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Wireless Broadband vs Fixed Broadband - The Story Continues

This never-ending story is used by opportunistic telcos and their lobbyists to confuse the issue in order to gain regulatory or political advantage.

The debate is now raging again in the USA. In an attempt to talk down their monopolistic position in the market the three telcos—and this time in particular, Comcast—are claiming that real competition does in fact exist in the American broadband market, citing competition from the mobile 4G LTE services as an example.

There is certainly no doubt that people have embraced mobile broadband and this had led to a change in customer behaviour in relation to their use of telecoms services. It is safe to say that to a great extent voice has moved to mobile networks and that people are also using their mobile for short clips of entertainment, such as YouTube, Facebook and music, and in general brief bursts of internet-based video browsing and video messaging.

The reality, however, is that in developed economies, where both levels of infrastructure are available, there are very few people that depend solely on the mobile networks for their internet connections—in general less than 10% to 15% of the population, and these are typically not heavy mobile broadband users, to the contrary.

The argument from the incumbents is wrong. The level of competition between the two is in general of a limited nature, simply because it would cost too much for people to use full video services over their mobile networks.

Things could be different if unlimited bandwidth capacity were made available over these mobile networks, but the history of mobile networks tells us that this is most unlikely. Furthermore, the laws of physics and the limitations in relation to spectrum use make it almost impossible to ramp up mobile networks in such a way that they would be able to compete in a commercially viable way with the broadband access capacity that is available over fixed networks. Where both levels of infrastructure are available it is unlikely that either of these services would seriously try to compete with the other. They will both concentrate on the unique markets they service, accepting that there is overlap for certain services, where there will be some competition.

Somebody using, let’s say, a couple of full length video movies over their mobile network would quickly run into hundreds of dollars of extra cost; and as a consequence very few people would do this. Depending on the various mobile broadband packages that are around, using video over mobile could be 20-50 times more expensive than using it over fixed broadband networks.

So, taking all these factors into account, fixed and wireless service complement each other, rather than competing with each other. As mentioned, in some areas they overlap but in most situations they are complementary.

In the past we have used another analogy—that of transport. You can walk, cycle, drive a car, take a bus, train or ferry, or you can fly; and you could argue that all of these transport services compete with each other. But the reality is that we intuitively know which service we will use at a particular time for a particular trip and in such a context there is no real competition between these various modes of transport, which we consider as being complimentary to each other.

The same applies to telecoms, and the fact that most people have both a fixed broadband connection and a mobile phone is a clear indication that people know how and when they will use these services.

So to claim that wireless and fixed compete with each other is untrue and too simplistic. It is clear that incumbent carriers simply use that argument to confuse the market, and to influence their governments and regulators to let them reap monopolistic rents from their services. In reality there is little or no competition in the USA in the fixed broadband market and mobile services are no excuse to warrant that situation to continue.

The fact that this issue arises over and over again is a clear indication that the incumbents and their political lobbyist are very successful in their campaign to create confusion.

We saw this argument used in Australia also, by those who were opposed to the NBN for political reasons. They argued that investments in the NBN were wasteful, as people would use their smartphones and wouldn’t need the fixed network.

In Australia the issue has largely gone away, but sometimes those who want to further their political or regulatory case will revisit the argument; and they always find willing participants in the politicised media, or in the ignorant media, who are happy to peddle their stories.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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