ISPs swelling Australia’s voice services market
30 August 2012
The conventional wisdom is that the main story in Australia’s ISP market is one of consolidation ahead of the NBN.
However, a close look at what’s happening in the service provider market reveals a second dynamic at work: many small providers, rather than getting out of the business, appear to be adjusting their business models by expanding their service offerings.
And, while significant numbers of ISPs and Voice Service Providers continue to exit the market each year, an influx of new service providers enters the market at the same time.
Market Clarity has tracked ISPs and Voice Service Providers (VSPs) since our foundation in 2006, and we hold a database of 473 active ISPs and 341 active VSPs (service providers who appear to be currently offering services, according to their websites).
Our new research, The Australian Telecoms Industry – Understanding ISP and Voice Service Provider Market Dynamics reveals that while there has been a consolidation of the markets, particularly among ISPs (which numbered more than 600 a few years ago), the overlap between the two markets has increased in recent years. As a result, while some voice-only VSPs have exited the market in the last three-to-four years, the total VSP market has actually grown; up 9.3% compared to the 312 companies we recorded offering voice services in 2010-2011.
More than half of Australia’s ISPs now offer some kind of voice service – and more than 82% of VSPs are also ISPs.
The expansion of ISP and VSP service portfolios is easily understood if we look at the success of iiNet’s multi-service strategy, based partly around its heavily promoted BoB hardware which combines an ADSL WiFi router and access to iiNet’s voice services in a single unit. While hardware sales are a minor part of the company’s income streams, the “BoB era” coincides with growth in iiNet’s voice services – and more importantly, a reduction in churn.
ISPs have good reason to fear an NBN-driven churn, and if they are to retain their customers after the fibre rolls into their footprint, will need strategies to try to “wrap up” their customers.
Another key trend Market Clarity has observed in our study is a growing number of ISPs adopting mobile services as an extra string to their bow. Close to 40% of ISPs now offer mobile voice or data services – something that was relatively rare when Market Clarity first compiled its databases in 2006.
Market Clarity also notes that while it’s only a small part of the market, there is one other emerging trend worth watching: ISPs focused solely on reselling mobile data services. Already, 3.6% of ISPs in Market Clarity’s database only sell mobile data services. We would expect that if carriers decide to add their 4G services to their wholesale portfolios, this segment of the market will continue to grow.
The Australian Telecoms Industry – Understanding ISP and Voice Service Provider Market Dynamics examines the market positioning and services offered by 473 active ISPs and 341 VSPs (as held in Market Clarity’s respective industry databases), including value-add services such as hosting, cloud services, fixed voice, VoIP and a number of other services.
The report also presents a breakdown of access technologies in use (DSL, cable, fixed wireless, satellite, fibre, Ethernet, NBN, hotspots, 3G, dial-up), horizontal market segmentation (consumer, SME, enterprise/government, wholesale) and vertical market segmentation in the ISP and VSP industries.
More information on The Australian Telecoms Industry – Understanding ISP and Voice Service Provider Market Dynamics, and the underlying ISP and VSP databases, including ordering information, can be found here.
Free White Paper – Understanding the Trans-Tasman Broadband Value Gap: ISP Costs in Australia and New Zealand
Although New Zealand ISPs have been introducing higher-quota plans over the last year, Australian consumers still enjoy significantly larger data allowances.
In Understanding the Trans-Tasman Broadband Value Gap, Market Clarity presents research into the cost base of ISPs in both countries. We were surprised to find that Australian ISPs spend more of their ARPU on network costs than their New Zealand counterparts.
There is a widespread perception, particularly in New Zealand, that the costs of international services drive the difference between the allowances offered Australian and New Zealand broadband customers.
However, Market Clarity’s research suggests that other factors are more significant. These might include the different domestic regulatory regimes in the two countries, and the competitive pressure brought about by Australia’s much larger number of retail ISPs.
The study, based on interviews with retail ISPs on both sides of the Tasman, examines network costs (network access, domestic backhaul and IP Transit), customer quotas and bandwidth allocations, profit margins and growth constraints.
Understanding the Trans-Tasman Broadband Value Gap: ISP Costs in Australia and New Zealand is available as a free download from Market Clarity’s website.
NBN Demographic Analysis
Market Clarity is pleased to announce a new capability: we can now provide a fine-grained demographic analysis of announced NBN coverage areas using data from the 2011 Census.
Carriers, policy-makers and other businesses with an interest in getting a rapid snapshot of the characteristics of NBN coverage areas – without having to devote your own resources to the analysis – can now receive a spreadsheet showing key Census characteristics for areas covered by the following:
- NBN live areas
- NBN “in-build” areas
- NBN one-year and three-year fibre coverage areas
We can also provide NBN demographic breakdowns based on customers’ own areas of interest – either using customer maps provided in a suitable GIS format, or based on datasets such as postal areas or exchange service areas.
NBN Proximity Analysis
The continuing rollout of the National Broadband Network will have increasing importance to Australian businesses. To help businesses plan for their own transition to the National Broadband Network, Market Clarity is now offering an NBN Proximity Analysis service.
Understanding when and where the NBN will be available relative to enterprise / government locations, allows organisations to take a strategic view on when and how the NBN will impact their network, and forthcoming telecoms procurement initiatives.
We are able to take any set of geo-coded locations (that is, locations supplied with latitude-longitude data) and provide a short-turnaround analysis of those locations relative to live, in-build, one-year and three-year rollout areas.
This analysis can indicate whether your business locations lie within an announced rollout area or, if not, their distance to an announced rollout area.
Information on Market Clarity’s geospatial analysis capabilities is available here, and we would be delighted to discuss your specific requirements.
ACCAN National Conference
5-6 September 2012 (Sydney)
Drawing on Market Clarity’s long history of analysing consumer and business telecoms services, Shara Evans will be sharing her views on the results of ACCAN’s National Communications Survey. What do the statistics tell us about the consumer experience? Is mobile broadband delivering for consumers? What is the extent of hidden ‘bill shock’?
CommsDay Melbourne Congress
8-9 October 2012 (Melbourne)
Using Census 2011 data and Market Clarity’s geospatial analysis of NBN rollout plans, Shara Evans will describe the demographic characteristics of the households covered by NBN Co’s fibre rollout over 3 periods:
1. Current release site information
2. Analysis of NBN rollout in the area in 2013
3. Analysis of NBN rollout in the area in 3-years