How relevant is download speed still?

Thursday 28 June 2012 | 14:38 CET | Market Commentary
The bandwidth (speed) of an internet connection is still always important, if not a unique selling point. This is especially true in places where copper, coax and fibre compete, such as in the Netherlands. If we look only at download speeds, we can see a still dynamic market: 
  • Cable has had already for a while 120Mbps, by using Docsis 3.0 technology. This is available for the vast majority of the Netherlands. 
  • Copper has been going through a series of upgrades, including VDSL2 (the successor to ADSL2+) as well as additional technologies such as pair bonding, vectoring and phantom mode. Using pair bonding, KPN has been able to increase its maximum speed over xDSL to 80Mbps, versus 50Mbps previously. This technique uses dual copper wires, something KPN can deploy nearly nationwide. Phantom adds a virtual third wire. Vectoring is a technology to improve performance by reducing interference. 
  • Fibre has clearly broken the 100Mbps barrier. There are now offers available at 200, 500, 600 and 1,000 Mbps, although these are still limited to local networks. 
In the interest of being complete, we note here some of the well-known shortcomings of copper and coax: 
  • Cable/Docsis 3: It's a ‘shared medium’. A system of overbooking ensures that neighbours use the maximum amount of bandwidth. While all media are at a certain level 'shared', this is more prevalent with cable, as research for Telecompaper shows. Figures on the average download speed during the day show that cable performs less well during the day than other technologies. Cable/Docsis 3: The bandwidth is delivered asymmetric (down > upload). This not per se a characteristic of cable, but a question of spectrum management. The cable industry defends this strategy by pointing to the assymetric nature of many other traffic flows. Download traffic is simply much larger than upload traffic. This is supported by the fact that, according to our Consumer Panel, symmetry is rarely a motivating factor in subscribing to a broadband plan. 
  • Copper/xDSL: The bandwidth decreases as the distance from the exchange increases. We can only guess how many lines can achieve 80Mbps, but we suspect it is a small minority. 
The capacity of the line is always used as a differentiating feature, even if this is only for marketing purposes. During our recent Breedband 2012 conference, another view emerged: broadband speed is quickly becoming an outdated concept, similar to the clock speed of a processor or the number of megapixels for a digital camera. Essentially, we known when enough is enough, and then there's nothing more to say about it. 

This speaker (Arent van der Feltz from Ziggo) may be right, but also maybe not: the number of connected devices is growing, the successor to HD (4K) is gaining pace and videoconferencing is waiting for a breakthrough. In the mean time, Vodafone refuses to supply its fibre customers with more than three decoders, as the use of more than three TVs would erode the HD signal. Add to that the eternal impatience of most people; downloading a film in one minute is always better than 10 minutes. 

As it appears, the jury is still out. It remains to be seen if KPN with its speed upgrade to 80Mbps will have any impact on the broadband market. The marketing may cause it some trouble, as first of all, 80 Mbps is far from available nationwide, and second, KPN focuses less on the speed and more on the possibilities of the connection. The underlying reason for this is that xDSL must still compete against its own fibre offering, and the performance of DSL is highly dependent on distance. An ominous sign is that Tele2 and KPN have already been upgrading their ADSL2+ networks (VDSL2, pair bonding) since the autumn of 2010, while UPC reported record growth in  Q1 2012, largely at the expense of the DSL market. 

The coming quarters will show whether the exodus from DSL can be halted and compensated by growth in fibre. KPN has set itself the goal of bottoming out by the end of 2012 and then resuming growth to reach a market share of 45 percent by 2015, versus 39 percent now. At the moment, without a major takeover on the cards, this appears an unachievable target. 

Some of the findings mentioned above were presented during our Breedband 2012 congress 20 June in Laren.

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