There is a big difference between supply and demand in the fixed network internet access or any other business. Some assume that supply is itself sufficient to create demand. That clearly is not the case.
Ofcom estimates that 30 percent of consumers who could buy a fiber to home actually do so. AT&T believes it will hit 50 percent take rates for its fiber to home service after about three years of marketing.
In South Korea, FTTH take rates seem to be only about 10 percent, for example, though network coverage is about 99 percent. In Japan and New Zealand, take rates have reached the mid-40-percent range, and network coverage might be about 90 percent. But in France and the United Kingdom, FTTH adoption is in the low-20-percent range.
Perhaps 10 percent of Australians buy the fastest service available, whether that speed is 100 Mbps or a gigabit.
In other words, though some assume that what really matters is the supply of access connections--seen in calls for better coverage and higher speeds, or lower prices--consumer behavior suggests the demand is not quite what some believe.
Even when it is made available, FTTH does not seem to lead to a massive consumer rush to buy. Quite the contrary, in fact, seems to be the case. Nor does the supply of gigabit-per-second connections necessarily lead to better results (higher take rates).
In the U.S. market, though perhaps 80 percent of potential customers can buy a gigabit-per-second service, only about two percent seem to do so. The reason seems to be that most consumers find their needs are satisfied with service in the hundreds of megabits per second range.
About 51 percent of U.S. fixed network internet access customers now buy service at 100 Mbps or higher, according to OpenVault.
Some 35 percent buy service rated at 100 Mbps to 150 Mbps, OpenVault says. About 27 percent buy service running between 50 Mbps and 75 Mbps.
It is one thing for policy advocates to call for extensive, rapid, nearly universal supply of really-fast internet access services. It is quite another matter for any internet service provider to risk stranded assets on a major scale simply to satisfy such calls. It is, in fact, quite dangerous to overinvest, as consumer behavior shows that most people do not want to buy the headline speed services.
Some might essentially argue that consumers do not know any better. Others might argue consumers are capable of making rational decisions. And the rational decision might always begin with how much speed, or usage allowance, actually satisfies a need.
Price also matters. Generally speaking, the trend in the consumer internet access market has been to supply faster speeds for about the same price faster speeds for about the same price.
Consumer budgets, in other words, are essentially fixed: they cannot and will not spend more than a certain amount for any and all communication services, while expectations about service levels creep up year by year.
So critics will always be able to complain. No rational ISP will push its investments beyond the point where it believes it has a sustainable revenue model. And that model has to be based on reality, which is that real customers do not want the headline speeds advocates often push for.
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