Though many U.S. providers offer service of 50 Mbps or even 100 Mbps, and though there is some business demand for those services, it does not appear that consumers are persuaded that the value-price relationship makes sense.
To be sure, lower prices virtually always increase demand for products people actually want, so some advocates would say the issue is that service providers will not price 50 Mbps or 100 Mbps at prices low enough to shift demand from the 12 Mbps to 20 Mbps services generally available to most consumers.
Most service providers would say they cannot afford to do so, so the issue remains the level of demand at current prices. Consumers in the United States do not seem to be alone in voting with their wallets for broadband at much-lower speeds than 50 Mbps.
In Germany, where one million consumers can buy fiber to the home service, the number of FTTH subscribers in Germany is 166,000, equal to only 0.4 percent of the country’s households.
German consumers are very slow in adapting to FTTH high-speed networks, one must conclude. In cities and regions where FTTH or “fiber to the basement” only about 17 percent of potential customers actually buy such services.
Some think the lack of interest from consumers is complicated by consumers who have contracts that prevent rapid switching behavior. Others might argue the marketing of such services is lacking.
But a simpler explanation might be that slower services are “good enough,” and have a favored value-price relationship. Low demand for fiber services, in that view, reflects the current state of end user demand, where there seems to be no compelling reason to upgrade.
So even though it is nearly universally agreed that fiber to the home is the ultimate goal for fixed network access, executives and policymakers are right in continuing to to emphasize that the financial return is inadequate to spur rapid and robust fiber replacement of existing copper-based but fiber-augmented access approaches.
In what has to be a troublesome sign, Verizon Communications, long the biggest U.S. service provider arguing that fiber to the home makes immediate financial sense, now has halted further FTTH builds and seemingly is more interested in mobile broadband.
That isn’t a good sign. It suggests that Verizon’s hoped-for total returns (new service revenue and lower operating costs) now are falling below expectations. That does not mean all smaller providers will encounter the same business case drivers. It might well be the case that, in some cases, fiber to the home networks do make immediate financial sense.
But in most cases, the business case is a defensive matter, not a growth strategy. In other words, it sometimes is the case that a particular service provider must invest in fiber to preserve hopes of keeping its business. So incremental revenue gains might not be the primary business driver.
In fact, the fiber builds might more often take the form of “trading market share” with local cable companies just to maintain current revenue prospects.