The New Bandwidth Paradigm

For years the prevailing belief was that consumers would always outstrip bandwidth supply.  From our recent conversations with several land line operators,  their experience suggests that in the near-term, that paradigm may not be true.

How could this be?

The answer is fairly simple.  Since streaming HD video became all the rage some 10+ years ago, there has not been any real pressure from any new bandwidth-intensive applications.   All the while, ISPs have been increasing their capacity.  The net result is that many wired providers have finally outstripped demand.

Yes, many video content options have popped up for both real-time streaming and recorded entertainment.  However, when we drill down on consumption, we find that almost all video caps out at 4 megabits per second.  Combine a 4 megabit per second self-imposed video limit with the observation that consumers are averaging 1 movie for every 3 connected households, and we can see what true consumption is nowadays – at or below 4 megabits per second per house.   Thus, even though ISPs now advertise  50 or 100 megabit per second last mile connections to the home, consumers rarely have reason to use that much bandwidth for a sustained period of time.   There is just no application beyond video that they use on a regular basis.

What about the plethora of other applications?

I just did a little experiment on my Internet connection leaving my home office.  My average consumption, including two low resolution security camera’s, a WebEx session, a Skype call, several open web pages, and some smart devices, came to a grand total of 0.7 megabits per second.   The only time I even come close to saturating my 20 megabit per second connection is when I download a computer update of some kind, and obviously this is a relatively rare event, once a month at most.

What about the future?

ISPs are now promising 50 or 100 megabit per second connections, and are betting on the fact that most consumers will only use a fraction of that at any given time.  In other words, they have oversold their capacity without backlash.  In the unlikely event that all their customers tried to pull their max bandwidth at one time, there would be extreme gridlock, but the probability of this happening is almost zero.   At this time we don’t see any new application beyond video that will seriously demand a tenfold type increase in bandwidth, which is what happened when we saw video come of age on the Internet.  Yes,  there will be increases in demand, but we expect that curve to be a few percent a year.

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