With the advent of fiber to the home becoming reality, 2005 is sizing up to be the year that bandwidth wars officially arrive. Residential broadband made its splash in the US around 1996 with the roll out of the cable modem and digital subscriber line (DSL). Nine years later, cable and telephone company competition is finally heating up as both companies via for each others customers in what is becoming an increasingly tight market. In this article we look at the war being waged, discuss some less than obvious details about the wars, as well as provide some insight into possible outcomes of such wars. 

Cost versus Value 

After 9 years of launching broadband services, only recently have these services begun to mutate in response to competition. Here is what has happened over the years to the price and speed of residential broadband services which we have listed conveniently for you in the following table (see Table 1.0). 

Table 1.0 Speed/Price Progression 

There are several observations that come to mind upon careful examination of this table. The most obvious one is that one has many different choices of broadband services (excluding wireless which is spotty but growing) and that the future is showing signs of further expanding the number of broadband options (evident from the introduction of Verizon’s FiOS fiber to the home service). Another observation is that clearly the costs of broadband are coming down – the cost of today’s broadband is ~89% less than it was 9 years ago and ~66% less than it was just two years ago. Broadband services over cable have increased in speed over time but have yet to discount its price. DSL has also increased it speed but has also lowered its price over time. Both satellite and fiber to the home are relatively new technologies and have yet to be discounted. Although one could say that this industry has been slow to materialize since only recently has it matched the number of dialup Internet subscribers, a number of obstacles (speed bumps) lay in wait for the industry to push heighten levels of adoption. 

Gate Keepers of Speeds Beyond 10Mbs 

As fiber is rolling into new neighborhoods, cable companies perform a familiar operation by raising their broadband service speed from 4M to 16M (which is 1M above that of the currently offered fiber service) and keeps is $49.95 price tag. However, unlike previously, such a change in cable modem speed cannot be carried out so easily – least not in anything beyond a marketing sense. The reason cable companies cannot continue to adjust the speed is because most consumer grade cable modems use Ethernet – specifically 10Base-T Ethernet which prevents its throughput from attaining speeds above 10Mbps (see Table 2.0).  

Table 2.0 Speeds of Computer and Network Interfaces 

There is also the matter that all broadband service providers installed inexpensive 10Base-T Ethernet cards over more expensive 10/100Base-T cards which were available at the time. Installation of these interface cards guarantee that the throughput of their Internet service will not work above 10Mbps unless their broadband service provider send a technician out to their house to replace their modems and (if necessary) computer Ethernet cards. Any modem manufactured prior to 2002 was forced to use USB 1.x which is only capable of 12Mbps – this has a similar throughput restriction of 10Base-T. We must assume that the jumper wire used to connect modem and the customer personal computer is capable of above 10Mbps speeds but as speeds reach for heights above 10Mbps the critical nature of the wiring becomes paramount. Hind sight is 20/20, but the cable companys’ failure to deploy 10/100Base-T interfaces (which were available at the time) on all their cable modems and customer computers will cost them dearly in repeat customer installs. DSL doesn’t even have the luxury of this problem because the limitations of its transport – however all fiber connections use 10/100base-T or equivalent high-speed electronics as the lessons have been learned. 

Convenience versus Necessity 

Broadband data services are still considered a convenience. In these days of two plus dollar gasoline, consumers really watch their outflows to the point where all monthly expenses get questioned as “do we really need this?” Compared to dialup Internet service which is priced at a bargain basement $9.95 a month (some are priced on pay as you go model with the first 10 hours a month free), paying over 5 times that for broadband (even if it is 70+ times faster) can be the first to go – especially after the introductory/promotional low cost rate ends. There is also this notion of how much speed (or bandwidth) does a consumer really need (see The “Need” for Speed – upcoming article from Birds-Eye.Net). Will consumers keep on requiring more bandwidth indefinitely or will demand level off? Once demand for more bandwidth slows, what is going to happen to prices, will they hold or will the trends of the past greatly influence pricing? Just as a curious exercise, we charted what might happen to prices if the demand for bandwidth leveled off at 15Mbps and the price reduction stayed the same for the next 6 years based on current trends. If this were to happen, in 2011, the average value of 1kbps of bandwidth could be a whopping 0.033 cents (or $4.95/month). However since discounts will also rise during this time rather than hold the same, the price for 1kbps may be more likely around 0.0273 cents (or $4.10/month). 

