"Speed and Price" Still are the 2 Main Ways Mobile ISPs Try to Differentiate

“Headline speeds” and prices are the two main ways Internet service providers position themselves in the market. You can argue that is a tough way to compete, and it is. Competing on price never is fun.

At the same time, speed is driven not directly by end user requirements but by rival claims. In that sense, it does not matter whether customers “need” faster speeds. Faster speeds are going to be supplied--and marketed--because aside from speed there is mostly only price as a differentiator.

That is not to say that, at the margin, other sources of value are unimportant, or ineffective. Within a zone of comparability, the extensiveness of a Wi-Fi hotspot network can be important.

Service features such as exemptions for consumption of mobile video entertainment from usage buckets can be significant differentiators. “Unlimited usage” waxes and wants as a feature touted by ISPs.

Still, competitive dynamics, and not actual end user demand, are what drives investment and marketing decisions in the telecom business. The gigabit Internet access trend provides an example.

Without Google Fiber, it is doubtful the big move to gigabit Internet access in the U.S. market would have gathered such force. But it is also true that without a move to gigabit speeds by Comcast, the largest U.S. ISP, the move would not have been so widespread.

With the caveat that executives have lots of reasons for taking public positions, Gary Bolton, Adtran VP says that two years ago, service providers told him that the biggest reason for deploying gigabit service was to satisfy future customer demand.

But that does not explain “why now?” In point of fact, it might be difficult to justify a jump to gigabit speeds “now,” by any rational measure of end user demand or app functionality requirements.

The simpler explanation is that, no matter what was said in public, he threat of competition is what motivated the investments “now.”

Recently, 70 percent of respondents surveyed by Adtran indicated competition is a top reason for deploying gigabit services, up from fewer than 50 percent in 2014.

In truth, competition arguably accounts for nearly 100 percent of the business motivation for deploying gigabit services. Google Fiber wanted to prod the rest of the industry to increase speeds much faster.

Comcast wanted to retain its marketing edge over its telco competitors. Telcos responded just to stay in the game. And many new suppliers saw “gigabit” as offering a way for them to enter markets with a distinctive value proposition.

But there is one other really-significant new development.

Compared to all prior eras, “physical media” is less important. In the past, only fiber to home networks might have been deemed technologically possible of providing gigabit speeds.

Now hybrid fiber coax can do so. And coming mobile 5G networks also will do so routinely. At the same time, stubborn business cases for fiber to home deployment have lots of leading suppliers looking at fixed wireless in a serious new way.

Both Facebook and Google are developing or investigation use of platforms based on use of fixed wireless.

AT&T has told the U.S. Federal Communications Commission that it is going to deploy many millions of fixed wireless access paths, while Verizon also has said it is looking at fixed wireless, especially as a result of its early 5G network deployment.

But headline speed, as always, might not be so crucial. More gigabit offers should also mean that more offers in the hundreds of megabits per second range will be offered. In the near term, that is functionally as useful as gigabit, for end users.