2005 – Year of the Broadband

By all counts, this has been a phenomenal year, the one where broadband transformed from a fast pipe to a fully viable platform. A platform that if leveraged properly can become a new engine of innovation and growth. We saw the revolutionary impact of the fast pipes on new web services such as MySpace, You Tube, and Heavy.com, that showed some serious growth in past 12 months. Many more emerged out of nowhere, and rocketed down the “always on” pipes.

The fast pipe helped spur some head scratching deals, and at the same time have helped drive down the price of voice to near zero.

But before we get into abstractions, and possiblities, lets look at some data to get a better handle on the Broadband Planet. Some have estimated that there are about a billion Internet users around the planet. It is hard to figure out how many are using broadband connections, but Point Topic estimates that the total number of broadband lines around the world is over 205 million. That’s nearly 55 million more lines from 2004, a nifty growth rate of over 35%.

Broadband’s big growth has come in China, Japan, Korea and parts of Asia, regions where families tend to be conjugal, versus the West where families are more nuclear. This leads me to believe that a substantial number of users are now going online using broadband. The interesting highlights of the year that was:

1. USA remains the largest broadband market with over 40.9m lines.
2. China comes in second place with over 35 million broadband connections.
3. Japan is third with over 22 million lines.
4. South Korea has over 12.0 million lines
5. Point Topic suggests that the UK will have 9.8 million broadband lines by New Year’s Day 2006, while France will have 9.7 million.

One of the highlights of 2005 was the per-meg prices of bandwidth in the last mile kept moving downwards, to nearly 24 cents a meg in Hong Kong, and between 35 and 45 cents else where on the planet. In comparison, US prices ranged from $5 to $9 a meg!

Looking forward, 2006 is a year when we can expect even more excitement as countries like Brazil, India, and Russia start a ramp-up in their broadband numbers. Africa, Middle East and Latin America are going to be the future geographies of growth, and they are quite likely to make their presence felt in 2006. Unfortunately, the growth in these geogrpahies isn’t going to be able to compensate for the slow down in the overall broadband market. The established broadband nations are now nearing saturation and as Point Topic rightfully points out, “newcomers are not yet growing fast enough to fill the gap.” Why? Simply because of the low PC penetration in developing and emergent economies.

Broadband and its impact on voice business (aka Voice over the Internet) is going to be substantial. Telegeography estimates that developing nations are the fastest growing destinations for international VoIP traffic. Brazil and Nigeria led the world in growth last year, with 112 percent and 103 percent, respectively. TeleGeography estimates that international VoIP traffic will exceed 42 billion minutes in 2005, representing over 16 percent of the total international voice market. The inbound calls, almost always eventually spur outbound calls as well.

So what shall we look for in 2006? In the US, marginally higher speeds, with incumbents offering between 3-to-15 megabits per second. Rest of the planet is going to start a transition to 50-to-100 Mbps tiers. In my mind, the speeds and feeds are just a way to keep score. In 2006, I expect to subtle behaviorial changes. The robust growth in total number of web searches in 2005 is the first sign of this consumer behavior change. An always on connection will change our habits in 2006, and the best part is that we won’t even know it!