A Christmas story…
Dec 20, 2019 by Martin Sims

Blog

Tags5G, ARPU, broadband

Firstly, a happy Christmas to you all and I hope you get at least a small break from work over the next few days. The PolicyTracker office will be closed next week and our news alerts service will be reduced over the holiday season.

Secondly, this feels like a good time to enliven our usual routine of straight-ahead spectrum policy analysis with a little personal story. In my day to day life, not many things happen which are directly relevant to our field, but there was a recent exception—which happened quite close to Christmas! (Get on with it. Ed.)

For years my home broadband was pretty slow. I hadn’t upgraded because I am lazy, it was too much like my day job and wasn’t inconveniencing me greatly.

Then my son started working at home, measured the broadband, found a low of 0.8 Mbps, and concluded that was why he couldn’t video conference with his workmates.

So we upgraded and now have broadband of 100-200 Mbps, at least a hundred-fold increase. Did I notice?

Not really. Some webpages load a bit quicker, but I only noticed this because I work in the field and was consciously measuring it. The BBC news page loaded in about a quarter of a second rather than half a second, but for some smaller sites which don’t use world-leading technology, I didn’t notice a difference.

Video streaming services on our TV loaded in 10 seconds rather than 30 seconds, but the viewing experience was good previously—no buffering—and after the upgrade, I couldn’t say it was definitely better. (And your point is? Ed.)

Would the casual user notice these small improvements? I doubt it. A quarter second improvement in page load times is just too small.

And more importantly, do users value these small changes so much that they are willing to pay extra for them? This is the industry’s long-term challenge.

Like home broadband, 5G is being sold on the basis of it being faster, and this is having some success. Some people will buy a service because it is faster and the latest technology; higher download speeds also encourage contract renewal and lead us to choose one supplier over another. But how long can that last?

The consumer benefits become ever more marginal. I barely noticed a hundred-fold improvement. Would the average mobile consumer notice a doubling from about 50 Mbps to 100 Mbps? One recent test said this is the current advantage of upgrading from 4G to 5G.

The more marginal the benefits, the less likely customers are to pay for it. Mobile ARPU in most countries has been flat for 10 years and higher speeds are unlikely to change this.

It’s the broadband paradox: the higher the speed, the more marginal the benefit and the less likely it is to generate new revenues from existing consumers.

Not a very Christmassy note on which to end—my apologies.• (That’s OK. Have a good one. Ed.)