Forecasting Residential Broadband Demand with Limited Information

1
Forecasting Residential Broadband Demand with
Limited Information

• A Long Term Supply and Demand Model
• Carlo Hjelkrem (Telenor Networks), Kjell Stordahl
  (Telenor Networks) and Johannes Bøe (Telenor
  Networks)
• ICFC 2002, June 25 28 2002

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Scope of Presentation

• New Technology Entering the Market
• Little or No Historical Data
• Traditional Quantitative Forecasting Models are
  Left in Favour of e.g. Market Surveys, Scenario
  Techniques and Analogies
• Diffusion Models Require Little Data
• Question What Happens To Demand When Supply
  Increases (Short and Long Term)?
• Need to Explain the Link Between Supply And Demand

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What is Broadband?

• Local Network Access with Capacity Exceeding ISDN
• I.e. over 128 Kbit/s (256 Kbit/s for Turbo ISDN)
• DSL, Cable Modems, LMDS

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What Drives Demand?

• Short Term- Increasing Internet Penetration-
  Transition from PSTN/ISDN to Higher Capacities-
  Fixed Price- Always On
• Longer Term- Entertainment- Larger
  Applications- TV/Video with improved Quality-
  Price Reductions
• Limitations- Limited Investments And
  Deployment- Length of Subscriber Lines- Price

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Households with Internet Access In Norway
61 Penetration
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Forecast Of Future Internet PenetrationLogistic
Diffusion Model
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Questions To Be Answered

• How Much by Old Technologies, PSTN/ISDN?
• How Much by New Technologies, Broadband?
• What Can We Expect From DSL vs. HFC and LMDS?
• What Market Share Can Telenor Expect?
• What Role Is Played By Availability (Deployment)?

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Broadband Demand In Norway, Q202
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Prices

• 384 Kbit/s NOK 450 - 56
• 704 Kbit/s NOK 550 - 69
• 1024 Kbit/s NOK 750 - 94
• Competitors 10 20 Below

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Broadband Penetration, Nordic Countries
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Market Size, Nordic CountriesMillion Households

• Finland 2.5
• Norway 2.0
• Denmark 2.5
• Sweden 4.2

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The Hybrid Broadband _at_ccess Project

• VDSL (Very-high-data-rate Digital Subscriber
  Line)
• HFC (Hybrid Fiber Coax, i.e. Cable Modem)
• LMDS (Local Multipoint Distribution System,
  Wireless Local Loop)
• DTH/SMATV (Direct To Home/Satellite Master
  Antenna Television, Satellite)
• Combination of Different Technologies
• Economics
• Investments Plans
• Coverage and Rollout Plans
• Segmentation of The Residential Market

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The HB_at_ Segmentation Criteria

• Competition
• Geography
• Demographics

Segments Identified

• A Areas with Major CaTV Operators
• B Areas with Large To Medium Settlements
• C Rural Areas

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The HB_at_ Segmentation
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Segment Data Input

• Number of Households with Access to The Internet
  Relative Number of Households in Each Segment
• ADSL Relative Number of Households in Each
  Segment
• VDSL Pilot in A1 (Largest in Europe)
• Cable Modem From Each Cable Operator
• Other Relative Number of Households in Each
  Segment
• PSTN/ISDN Residual

Mainly LLUB (ADSL), Some LMDS
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Segment Model
New Households with Internet Access
Tech Choice PSTN/ISDN ADSL Telenor VDSL
Telenor Cable Modem Other
Choice Prob 4 declining from 04 18 declining
from 05 30 increasing from 04 30 whole
period 18 whole period
Deployment 100 whole period 72 increasing to
90 i 04 1 increasing to 80 i 06 30
increasing to 60 i 05 25 increasing to 80 i
07
X
Old Households with Internet Access
Tech Choice PSTN/ISDN ADSL Telenor VDSL
Telenor Cable Modem Other
Choice Prob 4 declining from 02 18 declining
from 02 40 increasing fra 04 20 whole
period 18 whole period
Deployment 100 whole period 70 increasing to
90 i 04 1 increasing to 80 i 06 30
increasing to 60 i 05 25 increasing to 80 i
07
X
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Forecast Results
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Short Term Supply Elasticity

• ElADSLADSL 0.47
•  
• ElADSLVDSL - 0.1
• ElADSLHFC - 0.18
•  
• ElADSLOther - 0.35
•  
• ElADSLTotal 0.12

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Further Work

• Assessment of Relative Attractiveness of the
  Different Operators (Choice Prob) Applications,
  Quality,.
• Speed Choice
• Price
• TV-Centric Services (VDSL)
• Other

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Summary

• A Simple Model Describing the Most Important
  Market Mechanisms (?)
• Used Available Info Where Possible
• Used the HB_at_ Segmentation to Understand
  Competitive Scene

Model Adequate for Answers?
Yes

• How Much by Old Technologies, PSTN/ISDN?
• How Much by New Technologies, Broadband?
• What Can We Expect From DSL vs. HFC and LMDS?
• What Market Share Can Telenor Expect?
• What Role Is Played By Availability (Deployment)?

Yes
Yes
Yes
Yes