Broadband diversion has a huge impact, and traffic has little room for explosive growth

The unit price of traffic has dropped from 15 yuan/GB in the early 4G era to around 4.8 yuan/GB at the end of 2019. Data from the first four months of 2020 show that the unit price of traffic is still in a rapid decline channel. However, even though the unit price of traffic has dropped to such an extent, the growth rate of traffic has been in a straight line decline for a long time. With the rapid development of mobile Internet, keeping the phone in hand has long become a common phenomenon in everyone's life and work. After the explosive growth of broadband users, its diversion effect has made it difficult for traffic to increase explosively.

1. After breaking through the ceiling, the scale of broadband users is still growing rapidly

Data released by the Ministry of Industry and Information Technology show that from January to April this year, my country added 9.26 million new broadband users. Although the monthly operating data released by the three major operators is lower than the official data, it also shows that my country's broadband users are in a period of rapid growth. Among them, China Mobile's broadband user growth is particularly prominent.

my country's total population is 1.4 billion, and preliminary calculations show that the maximum number of households is 467 million (calculated at a ratio of 3:1). Data released by the Ministry of Industry and Information Technology show that by the end of April, the number of broadband users of the three major operators had reached 459 million. If the users of other small and medium-sized broadband operators are added together, the number of broadband users in my country will exceed 480 million, approaching 500 million.

The new round of speed increase and fee reduction has confirmed that the unit price of broadband will be reduced by another 15%. This means that there is room for further price reductions for broadband, which is likely to further stimulate demand for broadband. In addition, coupled with the marketing promotion of operators, the scale of broadband user development is likely to see a phenomenon similar to mobile phone users where one company has multiple broadbands.

After breaking through the ceiling, the scale of broadband users has continued to grow rapidly. At the beginning of the year, China Mobile announced a target of 12 million broadband users in 2020. Judging from the current development speed, China Mobile's annual broadband user development target is expected to be completed by the end of the third quarter, and the annual user development scale is very likely to reach 18 million households.

Behind such a large number of incremental broadband users is an even larger number of mobile phone users. According to the current common ratio of 1:3 of household numbers to household population, nearly 80 million mobile phone users will become broadband WIFI users throughout the year. After taking into account the scale of all broadband users, more than 1.4 billion mobile phone users will become broadband WIFI users.

2. The demand for mobile Internet is growing, but the growth of traffic is very limited

The current 4G user penetration rate has stabilized at around 80%. If the impact of migration to 5G is deducted, the 4G user penetration rate can be even higher. However, even so, it cannot change the fact that users prefer cheaper (free) broadband WIFI, especially when the video and picture resolution is getting higher and higher, and the traffic occupancy or consumption is increasing. In the same video market, the traffic consumption has increased several times.

In the past year, although the DOU of mobile phone users has maintained an overall growth trend amid fluctuations, the monthly increments have become smaller and smaller, and even negative growth has occurred in some months. The DOU of users in April this year is only equivalent to the value in November last year. This is not only inconsistent with the trend of continuous growth of mobile phone users, but also inconsistent with the reality of increasing demand for mobile Internet by users. The most reasonable explanation is the diversion effect of broadband.

In addition, the sluggish macroeconomic situation has weakened the public's impulse to consume data, which may force users to choose cheaper broadband WIFI. Official data show that 600 million people in my country have an average monthly income of about 1,000 yuan, or 33 yuan per day. In the current situation where income growth is affected, the proportion of communication expenses will naturally be passively affected.

The most authoritative Internet survey report in China, the China Internet Statistical Development Report, shows that Chinese netizens are young, low-educated, and low-income. Under the macroeconomic trend, the wisest choice for the "three lows" is naturally various free and free Internet access.

The limited growth of traffic consumption will inevitably lead to weak growth in traffic revenue. Data from 2018 and 2019 confirm this conclusion. It is precisely because of the limited growth of traffic revenue that the growth rate of operators' telecommunications business revenue has been lowered overall. As shown in the figure below, the increase in traffic revenue in 2019 was only 2.5 billion yuan, far lower than 56 billion yuan in 2018.

3. 5G is accelerating, but the traffic volume gap may be difficult to change

Data from South Korean operators show that the DOU of 5G users has doubled compared to 4G users. For operators, the doubling of 5G user DOU is naturally a good thing, but the unit price of 5G traffic is much lower than that of 4G traffic. In addition, the construction and maintenance costs of 5G networks are also much higher than 4G. In this case, can the incremental traffic stimulated by 5G eventually bring corresponding traffic revenue dividends?

If we go back to the early days of 4G, there was no speed increase and fee reduction, nor unlimited data. Operators relied on allowing data to replace voice, especially WeChat, to replace voice, and achieved the transformation from voice to data operations. Now that the 5G era is accelerating, how can operators complete the transition from 4G to 5G?

In pursuit of the growth of 5G user scale, operators not only offered 30% discounts, but also launched 5G data packages for 30 yuan (the figure below shows the 5G data package launched by China Mobile). The unit price of data in the cheapest data package has been reduced to 0.67 yuan/GB, and the most acceptable price for general users has also been reduced to 3 yuan/GB.

When 5G was first launched last year, the lowest price was 128 yuan/month, which included 30GB of data and 500 minutes of calls. No matter how the operator divides the voice and data, now using 30G of data, the lowest price is only 20 yuan/month. Of course, only a small number of users can enjoy the basic package at this time.

Although 5G's target customers are not in the personal market, in the early stages of the 5G era, the personal market will be the main source of 5G business revenue. After the rapid growth of broadband users, the impact of broadband diversion will inevitably continue to increase. At this time, how to balance the utility of broadband and traffic services requires a comprehensive assessment by operators. After all, the value chain of broadband is not long enough, and the revenue contribution of broadband is still difficult to compare with traffic. In the case of a single company dominating traffic revenue, it is necessary to reduce the impact of broadband on traffic diversion.