At the Right Price, There is Lots of Demand for Any Useful and Advanced Product

Much of the time, internet access, mobile or transport executives make statements that are correct, but also missing the qualifying adjectives. People do that because it is a faster and simpler way to speak. But is is a bit misleading.

One hears it said that mobile and fixed service providers do not want to be “a dumb pipe.” The unsaid qualifiers are that service providers do not want to be providers of “low-value, commodity-priced, low profit margin dumb pipe services.”

There is no problem with supplying internet access or data transport if that is not the only thing a business does.

Likewise, when internet access provider execs used to say “there is no demand for gigabit services,” what they meant was that there is little demand for gigabit services “priced much higher than standard tiers of service.”

When gigabit services are priced at a small premium to standard services, or when the standard service is sold only at gigabit levels, with some price premium over other “standard” services,

That is worth keeping in mind.

Internet service providers are a practical bunch. They tend not to invest too far ahead of demand, but customer demand for internet access speed demonstrably changes, in almost linear fashion, over time, and for some providers, at Moore’s Law rates.

The generic form of the ISP argument is that “there is no demand for X bandwidth at Y price. Over the last decade, that has been the argument advanced by many ISP execs about gigabit internet access. But demand is a function of price.

So when ISPs lower prices, consumers respond by buying more of the “faster-speed” services. Typically, this takes the form of boosting speeds, but keeping price constant, as was the case for most of personal computing industry history.

So there is no real contradiction between arguing “customers do not wish to buy service at X rates and prices, and prefer services at Y rates and prices.

In other words, as you would expect with price anchoring, most customers will buy neither the most-economical, nor the most-expensive tiers of service.

"Price anchoring" is the reason most consumers able to buy gigabit internet access will not do so, when lower-price tiers of service at lower speeds are available.

Price anchoring is the tendency for consumers to evaluate all offers in relationship to others. As the saying goes, the best way to sell a $2,000 watch is to put it right next to a $10,000 watch.

Anchoring is why "manufacturer's suggested retail pricing" exists It allows a retailer to sell a product at a price the consumer already evaluates as being "at a discount." Price anchoring is why a "regular price" and a "sale price" are shown together.

Price anchoring explains why gigabit access speeds are priced at one level, while low speeds are priced affordably, while the tiers most consumers buy are priced in between those extremes.

So price anchoring will continue to be relevant even when “top speeds” start climbing to multi-gigabit levels. Most buyers will avoid the absolute-fastest tiers. They will buy the medium-range tiers that will still be correspondingly fast.

And prices might not be too different from today’s prices. Internet access turns out to have retail pricing principles that are similar to the pricing of personal computers.