Gigabit is also aiding in a shift of market power to the
demand side and away from legacy telephone and cable companies that supply megabit
class service – often in the single digit Mbs range in the case of telcos -- over
“last mile” metal wire or cable to customer premises. The limitations of this
infrastructure versus fiber optic lines easily capable of delivering gigabit
class service have led telephone and cable companies to ration bandwidth,
selling it in various “bandwidth by the bucket” consumption tiers like
electricity or natural gas. Gigabit over fiber to the premise will obsolete
that business model at the same time premise bandwidth demand continues to rapidly
accelerate. Drivers include more and higher definition video streams, multiple devices in the home and emerging Internet-enabled home services. Also, more
knowledge workers working at home at least part of the work week.
Gigabit over premises fiber service will also obsolete the
legacy telcos and cablecos themselves, burdened with decades-old twisted pair and
coax cable infrastructure as well as high debt and shareholder dividend obligations.
That will give advantage to agile and financially creative overbuilders connecting premises with fiber
service.
Since telecommunications infrastructure is a natural
monopoly, once fiber first movers have established a substantial market
presence, the economics of challenging them with parallel infrastructure become
very difficult. This same dynamic has historically deterred those who would
overbuild the incumbent telcos and cablecos. But the shift toward gigabit class
service delivered over fiber could reverse the advantage of incumbency the
legacy telephone and cable companies have enjoyed for more than a decade.
The first mover advantage would be particularly high in
parts of incumbent telephone and cable company service territories where the
incumbents don’t offer landline Internet connections or very slow ones such as
first generation DSL.
