LIke it or Not, Mobile ISPs Have to Compete on "Speed"

Competing in consumer internet access markets is a challenge for internet service providers in several senses, but among them is the difficulty of sustaining a clear long-term advantage based mostly on the “top speed” a network can provide.

There are several reasons for the difficulty. First, every other major competitor has the ability to match--or exceed--any particular claimed speed advantage. So any advantage in speed is momentary.

The other problem is that there are diminishing returns to a strategy based on “ever-faster” speeds, given the higher capital investment and the certainty that competitors will match--or exceed--those speeds. Higher investment, in other words, does not lead to sustainable advantage.

Another problem is that consumers largely evaluate ISPs on such speeds. In fact, according to a recent survey conducted by Business Insider Intelligence. That survey found 84 percent of respondents agreeing that a high-speed mobile network is the most important offering to consider when selecting a mobile provider.

Just 68 percent reported that unlimited data was “extremely important.”

The problem there is that consumers evaluate suppliers on a metric that necessarily involves ever-higher capital investment, none of which provides a permanent advantage. That puts stress on business models.

This conundrum calls to mind the similar problem faced by personal computer manufacturers who historically competed on "speeds and feeds," only to find that this approach makes differentiation difficult to impossible.

For mobile ISPs, the stated consumer value placed on speed means suppliers will continue to seek advantages in that area, and will not be able to maintain such advantages permanently. That means ISPs are on a treadmill.