Broadband Opportunities: Internet Access - Devices/Services

Report Highlights

• The total U.S. market for broadband equipment and services is estimated at $8.5 billion in 2001. Increasing at an average annual growth rate (AAGR) of 25.4%, this market will exceed $26 billion in 2006.
• Satellite equipment and services will dominate growth, rising at an AAGR of 36.6% to $5.4 billion in 2006.
• Cable equipment and services will rise to number one by 2006, with revenues of nearly $8 billion and an AAGR of 24%.
• DSL services and equipment will fall to number two, but post a healthy growth of 22.9% on average per year through the period. Fixed wireless will reach $5.5 billion in 2006 rising at an AAGR of 22.6%

INTRODUCTION

STUDY GOALS AND OBJECTIVES

In 1965, Pentagon researchers Tom Merrill, Larry Roberts and Donald Davies experimented with the packet-switched network that would become the prototype for the Internet 4 years later. The crude form of modem they attached to two computers operated at 2,000 bits per second. This was fast enough to send brief text messages back and forth, though not nearly fast enough to send files.

While there's never been a bandwidth equivalent of Moore's Law (that accurately predicted, also in 1965, a doubling of computer chip memory and processing every 18 months), the growth of network connection and transmission speeds has been impressive in its own right. From early analog modem connectivity speeds of 2 Kbps (that, by the time of the first fully functional Internet in 1969/70 had increased to 14.4 Kbps), the simplest home dial-up modems now transmit at 25 times the speed of those original Pentagon computers.

Advanced broadband systems in homes and es now routinely transmit at one to 2,000 times the speed of those prototype modems. Where, in the early days of networked communications, transmission of short messages of 15 to 30 characters took several minutes, users of emerging broadband systems at home or work now can download entire books, record albums or videos in a matter of minutes, and possibly seconds in the not too distant future.

Even with this amazing progress, however, network connectivity for most users has not progressed in quite so orderly or linear a fashion as have chips. Though backbone networks equipped with fiber-optic lines have achieved broadband level speeds of 1.54 Mbps (megabits per second) for well over a decade, progress has been far more sporadic for end users, particularly small and residential consumers who make up the overwhelming majority of Internet accounts.

To be sure, the slow 14.4 Mbps dial-up modem speeds common only 5 years ago have for most users, been upgraded to 56k. As of mid-2001, however, the vast majority of U.S. households and small to medium sized es still accessed the Internet with dial-up modems. Essentially, this meant that their experience with networked communications was limited to e-mail, text, or fairly low-resolution graphics. There are a number of reasons for this lag, among them the expense of laying fiber-optic lines and the fact that copper wire that has served so well in bringing voice telephony to almost all American households, simply was not created to transmit data and video.

The task of bringing high-speed access and connectivity over the "last mile" to end users involves a panoply of complicated technical, economic and legal issues. These include technical challenges, such as developing methods for ensuring reliable high-speed two-way data over regular telephone wires via DSL or for converting coaxial cable systems designed for one-way reception of video programming into two-way communications systems. They also include defining relationships between installed cable and telephone networks, and competitive carriers and services.

Into this breach have come companies representing a broad array of established industries, among them telecommunications, Internet service providers (ISPs), media companies, satellite communications, equipment and service providers, and computer networking infrastructure and software providers.

This report will explore the history, evolution and unique structure of this new industry. It also will explore its most recent technologies and market dynamics.

REASONS FOR DOING THE STUDY

The broadband Internet access equipment and services industry has been, throughout its short history, a fertile meeting ground for a variety of different companies and industries. Among them are telecommunications equipment and service providers (both wireless and wireline), ILECs, CLECS, networking infrastructure, application service and customer premises equipment providers, as well as media companies.

This report is designed for marketers from each of these industries. By focusing on how broadband access is being developed, marketed and deployed for the last mile end user market, it will provide marketers with a grasp of the key trends and courses shaping broadband Internet access networks. In exploring the field, readers will get an overview of the newest broadband access technologies, including DSL, cable, fixed wireless, satellite and fiber to the home. They also will get detailed information on leading products, services and applications within each major sector of the technologies, and the emerging market dynamics of each.

CONTRIBUTIONS

This study describes the most critical developments in broadband Internet access devices, equipment and services over the past several years, tracing the history of the field, as well as reporting on the current state of the art. It will examine the near-term commercial opportunities and challenges of a number of different technologies and products. Through the study of historic patterns and new and impending technological breakthroughs, forecasts of dominant market expenditure trends are projected from 2001 to 2006.

SCOPE

This BCC report covers all aspects of high-speed broadband Internet access equipment and services, including infrastructure hardware, software and applications. The report also takes into account historic and emerging demographic and usage trends and technology expenditures. The study will include all varieties of DSL, cable, fixed wireless, and satellite broadband.

It will exclude traditional dial-up Internet access services and devices using POTS (plain old telephone service). It also will exclude dedicated high-speed access lines (T-1), employed to connect large enterprise backbone or carrier networks. While newer but still largely experimental technologies such as fiber-to-the-home and data-overpower lines will be briefly discussed, they will be excluded from the main tables because their widespread commercial deployment appears, as of this writing, unlikely within the time frame of the report.

METHODOLOGY AND INFORMATION SOURCES

Preparation of this report involved in-depth study and critical analyses of published data from a wide variety of government and private sources. Industry projections were made by BCC based on original studies of economic, social and technological trends, as well as critical examination of projections made by industry and other public sources.