October 14, 2013
Gigabit Access Trend is Growing
By Gary Kim
One can debate what is driving the trend, but most major U.S. Internet service providers now confront the challenge of upgrading to faster speeds and lower effective prices. One might attribute this to regulator calls for faster speeds, non-profit efforts to build gigabit test-beds, or Google (News - Alert) Fiber’s audacious launch of symmetrical 1-Gbps service.
In that sense, one might argue that government prodding, non-profit test-beds and Google Fiber market disruption all are pushing change in the U.S. ISP business.
Most recently, CenturyLink says it will deploy a 1-Gbps service to some neighborhoods in Las Vegas, in the fall of 2013, to “a few thousand homes,” with a “significant” increase in 2014.
CenturyLink also has a gigabit service in Omaha, Neb., where it had inherited a fiber-to-home test-bed of about 48,000 homes.
CenturyLink will deploy first in areas with the most demand.
CenturyLink says it has about 73 percent of its access lines capable of 6 Mbps speed, over 61 percent of lines capable of 10 Mbps and 32 percent capable of 20 Mbps. Some areas of CenturyLink metro areas can be served by speeds up to 40 Mbps.
Also, many independent ISPs that had been selling gigabit connections for about $300 a month recently have dropped prices to about $70 to $80 a month, in line with Google Fiber pricing.
The point is that Google Fiber is succeeding in changing consumer expectations about the value-price relationship for high speed Internet access services. That eventually will create more pressure for competing ISPs, as a reasonable expectation is that if a gigabit for $70 a month becomes the top offer, then all other lesser-speed offers will have to bear a value-price relationship in line with the top offer.
That means ISPs cannot keep selling access at the current prices. As a rough example, if a gigabit connections costs $80 a month, then a 500-Mbps connection “should” cost about $40 a month. A 250-Mbps connection “should” cost about $20 a month.
Those value propositions would severely undermine current ISP retail offers. So one new challenge -- aside from dramatically investing in higher access speeds -- is finding some way to reduce operating costs and capital costs in a significant way.
Edited by Rory J. Thompson
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