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1-Gbps Internet Access Trend Grows

May 29, 2014

1-Gbps Internet Access Trend Grows

By Gary Kim
Contributing Editor

Though Internet service providers might rightly have argued there was relatively little demand for 1-Gbps Internet access services, when such services were priced in the hundreds of dollars per month, Google (News - Alert) Fiber has changed thinking among ISPs, resetting the price umbrella to $70 a month for a gigabit consumer service.

So far, AT&T (News - Alert) has been the biggest U.S. ISP to respond, announcing both speed upgrades across most of its service territory, as well as upgrades to 300 Mbps, and then gigabit service in some neighborhoods in multiple markets.

But as often is the case, smaller rural and independent telcos are part of the trend as well.

Bolt Fiber Optic Services, TDS Telecom and Comporium are among rural and independent telcos who have announced gigabit access projects recently.

Precisely how ISPs will price and remarket slower-speed services is unclear. If one assumes the new gigabit for $70 a month is the level of market pricing, then a megabit per second service costs about seven cents a month. That wreaks havoc with current levels of pricing, where a 20 Mbps service might cost $50 a month (after all associated charges), or about $2.50 per megabyte per second.

Existing 50-Mbps services, which might retail for about $80 a month, might represent a cost of about $1.60 per Mbps, per month.

All of that will be undermined by the seven cents per Mbps pricing umbrella. In fact, there is a reason Google Fiber offers 5 Mbps for no incremental cost, for a period of some years. At seven cents per Mbps, a 5-Mbps service arguably “should” cost about 35 cents a month, a price virtually too low to bill for.

Globally, at current rates of price deflation, backbone transport should fall to about seven cents a megabyte by about 2030. That is a measure of the cost of data consumption transferred across the backbone, not access speed. But the point is that the overall trend of declining transport and access prices shows no sign of abating. 

Edited by Maurice Nagle
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