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Summary:

By all counts, this has been a phenomenal year, the one where broadband transformed from a fast pipe to a fully viable platform. A platform that if leveraged properly can become a new engine of innovation and growth. We saw the revolutionary impact of the fast […]

By all counts, this has been a phenomenal year, the one where broadband transformed from a fast pipe to a fully viable platform. A platform that if leveraged properly can become a new engine of innovation and growth. We saw the revolutionary impact of the fast pipes on new web services such as MySpace, You Tube, and Heavy.com, that showed some serious growth in past 12 months. Many more emerged out of nowhere, and rocketed down the “always on” pipes.

The fast pipe helped spur some head scratching deals, and at the same time have helped drive down the price of voice to near zero.

But before we get into abstractions, and possiblities, lets look at some data to get a better handle on the Broadband Planet. Some have estimated that there are about a billion Internet users around the planet. It is hard to figure out how many are using broadband connections, but Point Topic estimates that the total number of broadband lines around the world is over 205 million. That’s nearly 55 million more lines from 2004, a nifty growth rate of over 35%.


Broadband’s big growth has come in China, Japan, Korea and parts of Asia, regions where families tend to be conjugal, versus the West where families are more nuclear. This leads me to believe that a substantial number of users are now going online using broadband. The interesting highlights of the year that was:

1. USA remains the largest broadband market with over 40.9m lines.
2. China comes in second place with over 35 million broadband connections.
3. Japan is third with over 22 million lines.
4. South Korea has over 12.0 million lines
5. Point Topic suggests that the UK will have 9.8 million broadband lines by New Year’s Day 2006, while France will have 9.7 million.

One of the highlights of 2005 was the per-meg prices of bandwidth in the last mile kept moving downwards, to nearly 24 cents a meg in Hong Kong, and between 35 and 45 cents else where on the planet. In comparison, US prices ranged from $5 to $9 a meg!

Looking forward, 2006 is a year when we can expect even more excitement as countries like Brazil, India, and Russia start a ramp-up in their broadband numbers. Africa, Middle East and Latin America are going to be the future geographies of growth, and they are quite likely to make their presence felt in 2006. Unfortunately, the growth in these geogrpahies isn’t going to be able to compensate for the slow down in the overall broadband market. The established broadband nations are now nearing saturation and as Point Topic rightfully points out, “newcomers are not yet growing fast enough to fill the gap.” Why? Simply because of the low PC penetration in developing and emergent economies.

Broadband and its impact on voice business (aka Voice over the Internet) is going to be substantial. Telegeography estimates that developing nations are the fastest growing destinations for international VoIP traffic. Brazil and Nigeria led the world in growth last year, with 112 percent and 103 percent, respectively. TeleGeography estimates that international VoIP traffic will exceed 42 billion minutes in 2005, representing over 16 percent of the total international voice market. The inbound calls, almost always eventually spur outbound calls as well.

So what shall we look for in 2006? In the US, marginally higher speeds, with incumbents offering between 3-to-15 megabits per second. Rest of the planet is going to start a transition to 50-to-100 Mbps tiers. In my mind, the speeds and feeds are just a way to keep score. In 2006, I expect to subtle behaviorial changes. The robust growth in total number of web searches in 2005 is the first sign of this consumer behavior change. An always on connection will change our habits in 2006, and the best part is that we won’t even know it!

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  1. I find it amusing that you find the skype deal head scratching, then lay out almost every reason why it’s not.

    The fact is, voice WILL be free, and skype is the market leader. I guess the fact the ebay is the buyer is headscratching, but the metrics of the deal make so much sense… I think that in 6-12 months, people will be talking about the genius of this deal. Skype, in my opinion, was the #1 acquisition target of 2002-2005.

  2. the reason skype deal is head scratching is because of the money involved. i don’t think the $4 billion price tag makes sense. anyway i have my opinions on this, and you have yours.

  3. and just as an aside, the people who are driving the cost of voice to zero: pipe owners with no legacy business. because they are the ones who can afford to do it. unlike skype which is a parasitic service that can be choked at the will of the carriers/users.

  4. Modesto Alexandre Sunday, January 1, 2006

    2006 year of FTTH :)

    Happy New Year

  5. Charlie Sierra Sunday, January 1, 2006

    “…unlike skype which is a parasitic service”

    Om, shirley you don’t mean to imply that Yahoo, Google, Bittorent, or heaven forbid all blogs are parasitic? (well maybe bittorent…)

    Do the Cablecos consider CNN, ESPN, MTV parasitic?

    Who pays who in that arrangement, and what makes anybody think the internet distributor-content provider relationship will be upside down?

  6. charlie, as you rightfully point out, there are “payments” when it comes to CNN/ESPN etc. not parasitic in any sense. pipe owners are making money. anyway that is the problem Skype has. it uses the infrastructure but doesn’t really share the spoils as of now.

  7. Jesse Kopelman Tuesday, January 3, 2006

    I think you’re wrong Om. Without services like Skype and P2P, why would anyone pay $40+/month for broadband? If all you are going to do is e-mail and surf, dial-up or the cheapest tier of DSL is good enough. The pipe owners owe just as much to Skype et al as oil companies owe to SUV producing car companies.

  8. Om Malik on Broadband : » Paris Mayor: Free Internet For All Monday, January 9, 2006

    [...] According to some estimates, France has fallen behind UK in the broadband subscriber numbers. If you have interest in global broadband, please visit our Broadband Wiki and help us keep it up-to-date. [...]

  9. That kind good information with graph and figures. Thanks for posting it.

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