By End of 2015, I will be able to Buy Gigabit Service from 2 Suppliers

By the end of 2015, I will be able to buy gigabit Internet access from at least two Internet service providers, including the cable TV and telco suppliers serving my neighborhood.

That sudden development raises new questions. Have incumbent ISPs concluded they must beat Google Fiber to a gigabit?

What does that do for demand for other products, such as access at 40 Mbps or 100 Mbps?

And once users become accustomed to such speeds, will their perceptions of experience shift?

The big immediate questions are about incumbent ISP strategy.

Among the reasons Google Fiber launched Google Fiber was to spur just those sorts of investments by the major U.S. Internet service providers, and one would have to say Google Fiber is succeeding.

But a sudden response now suggests U.S. incumbent ISPs have decided the challenge from Google Fiber simply has to be met. Where the dominant cable TV and telco competitors have essentially waited to see what would happen, Google seems to be getting huge market share.

So what now seems to be happening are preemptive strikes by the incumbents, to acquire as much of the gigabit market as possible before Google Fiber arrives locally, disrupting Google Fiber’s ability to make easy gains and develop a positive cash flow position.

The obvious related question is what happens to profit margins for high speed service. Some would say Google long has wanted costs as close to zero as possible, and the preemptive incumbent ISP moves suggest Google also is getting its way on that score.

At the same time, some believe demand for services from 40 Mbps to 105 Mbps also will get a big boost, either because ISPs upgrade customers to those plans without a price increase, or because consumers now will see value in upgrading to faster speeds, if not all the way to a gigabit.

To be sure, some will say the cost of the gigabit services offered by cable TV and telco providers is an issue. That is more likely to be the case where Google Fiber is not viewed as a potential competitor.

Where Google Fiber must be confronted as a local competitor, prices are likely to align around Google Fiber’s pricing leadership.

Even where that is not the case, Google Fiber price leadership still matters, as it sets consumer expectations.

In my own area, the difference between 100 Mbps and 1,000 Mbps now is about $58 a month, for a stand-alone high speed access service not bundled with voice or video.

On a stand-alone basis, a 100-Mbps service might cost $92 a month. On a stand-alone basis, it might cost $151 a month for a gigabit service, with no discounts for bundling.

Some will object to those levels of pricing. Some of us would counter “just wait.” I used to pay $100 a month for 700 kbps.

On a triple play bundle, I could buy a gigabit for about $80 a month, from one supplier.

The caveat is that those prices do not yet reflect the entry of the second competitor, by the end of the year. I expect prices will fall.

Many consumers actually buy dual-product or triple play bundles, so the “actual” cost for the high speed access is hard to determine with precision, but using an $80 figure for stand-alone video, and $50 each for voice and Internet access, a triple play bundle costing about $130 might infer promotional prices of about $58 a month for video and about $36 each for voice and high speed access, with the high speed access at about 105 Mbps.

At some point, some end users are going to be able to directly compare their experience at 15 Mbps with 100 Mbps or 1,000 Mbps. In many cases, consumers are going to discover they actually do not discern improvements.

Oddly, that might actually retard adoption of gigabit services, where 100 Mbps or 300 Mbps alternatives are available.

Still,  that is going to raise some other issues, as what app providers are going to have to do, as latency becomes the bottleneck, not access bandwidth. If latency performance improves, then a bandwidth boost to hundreds of megabits might actually produce an experience boost.
Post a Comment

Popular posts from this blog

Voice Usage and Texting Trends Headed in Opposite Directions

Korea Telecom Sees New Value from Fixed Network

Someday 100 Mbps Will Not Qualify as "Broadband"