Home Broadband Speeds Reaching Multi-Gigabit Levels

Home broadband speeds have climbed for more than two decades and virtually nobody expects that trend to stop. Consider the growing number of internet service providers offering gigabit and multi-gigabit home broadband services.  

A 2022 Omdia survey of 760 home broadband service providers across 178 geographies found that 60 percent of service providers offered service plans operating at 1 Gbps or higher. In North America, 13 percent of service providers already had begun offering multi-gigabit speeds, Omdia says. 

Region	# of service providers surveyed	% SPs offering 1Gbps or faster
Asia & Oceania	144	51%
EMEA	392	57%
Latin America & Caribbean	71	20%
North America	160	88%

source: Omdia 

The other observation is that some form of “digital divide” seems likely to persist, as rural networks tend not to match the performance of urban networks. Networks in developed countries tend to outpace networks in developing regions. 

And beyond availability (potential customers can buy), consumers make their own decisions about what to buy, and why. As a rule, customers tend not to buy the most-pricey, highest-performance tiers of service. Instead, they tend to buy service somewhere in the middle. 

In 2022, for example, North American home broadband customers mostly were buying services operating between 100 Mbps and 500 Mbps, according to Omdia. That was neither the slowest nor the fastest tiers of service available.

source: Omdia 

Over time, that “typical” service level will shift upwards and to the right. But most customers will still be buying service somewhere in the middle.

Rural Home Broadband Might Not Always--or Even Often--be an Example of Digital Divide

Rural areas always face challenges when it comes to home broadband, for simple reasons: the cost of fixed networks in areas of low population and housing density is challenging. But the latest survey data from NTCA suggests matters have improved dramatically. 

The NTCA’s latest poll of its members indicates 61 percent of residents can buy service with downstream speeds of at least 1 Gbps, up from 55 percent in 2021,  45 percent in 2020, and 25 percent in 2019. 

source: NTCA 

Customers unable to buy service at speeds up to 25 Mbps have dropped to about nine percent. 

The 2021 report indicated as much as 76 percent of customers are able to buy services running from 100 Mbps to multi-gigabit speeds. About 55 percent of customers were  in the “1 Gbps or faster” category.

source: NTCA 

There are issues, to be sure. One might argue that non-reporting firms probably support lower speeds than the 38 percent of rural ISPs that responded to the survey request. Keep in mind that the respondents report an average of 4,287 residential and 648 business fixed broadband connections in service. 

It is likely that most of the non-responders are even smaller entities. In other words, as in most markets, it is likely that a small subset of ISPs in the U.S. rural ISP market represent most of the total potential customers. 

The important takeaway is that rural home broadband is improving fast and already is on a par with urban service levels in many cases. That is not the impression a casual observer might get if reading, seeing or hearing about the digital divide in news reports. 

As often is the case, reality can be distorted unless “both sides of the story” are told.

Why Metaverse Seems Likely to Emerge

Many are skeptical of the idea that "metaverse" will really develop as a three-dimensional, persistent and immersive experience widely used by people, businesses and organizations. It might not be inevitable, but it is probable.

Perhaps it is a form of technological determinism to assume that because a technology exists, it must be inevitable; must succeed in shaping economies, culture and social relationships. It is not a new idea, having gained notoriety in the late 1960s in Marshall McLuhan’s book Understanding Media. 

In the book, a seminal chapter, called The Medium is the Message, makes the argument that new technology reflects human culture and also shapes it. That might seem an unremarkable assertion. 

But, like all assertions that there is one root cause of human social relations, institutions and culture, it can be challenged as being reductionist: explaining wildly-complex outcomes as a result of just one driver. 

McLuhan argued that technology, not content--how we communicate, not what we say--is determinant of impact. In other words, the actual content of media is irrelevant. Only the media form matters. 

source: Alan Hook, Slideshare 

We are never very far from accepting this sort of thinking. 

Consider the way policymakers, regulators, analysts and much of the general public likely agrees that “broadband is a necessity” because it causes economic development, education and social inclusion. Policymakes and advocates often argue that faster broadband likewise drives higher economic growth. 

