Growing Number of Cases Where Mobile Internet Access is a Viable Substitute for Fixed Access

For Deutsche Telekom customers, mobile Internet access speed now is faster than what is available on the fixed network. That raises an important question to a new level.

Under what circumstances can a mobile Internet access offer substitute fully for a fixed network offer?

As mobile voice effectively has become a preferred substitute for fixed network voice, what are the conditions under which mobile Internet access is a functional substitute for fixed access?

Some usage scenarios already are clear enough. Where the cost of fixed network Internet access is non-economical, mobile will be the only form of access.

Where both mobile and fixed access are available, there are more use cases. With the advent of Long Term Evolution, the number of viable use cases has grown, compared to the situation where 3G is viewed as a potential substitute for fixed access.

Low usage, single-user consumers are a generic class of consumers for which mobile access using LTE could be a viable substitute for fixed access. Single-person households or users who do not watch much online video are examples.

On the other hand, multi-user households that watch significant amounts of video almost never are the best candidates for mobile Internet access substitution.

Someplace in the middle are many use cases where mobile offers might compete effectively with fixed network offers on a price-per-gigabyte basis.

It will is tough, but not impossible. Users will have to manage their own behavior, resisting the temptation to use resource-intensive apps when on the mobile network.

Substitution also will be easier in markets where public Wi-Fi or at-work Wi-Fi is plentiful.

We already have seen that in most markets, half to 70 percent of total mobile device usage relies on the fixed network, in the form of Wi-Fi offload.

So service providers with access to their own fixed network assets, plus mobile assets, might try to market usage buckets that incorporate both mobile access with fixed access, when Wi-Fi access is included.

Illiad’s Free Mobile, for example, uses a “Wi-Fi first” approach to support its lower recurring prices, in part because it owns some fixed network assets. Comcast is expected to take the same approach to creating mobile services.

Service providers without fixed network assets will have to leverage public Wi-Fi alone. That is more challenging, but becoming easier.

For mobile operators with some fixed Internet access assets, creating a sense of value is more a marketing exercise and a consumer perception issue than a technology exercise.

When mobiles are connected using any form of Wi-Fi, they have “effective” usage buckets that are almost arbitrarily large, no matter what the formal mobile usage bucket happens to be.

So whether approached from a “cost to supply” standpoint or a “cost to use” basis, an access supplier with both fixed and mobile assets has clear advantages.

From the service provider’s perspective, allowing smartphones to use any Wi-Fi connection dramatically affects the cost of supplying mobile Internet access to customers in a wide variety of stationary usage scenarios.

For consumers, the effective price of Internet access, on a dollars per gigabyte basis, is rarely even understood, on a granular basis.

Typical users never approach the usage limits of their fixed connections, which might have usage caps ranging from 150 Gbytes to 250 Gbytes, when such caps exist.

So the simple value proposition effectively becomes “monthly recurring cost,” not actual price per Gbyte. Effective price always hinges on actual consumption.

In other words, what is the “actual” price, per Gigabyte, of a plan costing $50, with 10 Gbytes of actual consumption? In that instance, $5 per gigabyte.

What is the “actual” cost of 1 Gbyte of usage, on a plan costing $30 a month? In that instance, $30.

So long as the cost to supply mobile bandwidth remains more costly than fixed network bandwidth, directly-competitive offers will be difficult. But “effectively competitive” offers will be possible.

One possible approach for a mobile service provider is to market effective usage buckets using all access methods, both mobile and fixed. In that case, the blended access cost, per device or per user, across fixed and mobile networks might be quite effectively comparable.

To be sure, full “mobile access” will remain subject to relatively stringent usage caps, compared to fixed access. But marketers might be able to create a perception of value by touting total monthly usage buckets that are effectively equivalent to fixed offers, because Wi-Fi consumption, which might be half to 70 percent of total usage, is available at “no incremental charge.”
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