In Business Model, Internet Access, Mobile, News, Spectrum

It probably no longer makes sense to argue about whether gigabit Internet access “should” be deployed at a time when “nobody needs a gig.” The reason is that the shift to gigabit networks is not driven by direct end user demand, at the moment. In somewhat similar fashion, it might make sense, but less sense than in the past, to argue that people “do not need 4G,” and that 3G better suits the actual end user demand at the moment. In some markets, all it takes is for one deep-pocketed new contender to disrupt the market by launching all-4G service, as Reliance Jio is doing in India. 

In other markets, a similar process might be said to be at work. Gigabit access speeds are strategic matter, driven by the level of intensifying competition in fixed and mobile networks, all of which are moving rather swiftly in the direction of gigabit and multi-gigabit capabilities. And that is being done irrespective of immediate end user demand. It might actually be true that “nobody needs a gig” at the moment. 

Australia’s National Broadband Network (NBN), for example, says “14 percent of NBN’s fixed line services used a 100/40 Mbps wholesale speed tier, 49 percent used a 25/5 Mbps wholesale speed tier and 32 percent used a 12/1 Mbps wholesale speed tier” in 2015.

In 2014, those tiers were at 18 percent for 100 Mbps plans, 42 percent for 25 Mbps plans and 35 percent for 12 Mbps plans. Note that demand for 100 Mbps actually dropped, year over year, while demand for 25 Mbps plans grew.

Many tier-one ISPs have argued that investing in capabilities consumers do not want to buy is dangerous, as it increases business risk and strands assets. It is one thing to argue that the cost of upgrading immediately to gigabit fiber-to-home networks will not yield sufficient return to justify making the investment.

But market context is changing. Cable TV operators, using hybrid fiber coax, likely can justify selling gigabit speeds, and already are preparing for multi-gigabit speeds, over their hybrid networks, without resorting to fiber to the home. Tht puts pressure on all other competitors to follow.

Likewise, the global mobile ecosystem is preparing for “gigabit to every device” in the earliest versions of 5G networks, with clear development paths for multi-gigabit and 10 Gbps 5G speeds. At the same time, 4G networks are using channel bonding to boost 4G speeds up to the multi-hundreds of megabits per second range, whether or not there is direct and immediate end user demand.

As has been the case in the past, next generation networks are being developed for strategic reasons, not driven by direct end user demand.

Some competitors not required to use fiber to home platforms are going to market gigabit services themselves, in large part to maintain or take a lead over their key competitors. Mobile operators, on the other hand, see an opportunity to take market share from fixed services, for the first time, on a widespread scale.

Under such conditions, it doesn’t make much sense to debate, any longer, whether “users need gigabit.” They do not, at present. That is not the point, however. Internet service providers see a need to provide such capabilities, for strategic reasons and as clear marketing tools.

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