Full Mobile Substitution for Internet Access Coming?

Quite often in business, as well as in physics and the natural world, the equivalent of quantum changes happen. A quantum change is like the change of state of water from ice from solid to liquid, or liquid to gas, gas to liquid or liquid to solid.

The key analogy is that a series of almost-unremarkable quantitative changes accumulate before a nearly-instant change of state happens. A recent example is the change in viewer habits from linear video to on-demand (initially VCR tapes, then DVDs, then streaming) to over-the-top alternatives.

Other examples can be seen in the “long distance” business in the United States. Because of the 1984 breakup of the Bell system, a discrete “long distance” business--separate from the local telephone business-- was created.

Competition--initially from MCI--gradually lead to lower prices overall. Then AT&T launched “Digital One Rate,” which eliminated the price distinction between “local” and “long distance” services, first in the fixed network business and then the mobility business as well.

Over a period of decades, consumer behavior changed, in response. People discovered it made more sense to place outbound “long distance” calls on their mobile phones, since it cost quite a bit less than calling outbound from a fixed network phone, and started calling “long distance” more.

Then, as the price of calling using a mobile also fell, people began abandoning their fixed lines.

The point is that a series of quantitative changes (prices, usage) eventually reach a tipping point, where a qualitative change happens.

The upshot is that we have seen “mobile substitution” happen in waves. First, substitution of mobile for fixed network voice. Then mobile texting as a substitute for voice and email.

Then mobile internet access began to displace fixed network consumption. Now we are seeing quantitative change in entertainment video consumption, from fixed to mobile.

Eventually, those quantitative changes can result in qualitative change, in the same way that earlier transformations have occurred, namely, mobile substitution for fixed.

Though it seems unlikely, based on today’s value proposition (fixed access offers more speed, much-lower prices per bit, higher consumption limits), that value proposition will gradually shift.

We already are seeing the early glimmers of change. Consider the bandwidth issues. Basically, orders of magnitude more usable spectrum, plus lower cell site costs, made possible by new architectures and platforms, accompanied by retail pricing innovations, are narrowing the gap between fixed network internet access and mobile alternatives.

Consider the use of small cells.

In 2017, 62 percent of Verizon’s wireless deployments were small cells. Verizon believes next generation networks will require an order of magnitude (10 times) to two orders of magnitude (100 times) more antenna locations than previous 3G and 4G networks.

AT&T says that the U.S. mobile industry will deploy more small cells in the next three and a half years than the number of macro cells deployed in the last 35 years.

Some argue the industry cannot afford to deploy so many small cells. That ignores the price changes for such cell sites. Where a macrocell might cost $300,000, small cells mountable on light poles, for example, might cost two orders of magnitude less than a macrocell.

Just a few years ago, at lower volume, such small cells might have cost an order of magnitude less than a macrocell, but volume always matters.

So here’s the quantum change possibility: 5G networks will, for the first time, allow consumers to choose a mobile solution for internet access, with no penalty in terms of access speed, usage limits or cost.

“Our research indicates that 5G networks have the potential to leapfrog the capacity of cable operators’ HFC networks,” said Peter Rysavy, Rysavy Research principal. “5G technology is a threat to cable operators” because 5G capacity and performance will meet or exceed that provided by a hybrid fiber coax or even optical fiber connection, in most cases.
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