One key issue as mobile operators contemplate the use of their networks to compete in the home broadband market--formerly the “fixed network internet access” market--is whether such services can compete with incumbents.
Two key matters are the retail price of a service plan, which is shaped, in turn, by the cost of supplying the capacity, usually denoted as “cost per gigabyte of usage.”
Determining price on a country-by-country basis also requires adjusting prices to account for differences in currency values and purchasing power (typically using a purchasing power parity method). All those things done, price per gigabyte of mobile data usage ranges between nine cents per gigabyte up to $110 per gigabyte, according to Speedcheck.
There are all sorts of other complications, including the speed of a connection; whether we include fees and taxes as part of the calculator and whether other changes, such as equipment rental, also are included. All of that will differ from country to country and provider to provider.
But a reasonable rule of thumb has been that mobile data costs an order of magnitude more than fixed network data, on a cost-per-gigabyte basis. So in the U.S. market fixed network gigabytes might cost 30 cents while mobile gigabytes cost $3.
If mobile bandwidth traditionally has been an order of magnitude more expensive than fixed network bandwidth, then it is obvious that, to compete, mobile bandwidth has to be as capacious and affordable as fixed network bandwidth.
What is clear is that, compared to past capabilities, 5G networks will have a cost-per-gigabyte profile that allows mobile operators to radically close the cost gap with fixed networks that prevailed with 4G and prior mobile generations.
Up to this point, mobile cost per gigabyte has been as much as an order of magnitude more costly than fixed network cost per gigabyte. As always, it matters how we count.
The posted retail prices are not necessarily the “actual prices” consumers pay, as many are on promotional deals at any particular time. The other issue is prices for actually-used capacity versus plan allowance price. They are usually different.
The nominal (designed-for rate) is total usage allowance divided by total recurring cost. But not many users actually consume all the data their plans provide. Also, customers on unlimited-usage plans will have highly-variable “cost per consumption” ratios, as price is fixed, while usage is unlimited.
Fixed network data costs, on a cost-per-megabyte basis, routinely have in the past been in the 20 times to 60 times lower scale than mobile data. Where fixed network data might cost cents per gigabyte, mobile data costs dollars per gigabyte, counting either plan costs or actual usage costs.
To compete in the home broadband market with fixed network providers means mobile operators have to match prices per gigabyte more closely. Cost per gigabyte has been steadily declining, for both fixed and mobile networks.
The importance of 5G is that, for several reasons, the cost of supplying a gigabyte of usage will drop, compared to 4G, as the cost of each successive mobile generation has done.
Using mobile networks to compete in the home broadband market never gets the headlines when we talk about 5G. The buzz is all about edge computing or internet of things or virtual reality.
We might be surprised by the near term revenue upside. Mobile operators might make more new revenue from home broadband services--however unheralded--than from edge computing, IoT or AI-based apps.
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