Sometimes, Gigabit Access Primarily Leads to Sales of 20-Mbps and 40-Mbps Access

Investing in gigabit Internet access networks might be among the most-effective marketing tactics for at least some Internet service providers. But it might not be a product that many customers actually buy, in some cases.

Much depends on the range of available offers, the degree of competition in a local market and the positioning of gigabit offers by competing ISPs in a market.

Where gigabit access sells for closer to $100 a month, and is but one of several offers, gigabit headline speeds might lead to higher sales of 20-Mbps and 40-Mbps services, even if relatively few customers actually buy the gigabit service.

In fact, one example of demand dynamics explains why that might be so. In my own neighborhood in Denver, I can buy a gigabit access service for $110 a month, guaranteed for a year.

If what I want to buy is a 100-Mbps service, that costs $70 a month, with the price guaranteed for a year.

The 40-Mbps service costs $30 a month, guaranteed for a year. All those prices are for stand-alone service, with no phone service.

In that sort of environment, many consumers are going to conclude that 40 Mbps is “good enough,” and provides a better price-value relationship.

Where the only speed offered is a gigabit, priced at $70 to $80, take rates might well be higher. The issue is what other choices are available.

While CenturyLink hasn’t seen much demand for the gigabit Internet access service it began selling in Omaha in 2013, the product has helped CenturyLink sell slower speed services, according to Stewart Ewing, CenturyLink CFO said.

“No one takes a gig service,” Ewing said. “But they take a 20-meg or 40-meg service, and that’s fine.”

The other problem is that upgrades to gigabit speeds, or even 105 Mbps, might not actually lead to better end user experience. My own subjective experience is that 100 Mbps does not actually improve my experience, compared to 15 Mbps.

That might not be true for a household where multiple users are using the connection at peak hours. But that is not my own typical use case.
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