Tuesday, October 5, 2010

Broadband Expansion Driving Opportunities in Emerging Markets

Broadband Internet is a topic on the lips of many these days, and a lot of the conversation has revolved around the benefits that expanded access to broadband can bring. The announcement this week that the number of fixed broadband subscriber lines in the world hit 500 million in July showed how far access has come - and how far it still has to go. The International Telecommunications Union (ITU) recently called on policymakers and regulators to improve access to broadband in emerging markets, citing the growing body of research linking broadband expansion to economic development. This research has demonstrated that broadband has a greater connection with economic growth than other communication technologies such as fixed-lines and mobile phones and dial-up Internet.

Yet despite its rapid growth, broadband access is uneven in emerging markets. In many countries, mobile broadband networks are poised to take off much faster than fixed-line broadband. The market opportunity associated with billions of mobile subscribers has spurred the delivery of Internet-enabled mobile services and mobile network upgrades to accommodate those services. There are already many more mobile phones than PCs, while the cost of fixed broadband has been found to be, on average, three times more expensive in emerging markets than mature markets. This trend is not lost on mobile phone players like Nokia, which is staking its claim to the next billion internet users on localized services and affordable smartphones that aim to rival the PC.

Despite these broadband trends, PC makers are unlikely to cede the next billion internet users to the mobile industry. Even with nearly 2 billion internet users, the "next billion" sit in the middle market with a level of household income that makes a low-cost PC within reach, especially with financing. Furthermore, most of these potential customers live in cities, where PC manufacturers have established distribution networks and Internet access is increasing as a result of falling broadband prices and a rise in public Internet access points. Understanding why and how consumers want to use the Internet may hold the key for companies throughout the value chain to capturing these next-generation users.

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