Mobile Broadband and Implications for Broadband Competition and Adoption

26 Pages Posted: 6 Jun 2014

See all articles by William Lehr

William Lehr

Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)

Date Written: November 2009

Abstract

The growth of wireless mobile broadband has the potential to drive significant new growth in Internet applications, services, and equipment markets. It is likely to represent as important a change for the Internet as the transition from dial-up to broadband, fundamentally changing the landscape for broadband Internet access by adding the mobility that is needed to enable truly ubiquitous and pervasive "always on" Internet services. Incumbent operators like AT&T, Verizon, Sprint, and T-Mobile, and new operators like Clearwire and Cox are investing billions of dollars to expand coverage and enable much higher quality mobile broadband services. Mobile broadband subscribership and the Internet traffic it generates are growing rapidly and these trends are expected to continue into the future.

While mobile Internet availability and usage are growing quickly, the primary forms of broadband Internet access today use fixed-access connections, chiefly from telephone and cable companies. Although we are still in the early stages of the development of mass-market mobile broadband and the fuller development of the mobile Internet that it portends, it is reasonable to speculate about what the likely implications of mobile broadband will be for broadband service markets and for the dynamics of broadband service competition and, therefore, broadband adoption.

In this paper, I survey current data on emerging trends to inform a vision of what the near-term future (3-5 year horizon) for mobile and fixed broadband is likely to look like. This analysis confirms the conclusion that mobile broadband will drive growth and provide a stimulus for innovation and investment for broadband infrastructure and the Internet overall. In the first instance, mobile broadband will bring us a step closer to the vision of pervasive, always on, everywhere connected computing and communications that will significantly enhance the value proposition of using Internet services. This should result in a rightward shift of individual and aggregate demand across the full spectrum of user types and stimulate the emergence of niche and value-added service markets (e.g., mobile healthcare, mobile e-Commerce, and locationaware services). These demand stimulus effects are pro-competitive since they expand revenue opportunities for incumbents and entrants alike, and should contribute to promoting adoption and usage rates.

Because it is reasonable to expect that mobile and fixed broadband will continue to be characterized by different service features, I expect that mobile and fixed broadband services will be perceived as distinct and complementary services, rather than as close service substitutes in most user/usage contexts. However, for some subscribers and in some contexts, mobile broadband may be perceived as an acceptable substitute and thereby mobile services will impose a degree of (intermodal) competitive discipline on broadband service markets in general, and on fixed broadband services more specifically. It is likely that mobile broadband will provide most direct competitive pressure on first-generation, lower-quality fixed broadband services. Competition from mobile broadband is also likely to encourage and accelerate upgrade investments in fixed broadband infrastructures as providers seek to differentiate their offerings by accentuating the relative advantages of fixed-access services. These effects contribute to the conclusion reached herein that the overall impact of mobile broadband will be strongly procompetitive.

Keywords: Broadband, Competition, Mobile

JEL Classification: L86, L96, L5, K23, L1

Suggested Citation

Lehr, William, Mobile Broadband and Implications for Broadband Competition and Adoption (November 2009). Available at SSRN: https://ssrn.com/abstract=2446011 or http://dx.doi.org/10.2139/ssrn.2446011

William Lehr (Contact Author)

Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL) ( email )

Stata Center
Cambridge, MA 02142
United States

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