Correlation, though, is not causation. Virtually all government programs to close the digital divide are touted as important because--it is argued--broadband leads to economic growth. In fact, careful reports only use the word correlation, not “causation” when discussing broadband and economic growth. 

Of course, lots of things also correlate with economic growth. The rule of law, population density, educational attainment, household income, household wealth, transportation networks, proximity to the oceans, or other sources of comparative advantage are known to correlate with economic growth. 

The same sort of thinking might arguably be advanced for 5G, personal computing devices, some applications, blockchain, web3 or the metaverse. 

The phrase “X changes everything” is an example of such thinking. In place of “humans use tools” we get “Tools shape humans.” Again, most people would perceive a grain of truth; perhaps many grains. 

One might argue that air conditioning was responsible for the current economic resilience and growth of the U.S. South, for example. 

The point is that it is never inevitable that any technology “must or will succeed,” simply because it can be brought into existence. Any new successful technology succeeds because it solves real problems. 

Computing devices and 5G succeed because they solve real problems: the need to access the internet and communicate in the former case; the ability to support quality experiences in the latter case. 

It is said that the novel Upgrade contains a conversation between two people, discussing two-dimensional media: “I can’t watch the flats. Hurts my eyes.” “Me too. It’s unnatural.”

The novel is a warning about the dangers of the metaverse, to be sure. But the element of realism--whether something seems natural or lifelike or not--is among the reasons some of us might believe the metaverse ultimately will develop. 

Simply, the history of all electronic media is an evolution towards more realism. Realism might be defined as the experience that “you are there,” realism approaches “real life” experiences: three dimensional, interactive, using multiple senses. 

Think about the experience of participating in a sport, watching others play a sport live in a stadium, watching it on television or listening on radio, viewing a photo of the game or hearing somebody talk about a great play during that game, reading a story about that game or viewing an artist’s rendition of a key moment in a game. 

The point is that there are degrees of immersion and realism, and that the degree of realism has tended to improve in the eras of electronic media. Consider augmented reality and virtual reality as part of that movement towards full metaverse. 

Though not perhaps inevitable, the history of electronic media suggests it is likely, simply because humans prefer greater realism in electronic media. That is why television displaced radio; why sound replaced “silent” movies; why color prevailed; why stereo and surround sound are popular; why HDTV replaced NTSC; why experiments with 3D experiences continue.

60% of Home Broadband Non-Buyers Don't Want It

The latest data from the U.S. National Telecommunications and Information Administration continues to show why the “digital divide,” measured as use of broadband internet access, has not closed faster. 

Nationally, 81 percent of respondents report using the internet. About 71 percent say they use the internet on their smartphones. About 49 percent say they connect their laptops, while 28 percent report connecting desktop computers. 

About 76 percent say they use the internet at home. As recently as 1998, 76 percent of respondents said they did not use the internet at home. About four percent claim the internet is not available where they live. 

Most users report using both mobile and fixed networks. Some 74 percent of respondents have a mobile data plan and 71 say they buy fixed network broadband. 

“When respondents were asked why they don’t use the Internet at home, nearly 60 percent said the main reason is that they don't need it or not interested,” says George Ford, Phoenix Center for Advanced Legal and Economic Public Policy Studies chief economist. 

That finding has been consistent since at least 2015, NTIA data shows. At the same time, “cost” has declined as a reason for not buying broadband access services. Some 18 percent of “non-using” respondents said using the internet was “too expensive.” 

source: Phoenix Center 

The Digital Divide Will Not Always be a Problem

Scarcity--both real and imagined--drives the prices and perceived value of nearly all products and services. “Lack of” also drives the political agendas of virtually all organizations and entities who promote an agenda. 

Those organizations require resources to operate, and resources mean jobs, prestige and power. So what happens when a “problem” is essentially solved? Do organizations disband, or do they find some other “new problem” to work on, thus inviting continued support of the entity?

