A boom in virtualization of fixed broadband access infrastructure is developing and will sweep through almost all connections over the next decade, passing the 500 billion mark in 2025. That will be 40% of the total 1.26 billion global broadband subscriber base by then, compared with just 0.48% at the end of 2018 and 2.58% now at the start of 2020. These findings have just been reported by Rethink TV, the research arm of Rethink Technologies Research, in its latest report, Broadband Virtualization Accelerates to 500 million connections By 2025.
Except for Africa, virtualization will proceed at a similar pace in all regions with relatively little difference between the telco and rather smaller cable broadband sectors. This reflects virtualization being universally recognized as essential to contain costs and boost efficiencies in a cutthroat broadband market that has become the lifeblood for both cable cos and telcos. With voice alone no longer generating much revenue and margins for video squeezed to around 15% in North America and Europe, broadband continues to deliver 60% or more. This is intensifying competition in the broadband space and driving operators towards virtualization to defend those generous margins.
Most operators deployed broadband over their existing infrastructure, which was originally developed for TV in the case of cable cos and voice followed by dial up data for telcos. That infrastructure has evolved to higher speeds through technical advances in terminating equipment and increased penetration of fiber, but is now running out of road for further improvements and is inhibiting new services for the digital home. This is provoking the impending virtualization which is only just beginning or yet to for most operators. The pace will pick up during 2020 and continue to increase over the next five years, running at over 9% of total connections per annum by 2025.
While Comcast on the cable side and telco Deutsche Telekom will be among the strongest early adopters, many operators in developing countries across Asia Pacific and Latin America will be not far behind as they deploy virtualized equipment, expanding footprint and as part of the replacement cycle. In fact some developing countries will be among the leaders, with Indonesia on course to virtualize 63% of its connections by 2025, a considerably higher proportion than the USA on 42.8% with a greater encumbrance of legacy.
The Rethink TV report has counted broadband and virtualized broadband connections for 127 principal operators in 34 major countries, while aggregating the rest to obtain complete regional and global totals. These allow the cable and telco sectors to be compared, as well as all the main countries, yielding valuable insights over rate of virtualization during the next five years at greater granularity than any survey to date.
