Blog Post

Gigabit broadband’s chicken and egg situation

The demand for superfast broadband won’t really take off unless carriers lower the prices on higher speed tiers, argues Williams Yeung, CEO of Hong Kong-based City Telecom (s CTEL).

“Many operators get distracted by the “chicken or egg?” quandary and as such are not sure if there is demand for 1Gbps services. Hence they do not dare to invest. Conversely, in a similar fashion to how Apple creates new demand with its category defining products, we are out to create new demand with our residential 1Gbps priced at US$26/month.

In the US, it’s a case of overpricing the egg. For example, we read that the 1Gbps service is available in Chattanooga but priced at US$350/month, resulting in very limited demand. For us in Hong Kong, are taking a different approach by selling a Porsche 911 Turbo (1Gbps service) at or below the cost of a Toyota Corolla (8Mbps xDSL service). Therefore we are turning the consumer question from the legacy “Why do I need 1Gbps?” to a new age, “Why am I still using a legacy xDSL service?” (City Telecom Press Release.)

I think the biggest mistake we are making is waiting for some red-hot, bandwidth-hungry application. Sure, we could see Anybot become mainstream and create a new kind of telepresence experience. Google Hangouts (s goog) could turn all of us into TV stars from our living rooms, but the new bandwidth-hungry apps are still on the proverbial drafting board. Instead, we should be looking at many tiny applications, each sipping bandwidth but on multiple devices.

I use Spotify for music, but I rarely go to their website. I use it on a handful of Sonos devices that are connected to the network via Wi-Fi. I listen to Pandora (s P) the same way. My Samsung television and DVD player are what I use to connect to Netflix (s NFLX). An Apple TV (s AAPL) is for iTunes-based TV shows, Vimeo and MLB games. We’re going to see a lot more connected devices proliferate in our homes, and that will create a different kind of networking expectation, both internal and over the Internet. My own behavior has changed; I don’t store anything locally except for very crucial data. I work solely on Google Docs (s GOOG) and extensively use other online services. I don’t really think about downloading and saving anything; in my 100 Mbps, cloud is a click away.

When pervasive connectivity arrives in our lives, and when we don’t have to think much about bandwidth limitations, only then we will stop this chicken-and-egg debate.

7 Responses to “Gigabit broadband’s chicken and egg situation”

  1. What pittance these telcos give us and call it “broadband” is just a shame. US is now way behind even Romania is broadband and slipping further.

    I would say one of the biggest highway robbery in the modern times was the tax breaks and billions these telcos took from Washington with the promise of delivering pervasive, fiber optic service from shining sea to shining sea. Now we know, we will never see it.

  2. The government should build a wholesale fiber network to every home and business and America. A 20-year jobs program. A nearly guaranteed payback. More competition. A non-exclusive lease to any and all comers.

    Oh, and guess what?

    The price tag is <1 year of the wars in Iraq and Afghanistan. And that's not even included the fact that it will pay itself back probably 100x over before all is said and done. Issue dedicated bonds if you must. How we have failed to do this over the past 15 years is completely beyond me.

  3. David Hoffman

    This is very sad. When a Hong Kong ISP knows about EPB Fiber and states that he can provide the same service at 10% of what we charge, we are really not leaders any longer. We need a Sputnik moment to scare the Senators and Representatives into not repeating the lies about how great our nation’s internet service is, that they get from the bribe paying ISPs.

  4. American business is stagnated by greedy short term thinkers masquerading as ‘capitalists’. We need more long term thinkers in every aspect to not only push technology but avoid economic disasters!