Tuesday, April 2, 2019

Supply and Demand for Internet Access

Demand matters when we discuss and evaluate the state of consumer broadband access. A recent survey of U.K. consumers found that 15 percent rely solely on their smartphone for internet connectivity. That is not to say better fixed network service and lower prices are unimportant.

But we always are looking at two different things: supply and demand. In the supply area, regulators want fast access, with ubiquitous coverage. But supply is not demand. Even where gigabit access is available, most customers actually buy some some other--and slower--speed access.

What ultimately matters is not simply that quality broadband is available, but what services people actually value and buy. Since there are virtually no applications in the consumer realm that require gigabit access, consumers often freely choose to buy services in the middle of the range of available choices.

Sometimes they choose to rely exclusively on mobile access. Most often they use both fixed and mobile access.

In the U.S. market, though internet use is perhaps 89 percent, fixed network internet access is reported in some studies at only about 65 percent, somewhere in the 70-percent range in other studies, and over 80 percent in other studies.


Some 19 percent of U.S .households are mobile only for at-home internet access. Add the fixed and mobile-only households together and perhaps 84 percent to 99 percent of U.S. households buy some form of internet access service.

The point is that that nearly 20-percent mobile-only demand suggests fixed network demand is close to saturation.

Beyond that is something more important: the ability to wring value out of broadband internet access. In principle, and likely in fact, different users, populations and countries are able to produce more value from internet access than others. In other words, they are able to turn internet access into productivity gains.

In the final analysis, value is what matters, not speeds, not even always coverage. What humans and firms are able to do with internet access is what matters.

No comments:

Small Business Survey Illustrates Trade-Offs

A new survey   of how U.S. small businesses are behaving provides a good example of how unintended consequences, externalities and trade-o...