Must ISPs "Upgrade or Die?"

"You upgrade or you die" is the catchy sub-title to a new report by GigU on the state of gigabit Internet access in the United States.

“We have made enormous progress,” the report suggests. “Scores of American communities” are building such networks. Moreover, “in a radical change ove rthe past 12 months, multiple service providers are initiating their own efforts.”

The “upgrade or you die” sub-title explains GigU’s view of competitive dynamics, where Google Fiber and municipal or other public-private testbeds have changed the competitive context.

The report also notes that progress towards gigabit access is not at a point where progress is “inevitable or irreversible.”

“We admit we’re not really sure that it is a case of upgrade or die for every telco or cable company,” the authors say. That likely is correct. In many markets, customers might not wish to buy gigabit services, at current or projected future price levels, compared to offers of 100 Mbps or 300 Mbps at lower price points.

Indeed, that is a current bet many cable companies are making, essentially gambling that, in the near term, the practical difference in end user experience between 100 Mbps or 300 Mbps and 1 Gbps is relatively slight.

But some extrapolation of Internet access speed trends since the days of dial-up access would suggest gigabit access will indeed be quite typical at some point. The issue is “when?”

By some reasonable extrapolation, it has been possible to suggest that 100 Mbps would be a typical access speed in the U.S. market by 2020, as crazy as that might have seemed 10 years ago, or even five years ago.

In 2002, it is hard to remember, only about 10 percent of U.S. households were buying broadband service. A decade later, virtually all Internet-using households were buying broadband access service.

Researchers at Technology Futures continue to suggest that 100 Mbps will be a common access speed for U.S. households by 2020, for example.

The new issue is how common gigabit access will be.

A reasonable forecast would have about half of U.S. broadband access users buying 100 Mbps connections--or faster--by about 2020.

About 10 percent will be buying 50 Mbps connections.

Nearly 24 percent will still be buying 24 Mbps service.

In 2009, Technology Futures predicted that, in 2015, about 20 percent of U.S. households would be buying access at 100 Mbps, about 20 percent at 50 Mbps, and something more than 20 percent will be buying service at about 24 Mbps.

That might have seemed a bold forecast back in 2009, but Technology Futures uses a rather common method of technology forecasting that has proven useful. In fact, Technology Futures has been relatively accurate about access speeds for a couple of decades, at least.

The 2009 forecast by Technology Futures furthermore seems to be a reasonable approximation of reality. Technology Futures had expected that roughly 20 percent of U.S. households would be buying 1.5 Mbps service by about 2010, another 20 percent would be buying 24 Mbps service, while 40 percent of U.S. households would be buying 6 Mbps service.

The Technology Futures estimates of 2009 seem to match other data reasonably well. An Akamai study suggested that typical U.S. access speeds. were about 4 Mbps, on average, in 2010,

Moore's Law, in fact, fairly well describes the growth of Internet access speeds in the U.S. market, since the time of dial-up access.

The point is simple enough: if Internet access bandwidth doubles every year, it is only a matter of time before 1 Gbps is a standard access offering. There will be a lag between the leading edge adopters and mainstream adopters.

But the more important point might be that mainstream users will, over time, have access to hundreds of megabits per second, where they now buy scores of megabits per second.