Is Mobile Internet Access "More Valuable" than Fixed?

Looking only at the cost per bit, one might conclude (incorrectly, perhaps) that mobile data access is deemed more valuable than fixed network access. One might also argue that the value of mobile bits is in some sense "greater" than fixed access precisely because it represents "access at any time, anyplace" instead of "at one place."

It is somewhat impressionistic, but mobile service adoption rates do suggest there is something consumers consider quite valuable. Consider adoption rates: mobile got adopted explosively, compared to fixed network service. That suggests a clear and strong sense of value on the part of consumers.

source: Our World in Data

It also is suggestive that mobile cost per bit has been 10 times higher than that of fixed access.

On the other hand, most surveys show relatively balanced levels of data consumption--mobile or fixed--on a global basis. Some consumption is mobile-only; some is fixed-only.

About half of consumption is untethered devices using fixed network resources (Wi-Fi in particular). 

source: Cisco

Nor is it easy to compare the value of fixed access compared to mobile access. Mobile access costs more, per bit, but consumption also is far less than on a fixed network. Fixed network consumption costs less per bit, but consumption levels are higher than on a mobile network.

Basically, 80 percent of device traffic demand is from fixed networks, though roughly half of all device traffic demand is from mobile devices. In part, that might be because mobile users know they can save money by offloading to Wi-Fi.

It is difficult to say how much that disparity is driven by perceptions of value and how much from the sheer disparity in transmission network bandwidth. Mobile bandwidth is highly restricted by the amount of spectrum available for mobile networks to use. Cabled networks have virtually unrestricted capacity upside.

Still, to the extent that value and price are directly related, mobile access might be deemed to be more valuable than fixed bandwidth, per-bit, when consumed "on the go," where fixed connections are not possible. The high use of Wi-Fi as a mobile network offload mechanism speaks to the cost differences between mobile and fixed networks.

The value of data access is not necessarily directly proportional to the volume of data consumed. A relatively small amount of data used for a navigation app or social network might have high value, while a large amount of data consumed by a video might have relatively lower value.

So the value of mobile internet access is not directly related to the volume of consumed bits.

Some might argue that “most” consumers will have little need for internet access on their phones. Many of us would strongly disagree with that notion. Some even have argued that only about 35 percent of phone users would be willing to pay for internet access on their devices. 

source: Mobile Opportunity

It is safe to say many of us believe a standard Bell curve of demand is the more likely outcome, where nearly every user buys some mobile data access. 

source: Mobile Opportunity

All internet access seems to be deemed valuable by consumers. It also is possible to argue that mobile access "anywhere" continues to enjoy a cost premium compared to fixed network access, as important as that is. 

T-Mobile Sprint Merger Means More Fixed Wireless Competition

How much market share 5G fixed wireless might actually get in the United States is a highly-contentious matter. Incumbents say fixed wireless is not a threat to cabled network market share and revenue. Attackers believe 5G fixed wireless will be material. Some have called 5G fixed wireless an existential threat to cable operators. 

The recent approval of the T-Mobile merger with Sprint boosts prospects for aggressive new competition, in a couple of years. And though T-Mobile has indicated it could capture 9.5 million fixed accounts by about 2024, for example. That alone would potentially reduce cable market share by nine to 10 percent, a huge shift. 

source: T-Mobile US 

Add in competition from other providers and a nine-point shift in market share is a reasonable expectation. 

Both sides could be right about the relatively small market share shift, and yet the impact could be quite substantial. There are several reasons. incremental sales--at the margin--that often provide a disproportionate share of profits. So fixed wireless could be highly relevant if it shifts accounts at the margin. 

One example might be that fixed wireless slows cable operator revenue growth in the business or customer segments. Fixed wireless might capture enough share to slice incumbent growth rates or cap growth rates. 

There are roughly 99 million fixed network internet access accounts active in the U.S. market. If fixed wireless manages to shift about 12 million accounts, that is a potential gain of 12 percent.

If 80 percent of that shift is from cable operators to telcos, implying a shift of 9.6 million accounts, that would mean a loss of 15 percent cable TV market share in internet access. 

To the extent that internet access is the cable operator  growth engine, that could have outsize financial and strategic impact. 

Another potential issue is possible average revenue per account hits, as incumbents attack cable services on the price dimension. So it might not be only the lost direct revenue loss but the impact on overall ARPU that emerges. 

source: Bain and Company

In recent quarters, for example, U.S. fixed network internet access net additions net additions have totaled about six tenths of one percent of the installed base, with cable gaining eight tenths of one percent while telcos lost about two tenths of one percent. 

In other words, a shift of about two-tenths of one percent per quarter halts the telco decline. A shift of perhaps six-tenths of one percent--from cable to telco--actually causes cable share to begin a decline. 

That is what the stakes realistically are: a chance for telcos to halt, and perhaps reverse, the long-term decline of their market share in internet access. 

Cable TV executives in the U.S. market naturally express as much skepticism about the dangers 5G fixed wireless services pose for their consumer broadband business as telco execs say they are optimistic. Basically, it will no scale, or will scale too slowly to keep up with cable’s own planned bandwidth plans, cable execs tend to say. 

It is very subtle stuff. Verizon, for example, only has to gain about 7,000 5G fixed wireless accounts per quarter to halt its customer losses. T-Mobile US and Sprint have virtually zero fixed network market share, so even smallish gains represent new accounts with average revenue possibly double what they get from mobile internet access accounts. 

The point is that skeptics and proponents alike can be right that 5G fixed wireless only shifts a small amount of market share. But it is precisely at the margin that fixed wireless could be significant. Fixed wireless could halt a 20-year decline in telco fixed network internet access share; choke off the cable operator growth engine and attack cable profit margins.