Fighting "Dumb Pipe" Won't Work

Fixed network service providers are trying to swim upstream in struggling against the notion that they provide “dumb pipe” or “big pipe” access to the Internet. Ignore for the moment the unstated “low gross revenue or low gross margin” adjectives that often accompany the phrase “dumb pipe.”

The simple fact is that a fixed connection provides the lowest-cost access method for an untethered device. In the case of a public Wi-Fi hotspot, the incremental cost can be “zero.”

In the case of a branded service provider hotspot, the incremental cost also might be zero, though the precondition for such “no incremental charge” access is that the customer already buys a fixed or mobile Internet access service.

Likewise, a fixed connection, equipped with Wi-Fi, provides the lowest cost bandwidth for consuming entertainment video on a variety of devices.

There are, to be sure, other services and applications that fixed network providers supply. But it seems unlikely any amount of marketing is going to persuade end users that the primary value of a fixed broadband connection is “lowest cost bandwidth.”

That does not mean fixed service providers will not have other, and new services and applications to sell. But it is hard to deny the obvious end user understanding that a primary reason for using a fixed broadband connection is the sheer cost advantage, compared to a mobile bandwidth alternative.

Traffic from wireless and untethered devices will exceed traffic from wired devices by 2016, Cisco forecasts, even though, up to this point, fixed connections have represented  perhaps 90 percent of all bandwidth consumed by end users. It is perhaps a shocking prediction, but has to be put into context.

In 2016, wired devices will account for 39 percent of IP traffic, while Wi-Fi and mobile devices will account for 61 percent of IP traffic. In 2011, wired devices accounted for the majority of IP traffic at 55 percent, Cisco says. That is a huge change, driven in part by a shift of Internet consumption away from “PCs,” the traditional driver of Internet traffic.

At the end of 2011, 78 percent of IP traffic and 94 percent of consumer Internet traffic originated from PCs. By 2016, 31 percent of IP traffic and 19 percent of consumer Internet traffic will originate from non-PC devices such as smart phones and tablets, gaming consoles and Internet-connected TVs.




Globally, mobile data traffic will increase 18-fold between 2011 and 2016, Cisco says. Mobile data traffic will grow at a compound annual growth rate (CAGR) of 78 percent between 2011 and 2016, reaching 10.8 exabytes per month by 2016.

Also, global mobile data traffic will grow three times faster than fixed IP traffic from 2011 to 2016.
Global mobile data traffic was two percent of total IP traffic in 2011, and will be 10 percent of total IP traffic in 2016.

One of the key observations is the difference between tethered Wi-Fi and mobile access. If 61 percent of all traffic is created by untethered and mobile devices, while 10 percent of demand is driven by mobile devices, then it is fairly obvious that Wi-Fi-based use of the fixed networks could represent half of all bandwidth demand.

In other words,untethered devices--including mobile devices in Wi-Fi mode--become the key drivers of overall Internet demand.