Service providers hate the notion of “dumb pipe” because it implies “low profit margin or lower gross revenue.” That probably is not correct. Profit margins are probably in the 40 percent range, at the low end, and likely are higher for cable operators. In fact, dumb pipe Internet access is likely to be the single most strategic service any fixed network or mobile service provider can supply, over the long term.
And one thing is clear: dumb pipes, especially fixed network dumb pipes, have become more valuable, in obvious ways, over the last couple of years. Tablets are the reason.
Though mobile service providers will do their best to convince users that tablets are more useful when they have their own mobile connections (Verizon Wireless “Share Everything” plans are an example), most people have learned to save money on their mobile data plans by using Wi-Fi for tablet, smart phone, iPod touch and other Internet-capable devices.
All of that means the value of a fixed connection now is higher than it used to be, when just one or two PCs were connected. Now the single fixed connection supports multiple users and multiple devices.
Depending on the number of users or devices that can be supported by a single fixed broadband connection, the justification for buying broadband never has been higher. Where once it only made sense to buy broadband access if a home used computers and the Internet, now it makes more sense to buy broadband because tablets, smart phones and other devices also can take advantage of the single connection.
In fact, the increase in number of devices using the home networks is one reason why “median monthly usage” (half of consumers use more, half use less) on North America’s fixed access networks has increased from 10.3 GB to 16.8 GB in the second half of 2012, some might argue.
Over the same period, “mean monthly usage” (arithmetic average) grew by over 70 percent increasing to 51.3 GB from 32.1 GB. Growing subscriber consumption is not limited to North America or fixed networks, either.
Relatively slow growth of mobile data consumption probably is a direct result of the shift to offloading of mobile data demand to the fixed network.
In North America, monthly usage on mobile networks has experienced only minor growth, Sandvine says. In the second half of 2012, Sandvine has observed mean monthly usage increasing moderately from 312.8 MB to 317.2 MB.