Almost always, the latter is chosen over the former. So we can virtually predict that, eventually, policy proponents are going to stop talking about the “digital divide” and move on to some other problem related somehow to “inability to buy broadband internet access.”

Already, many point to “digital literacy,” which is a demand issue, not a supply issue, as a substantial remaining problem. In other words, it is not the quality of the available broadband access that limits use, it is the skills of potential users. Faster broadband does not fix that impediment. 

But to the extent that generational differences exist, that problem eventually fixes itself. Younger generations are more comfortable with all new technologies than older generations, and as each generation passes, the “lag” evaporates. 

There will likely always be “differences” in available speed, latency, reliability or price between remote areas and urban areas, to be sure. Summer fruits and vegetables cost more, and are less fresh, in the winter. 

Still, at some point, internet access is going to be good enough that bottlenecks to experience and value will shift elsewhere in the ecosystem and value chain. 

Where servers are located; what customer premises gear is needed; how pricing and packaging models are crafted; which indoor transmission platforms are operating and processing speed and power could well determine whether internet apps, services and devices work at all or work properly. 

Most are now too young to have encountered it, but back in the 1980s global communications policymakers actually were concerned about how to create “voice access” platforms for most people, as “half the people have never made a phone call.” That might have been true in the 1980s or even 1990s. It no longer is true. 

We have “solved” the problem of humans having access to voice communications. We likewise will solve the “digital divide” in a meaningful sense: not defined as absolute parity of speeds, latency or cost per bit, but in the sense of “access” no longer being a barrier to usage. 

And that will lead a whole bunch of people and organizations to find some other new problem to solve.

Demand is a 5G Issue, Not Simply Supply

A foundational claim about any sort of digital divide is that supply is the problem. Networks do not reach everyone; or quality networks do not reach everyone or prices are too high. Those all are supply-side ills.

What often gets confused or forgotten is that there are demand-side drivers as well. Consumers might prefer to buy based on their own perceived needs. Most often, consumers buy home broadband services that are in the middle of what is available, in terms of price and perceived value.

The same thing might apply to mobile services as well.

Where it comes to supply and demand, pundits often assume that slower 5G uptake is to be blamed on supply, not demand. That is not necessarily the case. Subscriber levels for 4G in a few European countries have always been below what we might expect, and availability cannot, at this point, be the main culprit. 

Some might point to lagging 5G uptake and suspect that supply issues are at work. 

source: Ookla 

Customer demand also shapes uptake. Nearly half of all German mobile subscriptions appear to use 3G, instead of 4G. nearly a decade after 4G was introduced, according to a study by Opensignal. 

Governments and policymakers always are quick to quantify supply-based gaps in uptake, quality or availability of communications services, which is among the reasons stories about any form of digital divide are evergreen. 

Most often, studies about service gaps rely on supply or demand indices, including network availability, typical speeds and cost. 

Demand side choices by consumers tend to be overlooked. In other words, some “gaps” might reflect consumer choices, not failures of supply. And that matters for 5G, as much as it did for 4G.

We often are surprised at the resilience of legacy services, as those use of legacy services is always a case of supply failure. Not always. Sometimes demand choices are at work. In other words, a huge percentage of German mobile users seem to be opting to remain on 3G networks even when 4G networks now are in good supply, with good performance metrics. 

How Big a Problem is the "Digital Divide?"

One always-present issue when looking at any particular social or economic problem is that we always face multiple problems at the same time. Drug overdoses, malnutrition, carbon and methane emissions, traffic, inflation, joblessness, homelessness, lack of medical care, uneven or inadequate educational opportunities, domestic violence, fair treatment of ehtnic, racial, religious or other minorities, corruption, crime and many other problems have to be tackled simultaneously. 

And it never is possible to rank order all of those problems in terms of allocating resources to solve the problems, in a holistic way, in real time, even assuming we have our means-ends causality chains correctly understood. 

In that vein, the “digital divide” is a bigger problem some places, compared to others, even if it can be seen as a problem no matter where we find it. 

That clearly is the case for people in many lower-income or middle-income countries, where internet access in lower-income countries exceeds four percent of monthly gross domestic product, for example. 

