Sunday, September 20, 2020

Mobile Broadband as Fast and Cheap as Fixed? Yes, in Some Cases

Most of us historically have believed that mobile internet access could "never" be as fast, or as cheap, as fixed network services. But that now has to be qualified. For many use cases, mobile broadband might well be as functional, and as affordable, as fixed network broadband. In fact, in some markets, it can be argued that FTTH no longer is viable as a platform for any tier-one service provider with universal service obligations.

That does not always require that mobile speeds and prices be identical to the fastest fixed network offers, such as symmetrical gigabit or symmetrical multi-gigabit services. All that has to happen is that a specific mobile offer is equivalent to a similar fixed network broadband offer in terms of performance and price, for a specific customer's needs and willingness to pay.

That is why 5G fixed wireless will be the most common form of mobile substitution for home broadband, aimed at users with relatively modest bandwidth needs and high price sensitivity price sensitivity. In the U.S. market, that might be customers who will not buy speeds above 300 Mbps, or pay much more than $50 a month.

That this is possible at all is a function of new spectrum policies, Moore's Law and better technology enabled by Moore's Law. One example of the broader trend is the way Moore's Law has allowed faster speeds and lower prices, beyond what connectivity providers or computing suppliers might prefer.

The most-startling strategic assumption ever made by Bill Gates was his belief that horrendously-expensive computing hardware would eventually be so low cost that he could build his own business on software for ubiquitous devices. Basically, I believe he asked himself what his own business would look like if computing hardware was free. 

How startling was that question? Consider that, In constant dollar terms, the computing power of an Apple iPad 2, when Microsoft was founded in 1975, would have cost between US$100 million and $10 billion.

The point is that the assumption by Gates that computing operations would be so cheap was an astounding leap. But my guess is that Gates understood Moore’s Law in a way that the rest of us did not.

Reed Hastings, Netflix founder, apparently made a similar decision. For Bill Gates, the insight that free computing would be a reality meant he should build his business on software used by computers.

Reed Hastings came to the same conclusion as he looked at bandwidth trends in terms both of capacity and prices. At a time when dial-up modems were running at 56 kbps, Hastings extrapolated from Moore's Law to understand where bandwidth would be in the future, not where it was “right now.”

“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO. “If you drag it out to 2021, we will all have a gigabit to the home." So far, internet access speeds have increased at just about those rates.

As frightening as it might be for executives and shareholders in the telecommunications industry, a bedrock assumption of mine about dynamics in the industry is that, over time, retail prices for connectivity services also will trend towards zero.

“Near-zero pricing” does not mean absolute zero (free), but only prices so low there is no practical constraint to using the services, just as prices of computing appliances trend towards lower prices over time, without reaching actual “zero.”

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