Limitations in of Electronic Mail 

While broadband promotes convenience in some ways, it has established obstacles in other ways. For example most broadband services now block outbound SMTP (see What are SMTP Relay Services for more information about this) for SPAM-ing reasons. Many also don’t support bulk mailers so if you have large lists of family, friends, or associates that you want to keep in touch with you can’t use your bulk mailer to contact them. Broadband service providers also attempt to virus scan out going and incoming email for their subscribers which is a nice feature, but at the same time they prevent a number of things such as legitimate exchange of certain types of files between known individuals, quotas on size and frequency of mailings, as well as roaming limitations for normal use outside the service provider’s network. 

Best Effort versus Sane Lane for Sanctioned Traffic 

Broadband service providers offering “more services” or “more convenience” to their customers may also restrict, slow, or block other competitive or legitimate uses of services provided offered by companies outside their network. 

Broadband service providers have notoriously been market lagging. As a result, they are fearful of what is happening out on the Internet that could dip into their profits. One fear is that of what is called “Over the Top Services”. An over the top service is that of a company setting up shop somewhere out on the Internet (virtual brick and mortar shop) and selling services to broadband service provider subscribers over the top of the broadband connectivity they provide. Such businesses don’t have the expense of maintaining the broadband connection – rather just the expense of building, maintaining, and providing the service they offer. As a result such services are offered at significant discounts over traditional brick and mortar companies since their customer base is not limited by physical connectivity – rather everyone with Internet access is a potential customer. 

In some extreme cases broadband service providers have actually blocked some external services from working over their network. Recently, the FCC ordered a broadband operator to cease blocking a port that prevented its subscribers from access to the popular VoIP provider Vonage. On top of the directive, the broadband operator was fined $15,000. While small change for the fifteenth largest telephone company in the US, clearly the FCC position is that broadband operators cannot manipulate or block subscriber access to the Internet. Many broadband service providers also block SNMP claiming it could be used against their subscribers, but at the same time such a protocol is used by third party monitoring companies wanting to sell network monitoring services to broadband subscribers. While FCC’s involvement may be comforting in the near term, broadband service providers are well underway in deploying advanced technologies that will allow their services to travel a “sane lane” over guaranteed quality of service (QoS) bandwidth. Once the rollout of QoS is complete, competing services on the Internet will be relegated to traversing “best effort” transport. So long as there is bandwidth contention (demand for bandwidth is larger than what can be supplied), best effort treatment of these services originated out on the Internet will impact their quality as perceived by the subscriber. To combat this inequality, the FCC may consider forcing broadband service providers to also allow services originating out on the Internet access to this sane lane for their services. Should such a policy materialize, it would force broadband service providers into a more fare head to head competition with services originating on the Internet in terms of price, features, and reliability.  

Nice Guys Finish Last 

Hopefully, it won’t be long before broadband service providers become fierce competitors such that all cable companies, all telephone companies, and all satellite and wireless companies FULLY engage in battle – bandwidth wars. When such a time comes, there will no longer be these convenient physical boundaries provided by where wires are strung or the mutual cooperation that we see now. We are still living in the well behaved 90s, but TViP and VoIP are changing the rules as the land grab for markets is just too great and too tempting for service providers to not want to pounce on it. Let the battle begin.

Check out these other Birds-Eye.Net papers/products regarding this article:

• Bandwidth Contention and Profits - Combating forces working against efficient, profitable delivery of quality data services.
• Broadband Market Research - Great place to start learning about broadband
• Impact of Content Demand on Bandwidth Management - Addressing the source of broadband's network capacity depletion
• Lead with Content and Services, not Bandwidth - What is more valuable to consumers – a pipe or the water that flows through it?
• Limiting Top Talkers on a Budget - Employing restrictions of subscriber bandwidth usage without packet shaping.
• Speed Bumps on the Battlefield of Broadband (price) Wars - Obstacles to speed increases and the ongoing expansion of broadband.
• The Future of QoS - It will not be the differentiator that service providers are looking for
• The "Need" for Speed: Over-Delivering Bandwidth - Questioning demand for higher bandwidth in an effort to understand the repercussions.

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