Bandwidth use increases, revenue not so much...

I have been tracking my home’s bandwidth usage for over the past two years. My original concerns were twofold. First, usage seems to relentlessly increase, and second, many Internet Services Providers (ISPs) had a bandwidth cap of around 50 GBytes. per month.

I estimated that the “Bandwidth Bomb” for me would go off sometime in 2013 and it did, with some troughs, but I clearly would have exceeded my ISP’s acceptable use policy of no more than 250 GBytes transferred per month. Comcast’s Website assured me that the cap was generous enough and that only an exceedingly small percentage of users would ever have to worry about the Comcast bandwidth police.

As an amazing coincidence, just as I predicted I would exceed the cap, Comcast changed its policy and “Note:enforcement of the 250GB data consumption threshold is currently suspended”. So, at least for the time being, I can enjoy 2013 without a home bandwidth worry in the world.
So what about the first issue above, how did my home’s traffic change over the past couple of years? First let’s see what changes happened at the Kaplow home. We are now the owners of three iPhones and an Android Pad. When in the home, these connect to my home WiFi network. My own phone, also an Android-based phone stays happily on Verizon’s wireless LTE network as I have still have a grandfathered unlimited bandwidth plan.

The Xbox also go smarter with an upgrade that includes Kinect. The youngest son discovered its use not only as an game console and Netflix player, but also as a party-line (if you know what that is) for a couple of hours every day playing cooperative games (of course after all his homework is done and done well). There were no significant changes to the laptop inventory.

Let’s look at the bandwidth trends at my house. The first set of bars represent the four month average from September through December in each year. The data shows a 77% increase from 2010 and an additional 83% into 2012. So from 2010 to 2012 the last third of the year’s usage increased 325%!

Looking at the total year 2011 and 2012, this represents an average that went from 111 to 182 Gbytes per month or a 65% increase. If this trend continues, to continue the same business margins, my ISP has to wring costs from their infrastructure or raise prices. Alternatively, they could find a way to make money on other services. Currently, some of the infrastructure is covered via the bundle of TV and voice services. With streaming content from providers other than the cable company itself, will we see a trend that mimicked that the traditional telephone company saw people turning off their telephone for “naked” DSL Internet service, with people turning off or significantly reducing their TV content?

There are also additional pressures on cable (or even services provided by the traditional local phone service provider) revenues:

• Verizon is offering home phone service delivered over their mobile network. This takes away one of the “bundle” revenue elements. 
• Satellite services. This takes away the broadcast channel elements, putting even more pressure on access on-demand material over the Internet.
• Wireless providers in general. With the continued build-out of 4G LTE services, there will likely be a growing number people that just use a wireless provider for their home service. Much of this is just a pricing plan away (with of course, within the limits of the available spectrum, etc.).

So, the potential trend of reduced services revenue combined with increased Internet use means that it is likely that Internet service costs will increase if only to enable cable and other wire provider companies to maintain their revenue - with an unknown hit to margins. On the other hand, they may have to hold the line on pricing, if only to keep their customer base in the face of competition.