Speed kills (business models, anyway)
January 8, 2008 – 11:10 amIt seems that everyone is building faster, next generation networks. So, will many consumers enjoy faster access in the US any time soon? I don’t think so.
I believe that consumers will not see widely available faster Internet because it would undermine revenue from entertainment products. TV sells for more $$ than Internet, and by selling you a “triple play”, carriers can dip three times, collecting revenue for Internet, voice, and video. If the Internet access offered was faster, I believe that services like YouTube/Google Video would quickly begin to offer high def content, and that new peer to peer video solutions such as Joost and Veoh would see a huge boost to their business models.
Access spawns applications. If everyone had 20Mbps Internet, many would skip the whole $50 to $100 video and premium channel package and use newly enabled HD video over IP.
We’ve seen similar things happen in voice - Skype, Vonage etc have all taken bites out of land line revenue. Voice is not very bandwidth hungry, so there’s little that carriers can do to prevent its use. I think the same thing would happen to video if access was faster.
A prime example of this is AT&T’s new UVerse product, which is available in some limited markets in the US now. You can’t even have Internet on UVerse without buying TV. Sorry. And the fastest Internet access on UVerse is….6Mbps. This, on a VDSL2 circuit that syncs at 24Mbps or faster. The big bandwidth is allocated to TV, even if you are not watching it. There’s no legitimate technical reason for this.
Another example is Comcast’s “PowerBoost”, which offers a temporary doubling of bandwidth, but just for the first few moments of a download. The net result: no viable streaming high bandwidth HD video. Guess why? Because that would enable someone else’s video business model, a business that the cable executives would prefer to retain.
Are consumers being well served by the triple play? I don’t think so.
I predict that over the next few years, the marketplace will see offers of small incremental upgrades, with Cable and Telco each matching or slightly beating the other from time to time.
Neither wants to actually deliver enough bandwidth to enable HD streams.
5 Responses to “Speed kills (business models, anyway)”
“Are consumers being well served by the triple play? I don’t think so.”
Agreed. Plus once someone subscribes to a bundle of services it’s very difficult to cancel the services and move to a competitor. Negotiating new service for what ever combination of cell phone, land line, Internet and TV is a headache Comcast and AT&T are counting on us (customers) to avoid!
By Sean Haynes on Jan 8, 2008
I agree.
I have another hypothesis. By keep speeds low, it defers buying faster equipment, or upgrading backbones. Also by keep speeds low, and letting technology advance, but not using it, you keep your options open, so if there is a “bandwidth speed war” with your competitor, you have more shots to throw.
By patcat88 on Jan 8, 2008
We need to look no further than wherever pachell has launched project lightspeed.
They are bringing in a 25MB pipe (in areas of high $$$ income and a heavy comcrap presence) but only letting data have 6MB of it… what a pile of dog poo. Of course if they gave you more… then why would you pay them for the other 19MB that was to deliver their over-priced TV?
Grrrr….
Pachell and Comcrap have the keys to two of the largest gates around….
Thank God for Sonic
By Rod aka Veloslave on Jan 10, 2008
Here’s an update on this topic.
Qwest is going the direction I suggest on this. They plan to deliver 20 to 38Mbps Internet, then to allow Internet applications to deliver video. Props to Qwest!
http://telephonyonline.com/fttp/news/qwest-vod-video-011108/index.html
By Dane Jasper on Jan 11, 2008
We haven’t had cable TV in about a year. Meanwhile I very much like my 6mb adsl connection. A few months ago my boss said I could have a small format computer that he was frustrated with and ready to kick. I took it home, did some upgrades on it and it now sits atop the stack of media equipment next to the TV. We’ve been watching all sorts of shows through the web sites and joost, some in hi-def. The quality is generally good (usa network is a little low). It feels like real TV but is completely on demand.
This also makes watching fan subbed Anime and Live Action Asian Television real easy. Still haven’t popped for a long range wireless keyboard with a touch pad, but I’m making do with EchoVNC for the time being.
I didn’t hear about VEOH, I’ll have to play with them.
Sonic is my Cable provider.
By Walter Hansen on Mar 12, 2008