In most middle-income countries greater progress has been made, with costs below the International Telecommunications Union target of two percent of monthly GDP. 

In developed countries, the problems are mostly confined to rural areas or high-cost areas, as monthly recurring costs are below one percent of GDP. There still are issues to be solved, but they are relatively trivial compared to other problems we also face. 

source: ITU

Are Broadband Cost and Benefit Out of Alignment?

"Better broadband" is no less a "desirable thing" than better roads, bridges, elecrical grids and resource management programs that actually could work. So with decarbonization, elimination of disease, clean drinking water and sanitation, social equity or quality education. We always have multiple problems to solve.

But opportunity costs always exist. More of one thing means less of the others. Occasionally, it might be helpful to evaluate our priorities. We desire many positive outcomes, but our resources lag our ambitions. So cost and beneift always are legitimate questions.

Virtually all government programs to close the digital divide are touted as important because--it is is argued--broadband leads to economic growth. In fact, careful reports only use the word correlation, not “causation” when discussing broadband and economic growth. 

Often, even correlation cannot be shown, as is the case with much “foreign aid.” Still, correlation often does exist, and for obvious reasons. Some regions and industries are fast growing. It should come as no surprise that areas such as Silicon Valley show both high growth and high broadband availability. 

But it never is clear which holds: high growth leads to wealth; and wealth leads to excess spending power; which leads to demand for quality broadband, good restaurants and other outcomes associated with areas of high income. 

To use a phrase, perhaps high economic growth, high wealth, high educational levels, some industries and lots of younger people lead to quality broadband demand and supply, rather than broadband causing those outcomes. 

Will quality broadband really boost economic growth in sparsely settled rural areas far from urban centers, already losing residents and already suffering from low economic growth? 

To be sure, there is virtual agreement that universal broadband is a good thing, as universal telephone service, universal mobile service, electricity, education or medical care are  considered good things. 

But there still is no actual evidence--possible correlation, but not causal proof--that broadband access--or better quality broadband access--actually does “cause” economic development. 

Nor, for that matter, are many government reports actually clear about the differences between supply and demand issues; consumer choices and supplier business choices; or the ways people actually use the internet as it relates to potential economic benefit.

Reports often confuse “people who choose not to buy a product” with “inability to buy.” The former is a matter of consumer choice; the latter a supply chain issue. It is one thing to say “few people buy gigabit internet access.”

But that does not mean they “cannot buy.” They may choose to buy a different product, such as access at 200 Mbps. 

And while the internet can be used to conduct homework or conduct work,  it mostly gets used to “watch TV,” or engage in social media. 

Few--if any--really believe watching TV or engaging with non-business social media has a positive impact on economic growth in a direct sense, important though it is as a driver of income for influencers, advertisers, writers, directors, actors, studios, streaming services and TV networks. 

Beyond all that, improving broadband involves opportunity costs: other uses for that capital that are not undertaken because we spend the money on broadband. In a broad sense, all public policy choices involve such trade offs: things we cannot do because we chose to do something else.

Quality broadband is a good thing, don’t get me wrong. But it might not have nearly the economic upside people often wish to believe.

Will Telecom Italia's Fixed Network be Privatized?

Telecom Italia’s board of directions is said to be meeting Nov. 21, 2021 about a possible fixed network privatization effort by private equity fund KKR, which is already an investor in the Italian phone group's fixed network, Reuters reported. 

At first glance, the proposed deal looks like a standard private equity deal: buy an underperforming asset, make changes and then sell. But the deal might also reflect another private equity focus: buying infrastructure assets to hold longer term, as an alternative asset. 

Telecom Italia, for its part, also fits the scenario: it has high debt and shrinking recurring revenues and profits, arguably impairing its ability to invest in digital infrastructure including fiber to home facilities. 

At the same time, the access network scarcity moat is challenged by the building of a rival Open Fiber wholesale network owned and operated by electrical and gas provider Enel. 

