Australia: What’s in Store for the Broadband Market?

By 2004, Australia had enjoyed an impressive 120 percent CAGR for the last three years in broadband subscribers.  Momentum continued into this year, and we believe there remains significant room for continued growth.  Forecasts indicate that the growth rate will slow to a feverish double digit figure of 16 percent for the next five years.  This rate is impressive against our expectations for Western Europe and North America’s 14.5 percent and 10 percent respectively.  The drivers for subscriber growth will stem from untapped demand both in cities and rural areas, where intensifying competitive pressure starts bringing prices lower.  Overall, we believe the Australian market’s broadband penetration will reach almost 30 percent by YE2010, and almost 18 percent broadband revenue growth rate. 

In 2001, Australia’s broadband population was surprisingly low given the high level of mobile and fixed narrowband lines.  However, Australia caught up in the last four years and by June 2005, the penetration has increased 10-fold from less than 1 percent in 2001 to 10.7 percent.  This growth is mainly because of lowered entry prices.  The incumbent, Telstra, reduced wholesale prices for third party access, causing retail prices to fall by at least 20 percent.  Based on the gap between mobile and broadband penetration alone, it suggests there should be untapped demand operators can capture. 

Australia’s broadband penetration is comparatively lower than Taiwan’s.  This is despite the difference in purchasing power as reflected in GDP per capita on a Purchasing Power Parity (PPP) basis.  We touched briefly earlier on how Australia’s broadband penetration is hampered by supply constraints.  As such, we believe once these obstacles are gradually removed, broadband subscriber numbers should register double digit growth through 2010. 

We expect overall broadband revenue to grow at a CAGR of 18 percent throughout the next five years.  This will be mainly driven by DSL revenue, whose growth exceeds overall broadband revenue.  Broadband ARPS will stabilize at about US$37 in 2010 where we assume operators will simultaneously preserve high-income customers through new services while seeking the next layer of subscriber.

Read more complete analysis of the Australian broadband market in the latest issue of  Asia-Pacific Perspectives available in our online store.