How Much Demand for 100 Mbps?

While next-generation fixed-line broadband speeds will at some point increase dramatically to 50 Mbps, 100 Mbps, or higher, in some cases, just seven percent of European online households will pay more for higher speed, says Forrester Research analyst Ian Fogg. Some argue that will resolve itself in time. Up to a point, that probably is true. But between "here" and "there" is a transition period where deployed capital could be terribly wasted.

And it is not as though the communications industry has no experience with the dangers. An overly-enthusiastic approach to mobile 3G services nearly bankrupted many mobile providers across Europe in the first decade of the 21st century. All of that should suggest the wisdom of matching broadband supply to demand, when the transition from 3G to 4G, or 10 Mbps to 50 Mbps, does not necessarily provide an obvious end user value as great as the transition frm dial-up to broadband access.

One can argue that prices for higher-speed services are too onerous, but that simply begs the question. Given a choice, nearly all consumers opt for reasonably-fast or moderately-fast services, instead of the "blindingly-fast" services.

One can argue that the only reason is "price," but that argument is akin to saying that most people would buy a Lexus if it cost as much as a Honda Civic.

But more than 70 percent of U.S. broadband customers are happy with their overall service, ranking it between an 8-10 on a 10-point scale, according to Leichtman Research Group. A mere 3 percent scored their service with a 3 or less on the recently conducted survey, while just 26 percent said they’re “very interested” in receiving faster speeds at home. See http://www.leichtmanresearch.com/press/062210release.html.

Leichtman Research Group finds that 71 percent of US broadband Internet subscribers are "very satisfied" with their current Internet service at home (rating satisfaction 8 to 10 on a 10-point scale), while just three percent are not satisfied (rating satisfaction 1 to 3).

Overall, 66 percent of broadband subscribers rate the speed of their connection 8 to 10, while six percent rate it a 1 to 3.

None of that necessarily and directly speaks to the issue of how much demand there might be for faster services, though. About 26 percent of broadband subscribers are "very interested" in receiving faster Internet access at home than they currently receive, while 44 percent are not very interested.

What is not clear, though, is how much of that potential interest can be converted to actual buying of higher-speed tiers, and, if so, how fast those tiers would need to be, and how they would have to be priced, to move consumers to act. Many consumers might be happy enough to migrate from tiers operating in the 3 Mbps to 5 Mbps range up to 8 Mbps to 10 Mbps, particularly when there still is no compelling new application that requires such bandwidth.

"Next-gen broadband will not be such an easy sell, as there's little pent-up speed dissatisfaction," at least not yet, says Fogg.

Try and find any U.S. service provider, offering actual speeds of just 50 Mbps, talking about the take rates for such services. If you cannot find any company willing to talk about take rates, that is likely because the take rates are so low.

German cable network operator Kabel BW claims that around 40,000 customers are using broadband with speeds of 50 Mbps or 100 Mbps, at a time when 50-Mbps service costs about $41 a month.

 About three million homes are able to buy service at those rates. So buyers represent about one percent of customers. What is not clear is what percentage of those buyers actually are businesses, rather than consumers, either.