Is Bandwidth Addictive?

Conventional wisdom among marketing types holds that as consumers purchase more of a given product their needs become satisfied, and the ability to incrementally sell them more of that product diminishes. This is certainly true of cars and other capital intensive items, but it is definitely not true with other things, like drugs. The reason is obvious. Some things—like drugs, Starbucks coffee, and McDonald’s cheeseburgers—carry properties that further stimulate demand. The question is, does bandwidth obtained via broadband connections exhibit similar tendencies? That is, is bandwidth addictive?

Over the past few years Zeugma Systems has conducted a series of consumer surveys in conjunction with research firm IDC. Most of these surveys are intended to gauge consumer views on issues related to broadband and internet usage. Key among these issues is the measurement of consumer interest in enhanced broadband services that are more dynamic in how bandwidth is allocated. For example, I personally think it might be nice if the broadband network could recognize when I was watching streaming video and provide either augmented or guaranteed bandwidth for the video stream. Ditto for large file downloads, gaming, and other sorts of bandwidth-intensive activities. But I also recognize that my personal views are immaterial. What matters for broadband service providers is what a majority of their customers, most of them non-technical, think about such services. And, more important, would consumers pay extra for them?

Our surveys have consistently shown that (a), a significant subset of consumers are interested in such services and are willing to pay for them, and (b), even for those unwilling to pay for such services they are viewed by a majority of consumers as desirable enough to change service providers if the price was right. Specifically, 27 percent of survey respondents expressed a willingness to pay (and 11 percent of those would pay “almost any price”), and 52 percent said they would actively seek to change broadband providers to get them.

These results reflect the views of all surveyed consumers. But what happens when we look separately at broadband consumers by bandwidth tier? The assumption most (admittedly including myself) will make is that consumers purchasing the fastest broadband tier would be less willing to pay extra for enhanced bandwidth services, and consumers purchasing the slowest tier would be more willing. Reason would suggest that higher tiered subscribers already have lots of bandwidth and, therefore, are less likely to want more. Surprisingly, however, the reverse turns out to be the case.

For consumers purchasing the fastest broadband tier, 37 percent would pay extra for enhanced bandwidth services. For the middle tier, 21 percent would pay extra, and for the bottom tier, 16 percent would pony up more money. In other words, it appears that the more bandwidth people buy, the more they want. As Matt Davis, IDC director of consumer telecom services and the architect of these surveys quipped, “I love it when data defies conventional wisdom.” (But despite the fact that bandwidth does appear to be addictive, he feels it is unnecessary for the DEA to get involved).

This is encouraging for broadband service providers. It means, fundamentally, the resource that they own and manage—bandwidth—can be sold in ways that encourage their customers to want more. And more. And more.

See Associated Figure