Demand for next generation access and how we can meet it. Dr. Wolf Osthaus, 1&1 Internet AG WIK Fibre Networks Conference, Berlin June 6-7, 2011

Transcription

1 Demand for next generation access and how we can meet it Dr. Wolf Osthaus, 1&1 Internet AG WIK Fibre Networks Conference, Berlin June 6-7,

2 Agenda Market research on consumer demand for NGA Is there a demand for highspeed broadband? What are the drivers for ultra broadband demand? Is there a willingness to pay for extra bandwidth? What prevents customers from ordering higher bandwidth? Key factors for success of NGA investments The role of service providers such as 1&1 How NGA cooperation can work 1&1 Internet AG

3 Demand for higher bandwidth 44 % of respondents were interested in higher bandwidth for their internet access, while 56 % were not. Huge differences in results, if differentiated according to where people live or what their current bandwidth is: Demand for higher bandwidth much bigger in rural areas and respectively for people with currently rather low bandwidth. Are you interested in higher bandwidth for your internet access? -- Answer yes Big cities Small & medium towns Rural areas 16 MBit/s and more 2-6 MBit/s 1 MBit/s or less United Internet Media Research Broadband demand study, October 2010

4 Appetite comes with eating demand grows step by step If asked for their desired bandwidth, answers depend from currently available bandwidth. Demand for NGA-broadband is most common amongst people who already have 16 MBit/s or above, while people with currently low bandwidth tend to feel that 6-16 MBit/s suffice Desired bandwidth differentiated according to current bandwidth 52,1 1 MBit/s and less 2-6 MBit/s 16 MBit/s and more ,6 37,2 29,5 29,5 24, ,2 16,4 12,5 9,3 9,3 6,3 11, MBit/s 16 MBit/s 25 MBit/s 50 MBit/s more than 50 MBit/s United Internet Media Research, Broadband demand study, October 2010

5 Satisfaction with current bandwidth More than 80% of respondents already experienced their bandwidth as not being sufficient. 38% have this experience on a regular basis (at least once a week). Answers vary hugely depending on current bandwidth: 58% of respondents with 1MBit/s or less experience congestion at least once a week. How often did you experience insufficient bandwidth last year? (in%) daily at least once a week at least once a month less than once a month never Experience of insufficient bandwidth 15,8 22,1 14,3 28,7 19, ,9% United Internet Media Research Broadband demand study October 2010

6 Which services create bandwidth issues To determine which services are most likely to create bandwidth issues, it needs to put the frequency of experienced bandwidth issues in relation to the frequency, in which the specific service is used. Not surprisingly, it then shows that mostly video applications create problems. Services, that lead to bandwidth issues, in relation to the frequency of their use Bandwidth issues Frequency of use Movie / Video watching Internet TV Video Telephony/ Video Chat Online Games Online data storage and sharing Web Surfing Internet Telephony Online Software 37,5 30,2 13,9 12,6 9,5 13,0 20,1 29,1 17,2 28,8 40,8 84,4 6,8 17,0 9,7 26,9 27,0 92, United Internet Media Research, Broadband demand study, October 2010

7 Demand driven by interest in new applications Apart from faster loading of web pages already 2/3 of respondents mention shorter upload times as reason for their interest in higher bandwidth. There is a growing demand for interactive and innovative services, such as use of online software. What positive effects would you like to get from higher bandwidth? Faster loading of web pages 83,7 Faster uploads / sending of data Faster downloads (music, video) 67,2 65,1 Better quality of video / TV Faster and more reliabe use of online software Better response time with interactive services (e.g. Games) 40,1 47,0 45,6 Video-Telephony Better voice quality 23,4 27,5 Others 3, United Internet Media Research, Broadband demand study, October 2010

8 Access to new services thanks to higher bandwidth However, every second respondent, who already has 16 MBit/s or more, does not see any additional service he could get from higher bandwidth. Users with lower bandwidth are much more likely not to use some desired services today. Probably, there is need for better marketing the existence and added value of new services. Are there services you do not use due to lacking bandwidth, but which you would like to use if more bandwidth was available? No, there are no such services Internet TV Live Streaming Video on Demand Online Games Online Office (or other online software) 8,2 13,1 11,8 11,6 9,9 11,5 18,6 21,5 25,6 27,9 30,2 32,6 38,2 37,7 35, United Internet Media Research, Broadband demand study, October ,2 44,2 50,8 16 MBit/s or more 2-6 MBit/s 1 MBit/s or less

