Internet Access Prices are Going to Fall

If increasing supply of any desired product tends to reduce prices (and increase consumption), then new competitors in a market tend to lead to lower prices, and if “new and improved” products devalue legacy products, it is fairly easy to argue that retail internet access prices in many developed markets will fall as 5G networks are launched, as vast new amounts of spectrum become available, as the ability to make more-efficient use of spectrum increases and the number of providers that can claim to deliver “gigabit” speeds in a given market grows from one or two to five or six.

Those price reductions should, history suggests, take two forms. The price of a unit of consumption will fall, and absolute retail prices also should fall. For example, some of us paid more than $100 to buy service at 756 kbps and now routinely buy access at about $40 (before taxes and fees) that operates up to 100 Mbps.

In other words, absolute price is far lower, and price-per-unit also is far lower.

The forces increasing supply are many. New competitors are entering the market. More spectrum is being released. The efficiency with which we can use any set amount of spectrum is improving as well, and networks are being redesigned to improve efficiency as well.

Shared spectrum (dynamic spectrum) is one of the new tools. Huge amounts of new spectrum also will be released for 5G use, and impressive amounts of new unlicensed spectrum as well. Competition also is growing, as new providers enter traditional access markets and many end user entities (app, device, service suppliers) decide to incorporate access sourced on a wholesale basis into their core offers.

To be sure, some still doubt that the economics of 5G networks operating, in part, as fixed wireless networks, actually will prove as attractive as hoped. If so, then gigabit competition from mobile providers will not develop as expected.

At the same time, new developments in shared use of spectrum potentially will vastly expand the supply of spectrum, either on an unlicensed basis or on a “low cost” basis.  

Preston Marshall, engineering director for Alphabet Access at Google, flatly argues that the scarcity value of licensed spectrum is going to be challenged by access to shared and unlicensed spectrum.