6.6

Launching Services to Drive Broadband Demand

As discussed above in chapter 6.4, broadband in itself is of little value in the absence of so-called complementary goods that confer value to such access. Examples of complementary dynamics in broadband adoption include applications and content that users value, and therefore should be attractive enough to encourage the purchase of the service. However, beyond applications and content, complementarity also exists with the services that enable access to the Internet as well as value added features that broadband operators include with the broadband subscription and that meet specific quality guidelines. The availability of such services is an important factor that influences and possibly drives demand. This level of demand, of course, will be affected, as discussed above, by the attractiveness and affordability of the service offerings. 

  • 6.6.1 Internet

    A broadband subscription provides a high-speed connection to the Internet. The way the subscription is provided can affect attractiveness and will depend on the technology and regulatory or business considerations. This includes whether the broadband subscription can be purchased on its own or requires a subscription to an underlying transport technology. For example, in the case of a digital subscriber line (DSL) broadband connection, a telephone line is required. Subscribers have typically been obligated to pay a monthly rental for the telephone line in addition to the broadband subscription even if they do not use the telephone line for anything else but broadband. This adds to costs and may require an extra bill, discouraging users from taking up the service. Some operators include the telephone line with the broadband subscription, so there is no separate bill. In a few countries, the cost of the physical broadband connection is billed separately from Internet access. In other words, the user needs to pay one bill for a broad- band connection and another bill for Internet access.

    Several factors make a broadband subscription more or less attractive to potential users. One important factor is speed. Although some consider all “always-on” subscriptions of at least 256 kilobits per second (Kbps) to be broadband, in practice, speeds must be above a certain threshold to use desirable applications such as video viewing or gaming. It is important to establish that download speed has a direct impact on the user experience. Table 6.33 presents the times required to download different types of content.

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    TABLE 6.33
    Time required to download content at different service speeds

    Source: Broadband Commission Report, June 2011

    However, it is important to consider not all broadband users require fast download speeds. While a minimum speed is certainly desirable for all users to have a good experience, beyond a certain point, desired download speeds depend on the content being downloaded. In study conducted by the United States Federal Communications Commission, broadband users were segmented into four categories according to the content being downloaded (see figure 6.35).

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    FIGURE 6.37
    Type of user (segmented by download speed) in 2009

    Source: Adapted from the FCC Report “Broadband Performance: OBI Technical paper No.4”

    As the figure shows, a user that relies on email and accesses the Internet via a search engine would rarely require more than 512 Kbps. However, once the user begins to download audiovisual content (such as You Tube video clips), it might require 1 Mbps. In case downloading includes TV shows, the download speed required to have an appropriate experience increases to 4 Mbps. Obviously, if the user needs reach the levels od advanced videoconferencing, download speeds will reach 7 Mbps.

    In a typical developing country, one might observe that only 25% of users could be characterized as “multimedia”, thereby requiring only 1 Mbps. The problem is that the segmentation presented above is nothing but static. In fact, when assessing user behavior in terms of broadband consumption, one can observe that with more applications and content being available on the Internet, the higher the need for speed to confer an adequate experience. Furthermore, the faster speeds are offered, the more content is being downloaded. The same study conducted in the United States that segmented users by download speed observed the correlation between speed and content (see figure 6.38).

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    FIGURE 6.38
    United States: Download speeds and content volume in 2009

    Source: adapted from the FCC report “Broadband Performance: OBI Technical paper No.4”

    In summary, a variety of offers with different speeds provides more choice to the user. Other factors to consider are restrictions that the broadband providers may impose on capacity (for example, data or usage caps). Some operators distinguish between domestic and international use by having no cap or a higher cap for traffic to national sites and a low cap for access to sites hosted abroad. One issue with caps is that users often do not understand the relation between volume and their usage needs. Users can easily underestimate how much data they will use, particularly if they access a lot of video services or use peer-to-peer download services (some of which may run in the background). This makes it difficult for them to know which package to select when packages vary by data caps. Some operators cap usage through time rather than data volume (for example, monthly subscription of 20 hours). These practices are more prevalent in mobile services, where “unlimited” offers (no download cap) are almost non-existent.

    Increasingly, governments are responding to data caps and “throttling” practices by requiring service providers to disclose their network management practices clearly, in order to protect consumers and improve the overall broadband. Regulators have also instituted other measures, such as monitoring quality of service and alerting users to sites where they can test their broadband connection for speed or throttling. 

  • 6.6.2 Voice

    Voice telephony continues to be a popular service, although it represents a declining share of revenue for public telecommunication operators. A growing number of broadband operators offer voice over broadband (VoB) service, which is a managed service (unlike voice over Internet Protocol, VoIP, which is generally considered as an application running “over the top” of the public Internet and not directly managed by the network operator). VoB provides the same quality as a traditional fixed telephone and often provides other value added features such as call waiting, voice mail, and speed dialing as well as the ability for users to monitor these features online via the provider’s website. The price structure for VoB is often made attractive by including unlimited national calls for a flat rate or even including free national calls with the broadband service subscription. Since the service works through the broadband modem, users do not need to be connected to the Internet and do not even need a separate Internet subscription.

    Several regulatory issues are related to VoB. The most basic is whether or not a country’s laws and regulations allow it. Where VoB is legal, other regulatory considerations are often driven by the requirements placed on legacy wireline telephone networks. One is the requirement for users to be able to make emergency calls. Other regulatory requirements relating to consumers can include access for persons with disabilities and number portability. The latter can be influential in encouraging users to switch from traditional telephone services to VoB.

  • 6.6.3 Video

    IP networks allow video services to be provided over a variety of networks. This has allowed broadband operators to provide Internet Protocol television (IPTV) or video on demand (VoD) services. The ability to provide IPTV, VoD, or both can make operators’ broadband services more attractive, especially when other features are included, such as access to special programming not available elsewhere. Television as a managed offering with a broadband subscription takes many forms. Some operators require IPTV to be bundled along with the broadband subscription, while others offer IPTV on a stand-alone basis.

    Others have developed more extensive video service offerings, including BT in the United Kingdom, which offers its Vision service, which seamlessly integrates free-to- air digital television programs with a digital recorder and VoD feature. Some operators provide additional features such as radio programming and the ability to watch programming on computers, tablets, and mobile phones in addition to the traditional television set.

    The ability to bundle television with broadband Internet service is often subject to technical and regulatory considerations. In the case of IPTV, users need to have a minimum bandwidth to use the service. Some countries require companies that provide television service to obtain permission or a specific type of license. Sometimes permission is required from local authorities. Conditions vary, but in general, television service is subject to a higher level of regulatory oversight than broadband service. Regulatory limitations have sometimes meant that operators can only provide delayed service rather than live programming, making their offer less attractive.

  • 6.6.4 Bundling

    IP-based technology and digitalization of media allow a single network to provide a variety of voice, data, and video services. The ability to offer multiple services has led operators to bundle services together. This often includes a price reduction in the total cost of the service (that is, the bundled prices is less than the cost of buying the same services individually) and the benefit of receiving just one bill. “Double play” refers to a combination of broadband Internet and some other service, “triple play” refers to the ability to provide three services, whereas “quadruple play” also includes mobile service.

    Bundling offers can be attractive to consumers because of their lower costs and a single invoice. However, some consumers may only want one service from a provider and therefore need to have an “a la carte” option and not be obligated to purchase additional services. In any case, a service provider that is only allowed to provide Internet access is at a disadvantage versus converged operators since consumers are increasingly interested in receiving multiple types of communication services offered through bundles. Service bundles are currently offered as a promotion to limit customer disconnects through temporary discounts.