Two Orders of Magnitude More Access Speed Within 10 Years? History Says "Yes"

If history is any guide,  gigabit Internet access will not be at all rare in a decade, though how much demand for 1-Gbps might well hinge on retail pricing levels.

In August 2000, only 4.4 percent of U.S. households had a home broadband connection, while  41.5 percent of households had dial-up access. A decade later, dial-up subscribers declined to 2.8 percent of households in 2010, 68.2 percent of households subscribed to broadband service.

If you believe gigabit access is to today’s broadband as broadband was to dial-up access, and you believe the challenge of building gigabit networks roughly corresponds to the creation of broadband capability, a decade might be a reasonable estimate of how long it will take before 70 percent of U.S. homes can buy gigabit access service, and possibly 50 percent do so.

Consider that by June 2012 about 75 percent of U.S. households could buy a service of at least 50 Mbps, while half could buy service at 100 Mbps. So it took about a decade to put into place access at two orders of magnitude higher than the baseline (dial-up speeds).

The key distinction is between “availability” and “take rate.” Even though consumers are starting to buy faster access services, most seem to indicate, by their buying behavior, that 20 Mbps or 25 Mbps is “good enough,” when it is possible to buy 50 Mbps or 100 Mbps service.

In the U.K. market, for example, though service at 30 Mbps is available to at least 60 percent of homes,  buy rates were, in mid-2012, at about seven percent (to say nothing of demand for 100 Mbps).  

The European Union country with the highest penetration of such services was Sweden, at about 15 percent, in mid-2012.

To be sure, retail prices are an issue. With relatively few exceptions, U.S. consumers tend to buy services up to 25 Mbps, and price for a gigabit service is probably the main reason.

That is the reason behind Google Fiber's disruptive pricing for gigabit access at $70 a month. That pricing umbrella implies far lower prices for 100 Mbps service than consumers can buy at the moment.

And that is every bit as important as the headline gigabit speed. If a gigabit connection costs $70 a month, will a 100-Mbps connection cost $35 a month?