Broadband market in line for credit crunch shakeout

Business broadband providers are keeping their heads above water in spite of a sudden and marked slowdown in consumer subscriptions last quarter, but the market is in for a radical shake-up.

Andrew Dickinson, sales and marketing manager at Griffin Internet, told MicroScope that a lot of smaller providers and broadband resellers were starting to struggle.

“Smaller wholesalers are struggling to invest in their networks so we are seeing lots of migration towards us,” he claimed.

Dickinson revealed that Griffin typically saw a split of about two-thirds new line activations to one third line migrations, but said this had changed to a 50/50 split.

He added that Griffin’s larger reseller partners were reporting some of the smaller players were starting to actively offer themselves up for acquisition in the hope of preserving their customer base.

“You wouldn’t believe some of the multiples they’re accepting. The average price used to be between 18 and 24 months’ margin, now we’re seeing deals of 12 to 18 months,” he said.

Those providers that specialised in widely acknowledged recession-busting extras such as VoIP or video-conferencing were faring slightly better, according to Gradwell.com CEO Peter Gradwell, adding he had seen larger orders dropping off slightly, but small orders were continuing as normal.

“People are using our [UC] systems a lot more than before, which leads me to suspect they’re realising they can save money,” he said, claiming the firm had posted record numbers for the past six months.

In April, broadband analysis outfit Point Topic said the UK would add 800,000 broadband lines in the second half of 2008, but it has now revised that figure down to 620,000 on the basis of Q3 figures that showed a 20% slide.

BT Wholesale was the biggest loser, according to Point Topic, dropping approximately 70,000 users in the quarter ending 30 September. The main beneficiaries of BT’s misfortune were LLU providers such as Carphone Warehouse, owner of the TalkTalk brand, and Sky.

Point Topic attributed the slowing numbers to growing consumer fears of a recession. It said the numbers would be a blow to the government’s digital inclusion objectives, but added that the Department of Children, Schools and Families still planned to subsidise net access for up to 105,000 children, which will go some way to making up the shortfall.