Editor’s Corner: Who needs multi-gig internet anyway?

It started with a gig. Then came 2-gig, 3-gig, 5-gig and even 10-gig. Across both the U.S. and Canada, multi-gig service is all the rage among broadband providers, fiber and cable alike. While cable may be slightly behind the curve, they’re certainly on the same road with DOCSIS 4.0 in their sights. But all the fanfare around multi-gig services, which come at a premium of $100 or more, begs the question: who really needs them, anyway?

When the question was posed on social media, Twitter users didn’t hesitate to weigh in. Several folks pointed out such services are highly valuable for simultaneous connectivity in larger households with several children and for gamers who need a high-speed connection both for actual play as well as installing updates which can come in massive files. Others added multi-gig speeds are also a boon for anyone doing coding or any other sort of work that requires large file transfers, such as content creation, for instance.

But other users argued multi-gig speeds are just another prestige good akin to a sports car, and one even pitched multi-gig as simply a way for telcos to boost revenue without raising the price of lower tier services.

There is some merit to that last point. AT&T’s CFO Pascal Desroches stated outright on the operator’s Q1 2022 earnings call today that the launch of its 2-gig and 5-gig plans in January will provide “even more opportunity to move customers to higher speed tiers.” Among other things, multi-gig step ups are expected to be a “tailwind to the trajectory of our ARPU [average revenue per user]” over time, he added. That could be significant given analysts have expressed doubts about whether operators like AT&T can successfully raise consumer prices to offset pressure from rising costs due to inflation without losing customers.

“The problem with an industry that can’t raise prices is the flashing red light in today’s Q1 earnings report. Costs are rising – EBITDA missed in every segment – while prices are not,” analysts from MoffettNathanson wrote. “Without pricing power, the path forward for AT&T looks very challenging indeed.”

Digging into the data

Expounding on not just the who but also the why behind the multi-gig frenzy, Recon Analytics founder Roger Entner told Fierce customer satisfaction is a large part of the equation. “The faster things get, the happier people are,” he explained. “The reason why you want to have faster [speeds] is that everything becomes more effortless. It is quicker, it just works. And with multi-gig, it just works with more and more devices.”

Accommodating more devices is crucial given trends seen during the pandemic. Entner revealed a survey Recon Analytics conducted for AT&T in late 2021 found 62% of households bought at least one new connected device. The data showed 30% bought a new smart TV, 26% bought a new laptop or PC, 23% a tablet, 21% a streaming box, and 19% a gaming console. Others purchased smart speakers, connected doorbells and security systems.

“All of these devices eat data. And they [consumers] have more and more and more,” he said. "Do you need multi-gig if you have only one device? No. But when you have half of your house hanging on this thing, then yes.”

The same survey found 42% of consumers rated fast, reliable internet as 10 out of 10 in terms of importance. Thus, Entner said that’s the theoretical minimum take rate for multi-gig services. “These people will buy the fastest thing they can afford, which may or may not be multi-gig,” he stated.

Limitations and implications for FWA

As the telecom industry moves forward with multi-gig offerings, Entner said operators will need to be careful to explain to consumers that those speeds won’t necessarily be available on their devices – at least not yet. For instance, he noted while the motherboards of some gaming computers now support 2.5 Gbps, most in homes today can only support up to a gig, which means an older PC might only show it’s getting 1-gig regardless of the connection speed to the home.

“This will be one of the tricky things the industry has to communicate,” he said.

Entner added the multi-gig revolution also has implications for the long-term viability of fixed wireless access (FWA) broadband services. While he doesn’t expect these to die out, the value proposition is going to degrade as fiber and other multi-gig capable services proliferate.

“Right now fixed wireless in my opinion has a window of opportunity of 2, 3, 4 years before fiber and potentially DOCSIS 4.0 come in with pretty ubiquitous speeds,” he predicted. While the likes of Verizon, T-Mobile and others offering FWA are currently scooping up unsatisfied DSL customers and disgruntled cable subscribers, that won’t last forever.

“I applaud what Verizon and T-Mobile are doing and they will have good times for the next 3 years, maybe 4 years. But then comes this wave of fiber,” he said. However, Entner concluded wide channel mid-band FWA deployments could allow Verizon and T-Mobile to hang on in rural areas by deploying gigabit service where it’s less economical to run fixed connections.