sábado, 11 de febrero de 2017

Broadband in Russia: a question of diversification

Broadband Society is everywhere. We are analyzing broadband deployment in countries, and in this post we study, in collaboration with Diana Samarcheva, the case of Russia. It is well known that broadband has a great influence on the social and economic development of the country. There are a lot of examples proving the force of innovative technologies on the country’s economic position so the modernization of broadband is one of the main strategic goals named by the government in Russia.

Fixed Broadband Penetration (number of subscriptions per 100 inhabitants) in the regions of Russia and in other counties, 2013
Source: ITU, 2013; Ministry of Telecommunications and Mass Communications of the Russian Federation

In 2009 Russian president announced that the country should diversify its economics on the base of new technologies and innovations. In order to reach the highest worldwide standards Russia established rather ambitious targets of broadband technologies taking into consideration the geographic dimensions and low population density. In accordance with the modernization policy, the Ministry of Communications and Mass Media announced national broadband targets in 2012 to make 100 Mbps broadband available to 80 percent of Russian residents by 2018, with the ultimate goal to provide conditions – physically and financially – for affordable broadband access for all residents of Russia (according to the study).

However, the government faced a great problem – a digital divide. That’s why the most important point in its solving is the consolidation of all level forces – federal, regional and municipal. Nevertheless, the problem remains unsolved now because of the big country dimensions and the socio – economic position of some regions. For example, the gap between the regions which are considered as leaders such as Moscow and some backward regions such as the Chechen Republic reaches 285 times.
A digital divide in the case of mobile access is much smaller. In the Republic of Tuva, for example, mobile broadband rates are above average (87.8 active subscriptions per 100 inhabitant). What is more, according to Cisco, 49% of all network devices in Russia are supposed to have a mobile data connection in 2018. For comparison, the same indicator in the USA will comprise only 22%, Canada - 20%, France - 29%, Germany - 32%, Japan – 26%, Italy - 41% and 34% in the Republic of Korea.
So, as we can see, the market of broadband is going to grow more and more. Further market growth will occur due to the following factors:
• extensive increase in the geographical coverage and the development of networks of data transmission;
• the growing number of devices and their diversity (PCs, laptops, netbooks, tablets, set-top-box) in the home segment as a consequence of the increase in the bandwidth per household;
• increasing the attractiveness of tariff plans, due to complex tariffs.
The major market factors that will ensure the growth in the number of subscribers, is the extensive growth of the coverage of small settlements with networks of medium and large Internet service providers.
It is worth noting that the development of mobile networks on LTE technology doesn’t now have a significant impact on the development of the fixed Internet access, this technology is distributed mainly in the regional centers and rather complements the need for a fast Internet outside the home.
It is needless to say that the average revenue per user (ARPU) of broadband tends to stabilize; now providers are guided by the principle “more Internet for the same money” where instead of reducing the cost of tariffs the operators try to increase the access speed. The tariff policy of the operators continues to focus on special tariff offers and package offers that actually reduce the cost of services separately but retain the total income of the operator. Thus, the annual increase in the number of home broadband connections will be a major factor in the growth of the market.
All in all, the top company leaders share two-thirds of the market in the terms of subscribers (66,2%) and revenues from broadband services (69%). The undisputed leader is still the company “Rostelecom” with the market share of 35.1% by subscribers and 38.7% by revenues. The share of other players is gradually decreasing. In terms of revenue from the home broadband services “ER-Telecom” (10,6%) took the second place and “VimpelCom” took the third place with a share of 8.8% (data for 2014).
The company “Rostelecom” is also the leader in absolute growth in the subscriber base. Overall, in 2014 the company increased the number of subscribers to 610 thousands. The company “TransTeleCom” and “MTS” took the second and third place in this category increasing its subscriber base by 170 thousand and 160 thousand subscribers respectively.
So, the most expected trends of the broadband development in Russia are:
·       -The increase in the share of bundled offerings in the number of new connections for Telecom operators; the broadband market is becoming more and more overlapped with adjacent markets (pay-TV, telephony); The package offers are being created for better satisfying the needs of subscribers as well as for increasing the profits of operators from the same client;
·         -The operators’ priorities are the service quality and the increasing customer loyalty;
·       -The development of services such as “triple play” and “quadro play” (Internet, TV, telephony and mobile) and the development of a unified account for all services, which will encompass multiple devices.
“The market saturation in large and medium cities will continue to take place in the next two years in the segment of fixed broadband. The small cities not yet fully covered by fixed access will be the growth driver of this saturation. The project for eliminating digital inequality which is being realized with the support of the government will cover remote and sparsely populated areas which will increase the penetration rate of the broadband Internet access in the whole country. Additionally, there will be strong growth in digital consumption: the increase in the required speed of the Internet access, the increase in the consumption of different services, the expansion of the list of consumed services and additional services. The adjacent segments of OTT and IPTV will be fast-growing as the mass construction of optical access networks and reducing the cost of HDTV-ready and Smart TVs will make it possible to provide TV service in HD quality and interactive format”, - according to the words of Maria Florentieva, strategy vice-president of Rostelekom, M&A and IR.
And now let’s have a look at the main tendencies on the Russian market of fixed broadband Internet access among private users:
·         -The growth of high-speed service (100 Mbps and more)
For the last 2 years, the proportion of users who chose tariff plans with speeds of 100 Mbps or more has doubled. Rates with a speed of 1 Mbps and below is almost gone, they account for no more than 3% of connections;
·         Growth of connections in optical technologies, including PON
-The growth of video services on the Internet requires more bands for a comfortable use of the broadband service. In this regard, there is an active dissemination of optical technologies in the construction of data transmission networks (FTTH, FTTB etc.). According to J'son & Partners Consulting, in 2015 the growth of subscribers of FTTH/B accounted for 12%. ADSL technology continues to lose ground. So, the 2nd quarter of 2015 showed the prevalence of an “optical” user over a “copper” user (the company “Rostelecom”), which clearly shows the obsolescence of ADSL and the gradual withdrawal of this technology from the Russian broadband market;