KKR might or might not see value in merging merging TIM's access network merged with that of rival Open Fiber, which would then be able to run as a single national internet and communications access asset supplying retail services to other internet service providers and telcos.

Alternatively, the former Telecom Italia assets might have enough scale to operate independently of Open Fiber. In either case, the value KKR sees is linked to the scarcity value and regulated, stable cash flows the access network would generate.

As the access network is deemed to be a strategic asset by Italy’s government (as is the case in virtually every country), it presumably would benefit from investment to eliminate the digital divide. That changes the business model for FTTH as it introduces subsidies. 

Were the government to sanction a merger of Telecom Italia and Open Fiber assets, to create a single national wholesale provider, KKR’s investment would acquire a business moat. 

Future KKR options would then involve a sale of the assets to a third party or a longer-term holding as an alternative asset. 

Institutional and private equity investor interest in communications infrastructure waxes and wanes. Right now it is waxing, after a precipitous drop in interest in the wake of massive facilities overbuilding around the turn of the century. 

In large part, the interest is driven by returns on other assets, leading investors to desire some exposure to alternative assets, including infrastructure with some market moats, scarcity and dependable demand, plus free cash flow. 

That appetite is matched by connectivity provider capital investment issues, namely low returns on invested capital that have bedeviled connectivity providers in recent years. 

In many cases, service providers have trouble earning back their cost of capital, according to some analysts. 

source: Arthur D. Little

All of that creates a heightened private equity and institutional investor demand for investments in “digital infrastructure” that is similar to demand for the more-traditional interest in real estate and utility investments. 

But the strategies can vary. The easiest and arguably safest choices are core infrastructure operations where most of the return comes in the form of cash dividends. This is most often found in regulated segments of the industry, with low growth but consistent demand. Ownership of electrical utilities provides a good example of this type of asset. 

Most digital infrastructure assets do not offer predictability or moats as high as might be the case for electrical utilities or airports, but arguably is most true for mobile towers. 

In other cases, there are some specific drivers that shift a bit of the story to more growth, if some tweak to the business model is made. That seems to be the case for mass market telecom networks where the upside is the upgrade from copper internet access to fiber to home. 

In other markets, the same thinking underpins buying a regional airport with expectations of creating a higher-value super-regional hub. In the communications assets business, perhaps an example is the “roll up” strategy of amalgamating many diverse and smaller connectivity or data center assets to create scale. 

The point is that a confluence of connectivity provider need and investor want is fueling a resurgence of private equity and institutional investor interest in a growing range of digital infrastructure assets.

Why the Broadband "Problem" Cannot be Permanently "Solved"

 So long as we keep changing the definition of “broadband,” we are likely “never” to see “improvement” in the number or percentage of homes or people able to buy the product, no matter how much investment is made in facilities. 

When we change definitions of minimum speed, for example, we automatically increase the number or percentage of locations or people that cannot buy the product. Colloquially, that is known as “moving the goalposts.” Put another way, our understanding of “broadband” changes over time. 

The classic definition of broadband was that it was any service running at speeds of 1.5 Mbps. In the U.S. market the official definition of “broadband” is 25 Mbps. But most consumers buy service at speeds an order of magnitude higher than the minimum definition. Yesterday’s power user is today’s light user. 

source: Openvault

And though new platforms might help, a continuing evolution of our definitions to support an increase in minimum speeds will continue to be a challenge for any market or country with lots of rural or thinly-populated areas. In the United States, six percent of the land mass is where most of the people live. 

How we define the market also affects our analysis of the amount of competition in the consumer broadband market. The common observation in the U.S. market, for example, is that minimum service at 25 Mbps is unavailable to “millions” of people. 

Of course, that finding requires a big assumption, namely that all satellite and mobile services are excluded from the analysis. Two U.S. satellite suppliers sell broadband access across virtually the entire continental land mass, while mobile speeds already exceeded the minimum threshold in 2019 and early 2020. 

If any and all services supplying 25 Mbps or faster speeds are considered, it might be very difficult to find any U.S. locations unserved by at least two providers. 