9 Willingness to pay for extra bandwidth 38% of respondents are not willing to pay a surcharge for extra bandwidth. However, the share of people, generally willing to pay a surplus for higher bandwidth (62%), is higher than the one of people, who already desire to get higher bandwidth (44%). More willingness to pay amongst people living in rural areas: While 46% of respondents living in big cities declared not to be willing to pay a surcharge, this share drops to 31.7% amongst people living in rural areas. How much more are you willing to pay for extra bandwidth (more than 16 MBit/s)? up to 5 /month up to 10 /month up to 20 /month 11,5 33,1 49,8 Amonst those generally willing to pay, half of them accept a surcharge of up to 5 per month, another third of up to 10 per month The average accepted surcharge is more than 20 /month 5, United Internet Media Research Broadband demand study October 2010

10 Biggest obstacle for broadband demand is availablitily and price If respondents are asked, why they have not yet ordered higher bandwidth for their internet access, the most prominent answers are: More than half of the respondents say that more bandwidth is not available. Another third feels that more bandwidth is too expensive. Results vary hugely, if differentiated according to where people live: While lacking availability is the most prominent impediment in rural areas, price is rather an issue in urban areas. What prevented you from chosing a higher bandwidth for your internet access? (in %) 76,7 not available 48,5 29,5 too expensive 10,5 38,6 rural areas small & medium towns 44,3 big cities United Internet Media Research, Broadband demand study, October 2010

11 Further obstacles to ultra broadband demand Even if more bandwidth is available at a reasonable price, users fear inconveniencies, if they need to change their provider for more bandwidth. If higher bandwidth were available at reasonable cost, what else could hinder you from changing to higher bandwidth? (in %) New devices required Need to change my provider Risk of down time Need to install new devices / software 39,2 35,8 34,4 31,4 Limitations to content and services available 23,6 others 14, United Internet Media Research, Broadband demand study, October 2010

12 Users prefer to stay with their current provider Only 28% are interested to change their provider. More than double (57.6%) wish to stay with their current provider or would only change, if this is inevitable. Would you be willing to change your provider for higher bandwidth or would you prefer to stay with your current provider? I would take the chance to change to a new provider I would only change, if inevitable I prefer to stay with my current provider 26,4 28,4 31,2 57,6 I don't care / I don't know 14, United Internet Media Research, Broadband demand study, October 2010

13 Strategic success factors for NGA Availability Most prominent impediment for people to get higher bandwidth is lacking availability. More than 50% cannot get higher bandwidth for that reason. Price There is a general willingness to pay for extra bandwidth. However, the surcharge must not be prohibitive. An extra of 5 to 10 is realistic. Demand Video is the biggest driver for broadband demand. There is an interdependency between new services and broadband availability: Broadband drives demand for new services, which in return drive demand for more bandwidth. Key point is that users understand the added value of new services. Quality Smooth, frictionless change to more bandwidth is central for users (no new devices, no down time etc.). Users prefer to stay with their current provider. Thus: Open Access und interoperability are success factors for NGA.

14 The role of a service provider such as 1&1 Access Fixed / DSL / VDSL and first fibre cooperations Mobile Internet > 3,7 mill. customers ~5.000 employees 5 data centers servers in Europe & USA 38 mill. accounts Almost 10 mill. paid-service contracts 10 international markets Applications Hosting Personal Communication Information Management Cloud Computing Online Collaboration > 6 mill. paid service contracts + 28 mill. free service customers

15 Strength # 1: Customer basis and customer focus We have a huge customer basis and we focus on it Innovative products easy to use Broad media presence Online Direct Marketing Top Service and huge CRM reach Number of paid customer contracts in millions 1&1 Internet AG

16 Strength # 2: Attractive services and high end devices We offer the full width of internet services Internet access (fixed & mobile) Highend devices Personal Information Management Online Storage Online Presence (Homepage, Domain ) Additional Services SaaS, VoD Business Applications (Shops, Payments )

17 Strength # 3: Scalable internet platform drives efficiency Superior hardware partners Marketing User interface (e.g. Apps) 4. DIY 3. Hosting Online Shops Research & Development Network Data Center 2. DSL 1. Mobile Standardised Product Platform Customer Service Billing Operations & Logistics 1&1 Internet AG

18 Strength # 4: Experience in integrating technologies And not the least: 1&1 has an unparalleled experience in integrating various wholesale partners and network technologies. Current wholesale partners in various technologies A-DSL Dt. Telekom QSC Telefonica Vodafone V-DSL Dt. Telekom Telefonica Vodafone UMTS/HSPA/LTE Vodafone FTTB City networks Utilities (Open Access)

19 How successful cooperations can work INFRASTRUCTURE PROVIDER NGA provider creates infrastructure AVAILABILITY Higher bandwidth allows new services SERVICE PROVIDER PRICE Intense usage of networks allow amortization of investments AND attractive consumer pricing Consumer demand ensure quick uptake of network usage DEMAND Innovative services drive demand for broadband Service providers create innovative services It needs smooth cooperation at minimal transaction costs. Difficult to achieve in a market that is likely to be very segmented. Interoperability of technologies and operations will be key for success to ensure optimal quality for customers. QUALITY

20 Thank you for your attention! Questions? 20