities |
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