The point is that definitions and assumptions matter. By continually increasing the speed used as the definition of “broadband,” we will almost arbitrarily keep moving the goal line on who has it, where it is available and how many competitors can sell it. 

Ignore for the moment consumer choice, which has shown that most consumers buy services in the middle of the range: not the most costly or least costly; not the fastest or slowest offerings. 

Because “typical, average or median speeds” will keep getting higher, so will our definitions be adjusted. But at a time when satellite and mobile minimum and average speeds often already exceed the minimum definitions, and where most fixed network consumers buy services an order of magnitude above the “minimum” threshold, it is hard to “close the digital divide.”

There likely will always be some statistical gaps. Where there is a serious “problem” actually is--or will be--more debatable.

Will the Digital Divide Always Exist? Will it Matter?

To get funding, any advocacy group must first demonstrate that a problem exists. To keep getting funds, an entity has to insist no progress is being made, necessitating continued funding. And if the original problem actually is solved, the entity has to find some new problem that needs to be solved. 

All that applies to “broadband access,” no less than any other undertaking we might consider worthwhile. Despite much data indicating that internet access (mobile and fixed) is getting substantially better and has held up very well as nationwide stay-at-home policies were put into place because of the Covid pandemic, not every community has been so fortunate. 

Oxnard, Calif., for example, was one such place, seeing a dip in downstream speeds of about 20 percent from mid-March to mid-April, although performance now is moving back up post-mid-April, according to BroadbandNow, using test data from M-Lab. 

The community where I live experienced a 32 percent dip in downstream speed during the same period. Those are the stats. 

What I can say in my own case is that the dip in top speed happened on a connection that normally runs (depending on hour of the weekday) between 130 Mbps and 200 Mbps. The dip was brief, lasting perhaps a week, and did not cause any actual degradation of user experience.

The point is that statistics are one thing; user experience can be quite another matter. The median pre-Covid speed was described as between 75 Mbps and 93 Mbps (half faster, half slower). 

Multi-user households buying lower-speed services might have experienced issues. That was not my own experience, but differences, gaps and disparities exist, and might continue to exist in the future, for all sorts of reasons. 

Consumers make choices. They might decide to buy more-affordable services that can be stressed in multi-user households. Some, in single-user households, might decide to rely on mobile access only. None of that is necessarily a failure of policy, but an expression of consumer choices, or demand. 

Supply is an issue, though. In many communities, though served by gigabit cable networks, telcos still sell digital subscriber line services that are demonstrably slower. 

Still, one analysis by Fastly suggests that even the most-challenged digital subscriber line networks in the United States held up under the new at-home load. Cable TV networks also have held up well.

source: Fastly

According to Ookla, U.S. internet access speeds  on fixed networks dipped about four percent during the pandemic. Mobile speeds actually improved by one percent. 

Most of you are familiar with speed tests. Most of you also know you test your connections primarily when they seem “slow.” Almost nobody bothers to test when the networks are humming along. 

And M-Lab tests have increased significantly during the stay-at-home policies, suggesting customers are aware of greater congestion or slower experienced speeds. 

That would hardly be surprising, as all studies show at-home internet access data volume has grown 40 percent or so as people have been forced to work and learn at home. 

A study by Fastly also indicates speed and income are related. That should not be surprising. Lots of consumer behaviors and spending patterns are correlated with income, education, wealth and geography. Up to 20 percent of U.S. consumers also say they rely on mobile internet access, and do not buy fixed network access. Rural speeds tend to be slower than urban speeds. Rural use of the internet, PC ownership and income also seem to be lower than in urban areas. 

The point is that there always will be room to argue that a digital divide continues to exist, even if it is narrowing and has been narrowing for a couple of decades. And statistics often too-casually dismiss the many nuances as speeds are improving fast. 

But differences might always exist.  Since networks are expensive, the last two percent of locations will always be an economic issue. We might solve the basic speed issue, improving delivery from 10 Mbps to 25 Mbps to some higher figure. But urban networks will keep improving as well, so a gap might always exist.