Are mobile networks a viable substitute product for services provided by fixed networks?
As with most big questions, the answers are nuanced. Though some would still point to the utility of emergency calling services, most consumer observers and users have voted with their wallets in favor of the notion that mobile voice is, in fact, a nearly perfect substitute for fixed voice service.
The extent to which mobile works equally as well for business voice is less obvious, but views continue to change.
Perhaps the bigger issue is whether mobile is a viable substitute for wired network broadband services.
And there the notion of “perfect substitute” works less well. Mobile networks require spectrum resources that are more finite than the bandwidth that can be delivered by waveguide networks, and always will be more finite.
In principle, waveguide networks can use spectrum far broader than available to mobile or any other over the air networks.
And each waveguide network can reuse the same bandwidth as that used by its competitors, in the same locations, something that is impossible for mobile and other over the air networks using licensed spectrum.
In developed markets, the contrasts are more stark. In emerging markets, the practical choice is not between a more-limited mobile network and a fiber network, but between a mobile network and no network.
The other crucial difference between fixed and mobile networks lies not just in bandwidth, but in the cost of using that bandwidth.
On a cost-per-bit basis, a wired network will always have an advantage over a mobile network.
A laptop‑based wireless broadband basket (offers within the 500 MB per month range) cost USD 13.04 on average across the OECD in purchasing power parity (PPP) terms, although it reached USD 30 in some countries.
That is equivalent to $26 per GB of usage.
As always, price per GB drops as the size of usage buckets increases. Average expenditure was USD 37.15 for a 10 GB basket. A 5 GB basket for tablets cost USD 24.74 on average, but varied from USD 7.98 (Finland) to USD 61.84 (New Zealand).
Consider that many wired network plans either have no usage limits (Google Fiber and some others) or usage limits as high as 250 GB a month, for prices of perhaps USD 50.
The point is that although mobile Internet access might be roughly comparable for moderate usage scenarios, wired networks win, hands down, for high usage scenarios. And mobile networks are more expensive at low usage levels.
Using the OECD data, one can calculate that the price per gigabyte of usage is about $3.71 to $4.81 for a mobile broadband plan (just a dongle). The wired network might cost $5 to $10 per GB.
Thursday, August 22, 2013
Are Mobile Networks a Viable Substitute for Fixed Networks?
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
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4 comments:
The last paragraph indicates wired is more expensive than mobile. Is this correct? Only in small data usage scenarios?
It's a nuance. Fixed network service often costs less for slower speeds, more for higher speeds. But in many cases the usage cap is the same, or quite similar.
Many U.S. mobile network plans price usage at about $10 per gigabyte, when the usage is between one GB and 5 GB, for example. So use of 50 GB a month theoretically could cost $500, though few people would do so intentionally.
By comparison, a fixed connection would typically provide a usage allotment perhaps an order of magnitude higher, in the U.S. market, for example. So 50 GB consumed on a fixed network might cost only $50 a month.
The point is that if mobile Internet access bandwidth is considered a substitute product for fixed networks, speed is one diminsion. Nominal price is another area for comparison. Usage allowances are yet a third dimension.
When usage is high, as would be typical on a fixed network, mobile networks become much more costly, in comparison.
See some data from EE "Because 4G is proving to offer consistency as well as fast speeds, customers are increasingly using it to replace public Wi-Fi and home broadband. As the nationwide rollout of 4G has moved into less urban areas that have less public Wi-Fi, and relatively poor home broadband speeds, this trend has accelerated"
http://broabandtrafficmanagement.blogspot.com/2013/08/ee-lte-replaces-wi-fi-and-broadband.html
Thanks, Azi. I hadn't thought about the fact that 4G is faster than DSL in some areas. I haven't tried to test the theory, but my sense is that LTE can be faster than basic cable modem service at some hours of the evening as well.
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