$1 a Gigabyte in 2022?

On a global basis, Internet bandwidth costs have fallen by two orders of magnitude between 1999 and 2013. Some argue bandwidth will have to fall another two orders of magnitude before most people in emerging markets are able to use the Internet. 

At current rates of price deflation, one might expect global Internet bandwidth to drop two orders of magnitude by about 2022. That is important because prices for using a gigabyte of mobile data might then be about $1 per gigabyte, a level many believe will be necessary to support mass adoption and use of Internet apps. 

In 2030, at current rates of price deflation, a gigabyte consumed should cost about seven cents a gigabyte. 

Some believe it will take costs about a tenth of a cent per megabyte, or about $1 per gigabyte, before widespread Internet usage will occur in many parts of the developing world. 



Mary Meeker's "Internet Trends" presentation

When Should Telcos be Deregulated in Fixed Line Markets?

source: Leslie Marx

Are there any “dominant providers” of fixed network voice services? One might argue that particular concept, as it applies to “voice service regulation,” is way out of date, and does not reflect reality.

Mobile is the way most U.S. consumers use “voice services,” and new providers--mostly cable TV providers--are the leading providers of fixed network voice services.

Also, high speed access has emerged as the strategic foundation for tomorrow’s business, not voice. 

There, one might arguably maintain that cable TV operators are the dominant providers.

The top cable companies accounted for 83 percent of the net broadband additions in the first quarter of 2014, according to Leichtman Research Group.

Looking only at the 17 largest cable and telephone providers in the US, which serve about 93 percent of all high speed access customers in the U.S. market, about 1.2 million net additional high-speed Internet subscribers were added in the first quarter of 2014.

source: Leslie Marx

The top cable companies added about 970,000 subscribers, while the top telephone companies added about 200,000 net new subscribers.

Given enough time, that will lead to cable TV domination of high speed access in the U.S. market.

The 17 firms collectively serve about 86.5 million accounts. Cable TV firms have about 59 percent of the installed base, serving 50.3 million accounts, while telcos serve 35.2 million customers, representing about 41 percent of the installed base.

In other words, eventually, is it possible that the dominant providers in most markets could be cable TV operators, or other independent providers, such as Google Fiber. At that point, if telcos are laggards in both voice and high speed access, any regulation of them as “dominant” providers will be misplaced.

Of course, telco leadership of the mobile market will have to be considered, in an overall sense. But regulation of telco fixed network services already is growing strained, given the ongoing shift of market share leadership to new providers.

Suppliers with a wholesale access revenue model will want regulation to continue. Others might argue wholesale obligations should be applied to all access providers. The facilities-based providers obviously would prefer that nobody have wholesale access requirements. 

One way or the other, change will have to come. 

How Should Regulators Measure Big Acqusition Competitive Impact?

The proposed big U.S. communications industry mergers (Comcast-Time Warner Cable, AT&T-DirecTV), and the potential additional mergers (Sprint-T-Mobile US, Dish Network-T-Mobile US, Comcast-T-Mobile US) all will be scrutinized for their expected impact on competition in one or more U.S. markets.

But it is hard to quantify the actual consumer benefits of competition in the U.S. linear video entertainment  business, and perhaps equally hard to quantify the impact of intra-industry consolidation (Comcast-Time Warner Cable merger) and inter-industry moves (AT&T buying DirecTV).

One might argue that Comcast buying Time Warner Cable does not reduce video competition because the firms do not actually overlap in terms of present coverage. The deal only increases Comcast scale. But the deal also would increase Comcast share of high speed access to about 40 percent, some argue.

That is a level of market share that normally would draw antitrust and competitive review or rejection.

The AT&T offer to buy DirecTV, by way of contrast, involves no similar levels of concentration, some would argue, as AT&T, even after a successful acquisition, would have 27 percent share of the linear video entertainment market.

Still, regulators will have to assess the potential impact on competition. And one of the issues is how few contestants are required to provide reasonable levels of sustainable competition.

Even most casual observers might agree that two contestants is a bare minimum, three is better and four is better still. At some point, the issue becomes how many contestants are viable, long term.

Some will argue that a duopoly mobile business was insufficiently competitive, featuring high prices and low innovation. On the other hand, some would argue a duopoly fixed network business (cable TV versus telco) has been reasonably effective at producing competitive benefits.

The issue is the additional role played by mobile and satellite TV providers, across the broader market.

There might be only two fixed network service providers of triple play services, but there are four providers of video and four providers of mobile service in most markets, plus two providers of fixed network voice, plus numerous specialty providers of business voice and data.

It is hard, under those circumstances, to predict the competitive impact of removing one video provider from the ranks of suppliers, or allowing one provider to gain 40 percent share of the high speed access market, or shrinking the total number of national mobile providers.

Also, how suppliers compete could change. Competition might shift in some measure to qualitative elements of the experience, as T-Mobile US has done with contracts, device subsidies, international calling and texting.

Service providers might compete less on subscription prices, and more on equipment rental fees and features (exclusive programming, high definition, digital video recorder features, international calling and texting).

More important are “hidden price breaks” for buyers of bundles (double play, triple play, quadruple play). In such cases, price competition is disguised.

The Federal Communications Commission once estimated consumer price savings as high as 15.7 percent, in 2004, primarily from satellite competition to cable TV providers.

Using a different methodology, the General Accounting Office (GAO) compared the monthly cable television rates in six markets with broadband service providers who offered a full range of services including subscription television with six comparable markets without such competition.

Monthly cable TV subscription prices for expanded basic service in five of the six matched markets ranged from 15 percent to 41 percent lower with competition.

Averaging the results, the average price was 22.2 percent lower when competition was present. (Prices for voice telephone service and high-speed Internet service were either less or the same in the competitive markets), one study suggests.

But prices only reflect part of the comparison. Programming lineups have changed as well, so a given price represents availability of more channels. One might argue about the incremental value of most of those channels, but the number of channels available has grown substantially.

Suppliers also note that new features--high definition quality, DVR, subscription video on demand--have been added as well.

Complicating matters further, most consumers these days are buying services in bundles that effectively blur the actual cost of each constituent service. So posted retail prices for single services do not necessarily reflect the actual prices being paid.

Furthermore, competition can occur on either price and value fronts, and that also is hard to quantify.  

When the U.S. airline industry was highly regulated, for example, competition centered on amenities, not price.

Just how much competition could be affected by any of the big acquisitions is the issue.

Some might argue that high speed access and mobile competition matter more, as video is likely to shift to a new over the top mode relatively soon, in any case.