A 3-Provider ISP Market Reduces ARPU 28%, Take Rates by 75%

Competition has implications. As the broadband availability gap study suggested, a three-competitor market reduces ISP average revenue per user by 28 percent, and take rates by 75 percent. 

That latter statistic is quite important, as it means any single facilities-based ISP strands as much as 75 percent of its invested capital.

The corollary is that the cost per customer has to reflect the cost of the stranded assets. If, for example, the cost of the network were $1,000 per location, at a 25 percent take rate, the cost per customer would be $4,000. 

That's one reason why the economics of wireless networks are better than fixed networks, especially under competitive conditions. There is much less stranded capital. 

One concrete example is the French mobile market, where upstart "Free," owned by Illiad, is forcing the other three legacy carriers to cut prices as they lose market share. Since the launch of Free, revenues, incumbent profit margins and market share have been lost. 

SFR suffered an 11 percent  year-over-year revenue decline, as it faces the second year of price competition with Free. The three legacy providers (Orange, SFR and Bouygues) have seen average revenue per user in France fall to $36.25 during the last quarter of 2012, from $43.37 a year earlier, according to Informa.