A new report from Ovum warns new entrants planning to deploy broadband technologies such as digital subscriber line may find the cost and complexity discouraging, and other access methods such as wireless local loop are a potentially more viable solution in many markets.
Ovum’s report, “Broadband Access: New Business Models,” points out that most early broadband access operator business plans were vastly overoptimistic, resulting in largely delayed deployments and indefinite postponements for commercial release of services.
“Technology costs are only the tip of the iceberg for operators and new entrants,” said Yum Petkovic, Ovum analyst and lead author of the report. “The cost of interconnection can often form the biggest expense, even leaving aside the cost of rolling out a new network. So despite all the regulatory work needed to unbundle the local loop, countries which have achieved unbundling may find that new entrants are not queuing up to take advantage of the new rules.”
Trial broadband service in the United States highlighted the downside of DSL, which is unable to cover long distances because of noise distortion, the report said. DSL also has bandwidth restrictions that tend to shorten its overall life cycle.
For new entrants, Ovum said the favored option is wireless local loop. This option allows operators without an existing customer base to build new networks without paying for interconnection lines or digging up new roads. Those who choose wireless local loop will be able to bring their customer offerings to market and recoup rollout costs quickly.
“Wireless is definitely a good short-term strategy because the revenue generated soon will outstrip cost margins,” Petkovic said. “The wireless approach is being encouraged in Hong Kong, for example, as it represents the quickest way to foster competition-nearly 20 licenses already have been awarded.”
Many countries in Europe, including the United Kingdom, France and Switzerland, have held or are holding auctions to award wireless local loop licenses this year, the report said.
Each broadband delivery method offers different capabilities and restrictions, the report noted. Operators will have to compromise between being able to deploy quickly to build a customer base, and lifetime performance issues. Population density, geographic layout and the sophistication of current networks also play a part, Ovum said.
