Is it really possible to quantify the economic uplift from internet access or home broadband operating at 100 Mbps or 500 Mbps? One might argue there is a difference between access at 100 Mbps or 1,000 Mbps. But do we actually know that?
And consider data consumption as a “good thing” if it is higher. My own account recently surpassed 1 Tbyte per month (and continues to climb). One might argue that is evidence of some sort of “productivity” advantage. It is not.
The reason more data is being consumed is because the household watches streaming video, often in 4K. Consumption of linear video (which does not increase data consumption has dropped to the point that only some live news and sports are ever viewed.
So in my case, higher data consumption has nothing to do with productivity, or learning or work. It is entertainment video consumption, pure and simple. If there were any heavy gamers on the account, that might also drive higher consumption.
But productivity? The increased amount of consumed data has nothing to do with it.
Many industry trade groups have to walk a fine line when addressing usage, take rates, revenue and speeds, in relation to societal or economic benefits.
Proponents must argue their industries create lots of value for economies and society; are well positioned for growth and at the same time, still need some help. The connectivity industry seems always to be in that position.
A new report on digital communications issued by the European Telecommunications Network Operators’ Association points out that fiber-to-home coverage has passed 50 percent of locations and that 5G coverage likewise has doubled over a single year from about 30 percent to 60 percent.
On the other hand, ETNO says, peers are doing much better. “Uptake of 5G in Europe has been lagging behind,” says ETNO. “Despite being available to 62 percent of the population, 5G in Europe constitutes only 2.8 percent of the total mobile connections, compared to 13.4 percent in the US and 29.3 percent in South Korea.”
That implies that uptake is a problem.
On one hand, ETNO argues that “telcos” have increased their commercial activities in edge computing, Open radio access networks, internet of things, “big data” and security, making the argument that telcos are innovating and investing.
ETNO also notes that average mobile data usage per capita per month, in 2020, was 8.52 GB in Europe, 10.62 GB in the US and 12.52 GB in South Korea.The implication there is that usage volume is a problem.
Average spend per capita on communications in Europe is forecasted to be €33.8 per month, lower than global peers (€71.7 in the US, € 36.1 in South Korea). So lagging average revenue per account is deemed to be a problem.
source: ETNO
Service provider revenues in Europe are also lower than in other geographies. Mobile average revenue per user (ARPU) was €14.4 in Europe, compared to €37.9 in USA and €25 in South Korea. Again, this is viewed as a problem, ETNO notes.
source: ETNO
The same general pattern holds for home broadband revenue, ETNO says.
source: ETNO
ETNO also argues that average home broadband downlink speeds are higher in some peer markets.
source: ETNO
The message is equal parts “we are vital contributors to society and economy” and “our financial survival is imperiled.” Says ETNO, “networks are vital, but the financial outlook remains unclear for the telecoms sector.”
This is the sort of argument any industry would make when it wants to show it is important for the government to support the industry, and also arguing why that support is required.
Aside from arguments over which other participants in the ecosystem should be compelled to contribute additional support (capital investment, usage fees, support payments), how one thinks about usage, customer revenue magnitude, ISP revenue magnitude and prices are an areas where more debate is possible.
For example, the explicit assumption is that higher data consumption by customers is better than lower data consumption. Higher customer spending is assumed to be better than lower spending.
The assumption is that uptake of the newest networks is good, in and of itself. Hence, higher 5G adoption rates are good; lower rates are bad.
ETNO notes that average public market equity values for ISPs are lower than for other categories of firms, the typical argument being that content and app providers earn higher multiples of revenue and therefore are valued more highly.
That is obviously true, but also ignores the fact that each industry can have a different market valuation, for reasons the market assigns. Growth companies are valued differently from value assets. Retailers are valued differently than software and information technology companies.
Different parts of the financial services business are valued differently as well. The point is that markets assign valuations. The mere existence of differences only indicates that the market values some firms and industries higher or lower, for reasons related to growth potential, business moats, revenue consistency or any number of other reasons.
The implicit argument made by suppliers and proponents of information or communications technologies is always that society and the economy profit when such adoption happens. Most often, the claims go further and argue that economic growth actually is driven by the rate of new technology adoption.
All of those assumptions can be challenged. At some level, we might all agree that universal availability of electricity is correlated with economic growth. But correlation often is not evidence of causation. If areas with the same degree of access to electricity still have different outcomes and growth rates and magnitudes, something else is at work,.
Also, most policymakers embrace lower consumer prices as a positive good. So some would argue lower prices are a good thing, not a “problem.”
Also, demand is different from supply. In arguing that consumption is an issue in Europe, ETNO essentially argues that lower demand is a problem. As much of a problem as that might be for ISPs, it is not so clear that demand actually is a “problem.”
We need to separate two different issues. One issue is making sure home broadband and high-quality mobile service is ubiquitous. But a separate issue is how consumers avail themselves of those resources.
But data consumption, data rates, average revenue per account or average cost per access might not have much to do with social or economic uplift.
