How gigabit became the broadband standard

1G broadband services are typical, Omdia survey finds

Sixty percent of service providers now offer gigabit or multi-gig residential broadband services, according to a global survey

In early 2022, Omdia surveyed over 760 fixed broadband service providers across 178 geographies to find the highest residential consumer offerings. The survey found that 60% of service providers surveyed offered 1Gbps or higher, compared to 45% in 2019. Table 1 shows the percentage of service providers offering 1Gbps or faster by major region. North America is far ahead of the other regions.

Table 1: Omdia 2022 fixed broadband service provider survey results, by major region

Source: Omdia

There are several drivers behind the trend for gigabit and multi-gig service offerings:

• Consumer demand for high-quality bandwidth services
• Operator broadband access network technology upgrades
• Service provider marketing strategies and overbuilder competition
• Government and private equity investments

Consumer demand for high-quality bandwidth services

In 2021, 16 million broadband subscribers in North America subscribed to service bandwidths of 500Mbps and faster. According to the Omdia research, 67 million subscribers, representing 50% of all North American broadband subscribers, will be at speeds of 500Mbps and faster by 2026. Figure 1 provides detail on gigabit and multi-gig service take-up rates.

Figure 1: Consumer subscriptions by speed, North America, 2019–26 Source: Omdia

Since 2019, work from home, remote learning, and e-services have moved from minimal to commonplace. Bandwidth consumed in the average home has eclipsed rates from prior years; this trend continues in 2022. Households were once considered “power users” because monthly data usage of 1TB or more is now regarded as average. In tandem, subscribers are paying more attention to their download speed throughput. According to Omdia, the average download speed per subscriber was 200Mbps in 2021, increasing to 700Mbps by 2026.

Furthermore, upload and low latency are not just topics for business services. Residential subscribers have adopted upload and latency-sensitive hobbies, including cloud gaming and live streaming. These factors have many subscribers analyzing their broadband service. Competition is leading to churn when broadband requirements are not satisfactory.

Operator broadband access network technology upgrades

Next-generation broadband vendor solutions have created new opportunities for service providers. In North America, the adoption of passive optical networking (PON) technology is expanding. In 2019, PON optical line terminal (OLT) port shipments in North America were 300,000, compared to 831,000 in 2021.

Adopting 10G PON is gaining traction because it enables faster broadband offerings and new services. Omdia forecasts OLT port shipments in North America to reach three million ports in 2027. Ninety-eight percent of ports shipped will be 10G or higher.

Several operators are installing 10G optical networking terminals (ONTs)/optical networking units (ONUs) at customer premises. The cost difference between 10G PON ONTs/ONUs and the older generations has declined to less than the cost of a truck roll. The service provider can eliminate the cost of a truck roll in the future by deploying 10G PON ONTs/ONUs now. Figure 2 shows the expected growth in North America for next-generation ONT/ONUs ports (10/25/50G GPON + EPON) between 2022 and 2027, forecast to grow at a 74% CAGR from 2021 to 2027.

Figure 2: PON ONTs/ONUs ports, North America, 2022–27 Source: Omdia

Service provider marketing strategies and overbuilder competition

Today, the average North American household does not need gigabit speeds to support their needs.   Yet, consumers have grown accustomed to gigabit broadband advertisements. As shown in Table 2 below, Omdia’s survey results show that out of 160 fixed broadband service providers in North America, 88% offered 1G or faster broadband services. Further, 16% of service providers surveyed already offer multi-gigabit services to residential consumers.

Table 2: Omdia 2022 fixed broadband service provider survey results, North America

Source: Omdia

Even though the take-up rate for gigabit and multi-gig tiers is still low, the consumer perception that these speeds should be omnipresent offerings has taken hold. If a service provider does not offer gigabit service, consumers may now perceive them as subpar; this is despite whether the customer wants a gigabit-speed service or not. Further, if gigabit service is available in a subscriber’s footprint from a competitor, especially symmetrical, there is the risk of churn. The subscriber may perceive the competitor’s network as “better,” even if they do not take the gigabit service.

Investments from governments and private equity

There have been significant government investments in broadband in North America for over a decade. The aims have been to bridge the digital divide for millions of unconnected and under-connected. Many homes are without reliable broadband because of the cost-prohibitive nature of connecting the “last mile” or last part of the connection to the customer premise. Many of these places are in rural or hard-to-reach areas. Recently, more funds were created to overcome these obstacles, including $65 billion by the US government. While government subsidies are not directly driving gigabit services, they are making many “last miles” less cost-prohibitive. They are creating millions of new subscribers, too.

Fiber networking is seen as a thriving market in the private investment sector. Financial institution investors, including private equity and pension funds, view fiber as an asset with an attractive risk-return profile. Many investors are willing to invest capital with longer paybacks, given the utility profile of broadband investments. Because of this investment, many service providers are expanding their fiber-to-the-home (FTTH) buildouts and service offerings.

Looking beyond 1G

Gigabit service is the norm today, but the number of multigigabit offerings is expanding. High-quality offerings are becoming more prevalent, including low-latency services geared toward gamers and enterprise-like services for those now permanently working from home. The bottom line is consumers are demanding better broadband offerings. Vendors are supplying next-generation solutions, operators are deploying gigabit services, and investors are providing the funds in a race that is not showing signs of slowing down anytime soon.

Appendix

Authors

Jaimie Lenderman, Principal Analyst and Research Manager Service Provider Networks

Julie Kunstler, Chief Analyst, Service Provider Networks

askananalyst@omdia.com