Evolution of Broadband technologies in Russia, 2008-2013
Source: TeleGeography’s GlobalComms Database, 2013

·        - The increasing penetration of broadband access devices and their diversity (Multiscreen)-

      A variety of access devices continues to grow and a gradual replacement of desktop computers by portable is taking place now. In 2015 in Russia, 53% of the families used PCs and 63% - laptops. In addition, over the past three years the average retail price of smartphones and tablet PCs have decreased, even taking into account the increase in prices in 2015. These devices have become available for people with almost any level of income, and their sales have increased significantly. Thus, different family members began to use actively broadband access from different devices, often simultaneously.
      However, there is always room to grow. Below we can see the forecast for the main broadband positions for 2020 in Russia.

·          IP traffic will grow 3-fold from 2015 to 2020, a compound annual growth rate of 25%;
·         Internet traffic will reach 6.3 Exabytes per month in 2020, up from 2.0 Exabytes per month in 2015;
·          Fixed/Wi-Fi was 65.7% of total Internet traffic in 2015, and will be 62.8% of total Internet traffic in 2020;
·         Mobile was 11.4% of total Internet traffic in 2015, and will be 29.8% of total Internet traffic in 2020;
·          IP video will be 77% of all IP traffic in 2020, up from 58% in 2015;
·          Ultra HD will be 11.6% of IP Video traffic in 2020, up from 0.7% in 2015 (128.5% CAGR);
·         Total Internet video traffic (business and consumer, combined) will be 75% of all Internet traffic in 2020, up from 57% in 2015;
·         Internet gaming traffic will reach 4.7 Exabytes per month in 2020, up from 1.1 Exabytes per month in 2015;
·         Mobile data traffic will reach 1.9 Exabytes per month in 2020, up from 225 Petabytes per month in 2015;
·         There will be 841.2 million networked devices in 2020, up from 510.4 million in 2015;
·         The average fixed broadband speed will grow 1.8-fold from 2015 to 2020, from 28.3 Mbps to 50.4 Mbps;
·         The average FTTx Internet household will generate 131.8 gigabytes of Internet traffic per month in 2020, 94.4% more than other broadband households.

    Despite the broadband technologies are not perfect in the Russian Federation, they have a really good tendency to grow and develop. We analyze international broadband evolution in this blog, in Research Group about Digital Journalism and Marketing and Broadband and in Research Group on Innovative Monetization Systems of Digital Journalism, Marketing and Tourism (SIMPED), from CECABLE,  Escola Universitària Mediterrani of UdGUPF and Blanquerna-URL, in Twitter (@CECABLEresearch), Google+, in the group of LinkedIn, in the page of LinkedIn, in the group of Facebook, in Instagram (CECABLE), in Pinterest and in this blog. We will go in deep in the XXII Cable and Broadband Catalonia Congress (4-5 April, 22@, UPF). Go ahead! 

19 comentarios:

  1. A very interesting article. Russia is improving its broadband! Congrats!

  2. Bonito análisis sobre la banda ancha en un gran país.

  3. Muy buena iniciativa la del análisis de la banda ancha por países. ¡Felicidades!

  4. ¡Muchas gracias! Si tenéis otras sugerencias sobre posibles nuevos contenidos, no dudéis en trasladárnoslas.

  5. Interesante la visión internacional sobre el despliegue de la banda ancha. En Rusia también se ponen las pilas. ¡Adelante y a por todas!

  6. Els russos saben que dependran cada cop més de la banda ampla.

  7. Felicidades por estos análisis internacionales.

  8. Molt bona idea la d'analitzar casos de països. Dona una idea molt adient sobre el desenvolupament de la banda ampla internacionalment.

  9. Moltes gràcies! Si teniu suggeriments sobre nous objectes d'estudi al blog, indiqueu-nos-ho!