fiberopticIn some ways, gigabit Internet access is a “tomorrow” issue for many of the world’s Internet service providers, as it might well be for many providers of Internet access in rural areas of the United States.

Global average connection speeds were 4.6 Mbps in the second quarter of 2014, for example. The global average peak connection speed was 25.4 Mbps, according to Akamai.

Price also is an issue. In the four years between 2008 and 2012, fixed broadband prices fell by 82 percent overall, from 115.1 percent of average monthly income per capita in 2008 to 22.1 percent in 2012, for example.

And perhaps four billion humans do not have any access at all, yet.

Perhaps access is less an issue than was the case a decade ago, a survey by NTCA-the Rural Broadband Association suggests. A 2013 survey found 100 percent of respondents offered broadband access to their customers, compared to 58 percent in a similar survey taken in 2000.

About 66 percent of respondents said they were providing speeds greater than 10 Mbps. But that is a far cry from 1,000 Mbps, which is what gigabit networks increasingly will be offering in many U.S. metro markets.

So it might not come as a surprise that global ISPs–who face many of the same challenges as rural U.S. ISPs,  have a significant amount of uncertainty about anticipated take rates for gigabit broadband, particularly among incumbent telco respondents, a new study by Broadbandtrends suggests.

The survey of 88 Internet service providers (ILEC, CLECs, Municipalities, Utilities, Wireless, Cable and Alternative over‐builders) polled respondents in North America, Europe, Middle East and Africa, Asia Pacific, and Caribbean and Latin America regions.

More than half of respondents are currently offering gigabit access to businesses and institutions, while 34 percent are offering such services in the residential market.

“Being perceived as a technology leader was the overwhelming driver for gigabit broadband deployments,” said Teresa Mastrangelo, Broadbandtrends principal analyst.  One suspects that is primarily an issue for commercial providers, for whom “leadership” is believed to be related in a direct way to revenue prospects.

On the other hand, many gigabit access efforts globally are the result of efforts by governmental entities, especially small towns. In those cases, the drivers are expected social and economic development benefits.

“For some operators, particularly municipalities, gigabit broadband is proving to be the foundation that can improve and enrich education, healthcare and public services as well as the economic engine for growth, investment and job creation,” said Mastrangelo.

Still, it is not hard to imagine the skepticism about gigabit access on a sustained basis. That is basically the way one communications regulator put matters, in a discussion about the need for additional mobile spectrum.

The real problem is not fundamentally spectrum scarcity but a “scarcity of answers” about sustainable business models, said Louis Casambre, Executive Director, Information and Communications Technology Office, Department of Science and Technology (ICTO-DOST), Philippines.

Demand for Gigabit
That might well be a question rural U.S. ISPs ask themselves as well.

ISPs think–likely correctly–that many consumers might conclude a “good enough” service for $40 beats a “best in class” offer costing $70, or about 75 percent more. And though the ability to sell a gigabit connection for $70 to $100 a month might be feasible in urban areas, more accurately, some neighborhoods in some urban areas, it is far from clear that can be done in most U.S. rural communities.

By now, it is clear that a shift to gigabit Internet access speeds in the U.S. market is no mere matter of a few “hero” tests here and there, but the next evolution of the Internet access business in many markets, with a pull-through that will boost speeds into the hundreds of megabits range in communities where demand or cost make gigabit investments difficult.

But that poses new questions for rural ISPs, who face investment challenges greater than faced by urban ISPs.

Earlier belief on the part of many ISPs that there actually was little demand for gigabit access services were right, as far as their own offers.

Few consumers were anxious to pay $100 to $300 a month for a dramatically-faster service, when a service costing $40 to $80 was deemed adequate.

How that might change, as more gigabit access offers create a new sense of what a “typical high speed access service should provide, and should cost,” is the issue.

The point is that demand for gigabit access very much hinges on retail price.

So even if the “number one challenge for offering gigabit broadband services was unclear customer demand,” that is largely a function of value-price relationships.

In point of fact, demand for a gigabit service costing $70 should not be markedly different from demand for any high speed service costing close to $70 a month.

But that is the issue for rural ISPs: they might not be able to deploy infrastructure allowing sustainable operation when retail prices are set at $70 to $100 a month.

That might be a big issue especially if consumers are able to buy services that offer less, but also cost less.

In that sense, rural U.S. ISPs will face real gigabit demand issues, driven in part by the cost of supplying such access.

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