Gig speeds mainly about marketing for now: analyst

Canadian companies’ recent embrace of gigabit Internet isn’t meeting a need that exists in the market, but it is setting telecoms up for the day customers start demanding such speeds, according to Greg MacDonald, telecommunications analyst with Macquarie Capital Markets. “I think a lot of it is marketing to date,” he said in a phone interview. “There are not a lot of households, even, let alone individuals that will use a gigabyte speed. Having said that, if you look at the usage patterns, they’re going up fairly substantially.” Earlier this week, Quebecor Inc.’s Videotron announced it has been testing a new gigabit Internet service in Montreal in a pilot project, running over DOCSIS (data-over-cable interface specifications) 3.0 technology. It said that it would release details about a commercial roll-out at a later date. Videotron is the first large cableco in Canada to announce such speeds, following BCE Inc.’s announcement in June that it would launch its Gigabit Fibe service, first in Toronto, and then in other locations in Ontario, Quebec, and Atlantic Canada. MacDonald said that the introduction of ultra high-definition or 4K television, which has a resolution that’s about four times higher than regular high-definition sets, is one example of how demand will grow. “The potential for those devices to start getting into the marketplace will put a demand increase of multiples on what the average consumer is taking down right now,” he said. The “proliferation of multiple devices per person is also having a big impact. So the order of magnitude and demand growth for bandwidth, we’re probably at the steepest part of the S-curve on that, he said. In May, Cisco Systems Inc. said Canada’s data usage over Internet protocol networks will triple by 2019 in comparison to last year. It predicted Internet traffic specifically would reach 3.2 exabytes a month in Canada by 2019, or more than three times the 978 petabytes per month seen last year, with average annual growth of 27 per cent. There are two benefits for companies offering 1 GB speeds, MacDonald said. “It is, number one, bragging rights, because it’s a nice, easy round number … and it’s something that can stand out,” he said. “You want to appeal to a consumer that you have the fastest speed out there. If you’re going to go and drive on a highway in Germany, you’re going to go check out the Autobahn, even if you’re driving a Volkswagen and really can’t use the full speed of that left-hand lane.” He said customers are likely to sign up for such speeds if the prices are similar to what they’re paying for their existing service. Neither Bell nor Videotron have released pricing details. “If the companies are building, and the telcos are building fibre-to-the-home (FTTH), and the cable companies have had the capability … for a while, so why not do it?” he said. By doing so, companies are both getting ahead of the curve and “addressing an inevitable need,” he added. MacDonald noted that one potential benefit of building out wireline networks with these capabilities is that companies could use them to offload data from wireless devices. The Wire Report has recently reported on digital activists pushing for the use of home routers to provide free wireless Internet, and on companies like Cogeco Cable Inc. rolling out home spotting, or the use of multi-signal routers in people's homes to provide both private WiFi signals to residents and separate public signals to visitors or those in the vicinity. Daniel Proulx, Videotron’s chief technology officer, said in a phone interview that the company chose to do a pilot project so that it could test and demonstrate gig speeds in a real-world situation with real customers, not in a laboratory. “The goal was to be able to use the actual infrastructure, to be able to offer the service to the customer base through our installed equipment,” he said, adding the company wanted to do the pilot project to ensure there won’t be any unforeseen issues when the market is ready for 1 GB speeds. He said that at the end of this year, “we will have all the numbers to be able to make the right decision about pricing” and where the service will be available. When asked about whether and when gig service will become ubiquitous or necessary to fulfill customer demand, Proulx noted that Internet speeds have increased a thousand-fold in the 20 years since he entered the telecom business. “Technology doesn’t sleep. When we were working on the megabit service 20 years ago, we were asking ourselves what people will do with it. Now the gig service is coming. I don’t see an application tomorrow, because I would say the most popular speed in our market is 30 Mbps,” he said. “But you don’t turn around networks in one night. So you need to be ahead of the curve. You need to have early adopter products.” While the typical user is using much less than 1 GB per second at the moment, “you need to look at the past to forecast the future, and you need to be ready.” Bill St. Arnaud, an independent telecom analyst, said in an email that while companies may announce gigabit services, there are factors affecting whether that’s the speed the customers will actually receive. That includes the “aggregation ratio (number of users sharing the same fiber or coax cable) and the use of caching or content servers,” he noted. Despite the recent announcements, he said Canada is behind its peers when it comes to the provision of gigabit Internet. “Canada still lags most of the developed world in terms of deploying a competitive priced gigabit service,” St. Arnaud said. “Based on past experience, the telcos and cablecos will want to protect their existing very profitable low-speed services so they will price their gigabit services very expensively — considerably more than other countries.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

Gig speeds mainly about marketing for now: analyst

Broadcast | July 30, 2015

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Gig speeds mainly about marketing for now: analyst

Broadcast | July 30, 2015

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

Canadian telecom provider challenges CRTC’s decision in face of dominant carriers’ access to last mile fibre

Bell fibre build progress threatened by regulatory uncertainty: Bibic

CRTC addresses internet installation dispute between eastern Ontario township and small ISP

CRTC greenlights Northwestel Connecting Families packages

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us