Will LTE Be Complementary to Fixed Broadband, or a Substitute?

Will Long Term Evolution remain a complementary form of broadband access, or will it become a functional substitute? And, if so, for which sets of consumers will this be a logical choice?

AT&T and Verizon Wireless certainly believe there are some significant percentage of customers for whom broadband access supplied by mobile networks, though in a “fixed” basis, will be a viable substitute for fixed network broadband access.

Up to this point, the amount of such mobile substitution for broadband access has been fairly limited, and nothing like the substitution of mobile voice for fixed voice. But fourth generation networks, offering high speeds, which some liken to “digital subscriber line” speeds, should provide greater potential for substitution.

Still, some do not believe mobile broadband is a substitute for fixed broadband. Some of us doubt that. There might be many ways to infer meaning from the fact that fixed network broadband adoption has not changed much since 2009.

Some might say that is because later users value broadband access less, or because tough economic conditions are forcing consumers to make choices, or simply that people who use the Internet mostly already buy broadband access. It is hard to disagree with the logic.

But some of us would argue that there is a growing trend for some users to substitute mobile broadband for fixed broadband because most of what those users do can be done on a smart phone.

Some might argue, with reason, that such preferences remain a single digits kind of development, and that probably is quite true. On the other hand, a couple of important market drivers are operating, and should grow in importance.

As tablets have shown, most people, most of the time, consume content, instead of creating it. This is what is contributing to the “post-PC” era we seem to be entering.

But that very fact means a greater number of users might conclude that they can get by with smart phone broadband, and really do not need a fixed broadband connection. That might be more true for single person households and households of younger and unrelated persons.

On the other hand, the other angle is that a fixed connection might increasingly have the most value as a way of offloading traffic from smart phones and tablets, not so much to enable use of PCs. That might account for the finding that 83 percent of smart phone users also have access to fixed broadband at home.

In other words, despite growing “smart phone only” access, the vast majority of smart phone users also have fixed access services. But the market can change. If fixed broadband tariffs start to rise, and if LTE 4G tariffs start to fall, many more users could opt for a different mix of spending than they have shown in the past.

Up to this point, 4G prices have been higher than 3G . But that could already be changing.

Comparing retail prices between the second quarter of 2012 and the fourth quarter of 2012, service providers in 73 percent of countries have reduced the “effective cost” of their 4G tariffs  to a significant degree, according to ABI Research.