Driven by telco and cable providers like AT&T (NYSE: T) and Comcast (NASDAQ: CMCSA), the number of gigabit Internet connections is projected to rise tenfold to 10 million by the end of year, with residential connections accounting for about 70 percent of the total, says Deloitte Global.
The research firm said that rising demand will be fueled by increasing availability and a decline in broadband service prices.
In 2015, Deloitte noted that the number of Gbps tariffs almost doubled in just three quarters, from just over 80 to more than 150. The 10 million subscribers are likely to be a portion of 250 million customers expected to be on networks capable of gigabit speeds by the end of the year.
Pricing for gigabit services has continued to drop over the past three years. As of the end of 2012, the average entry level price was over $400. This is in contrast to the end of the third quarter of 2015, where the average had fallen to under $200, and the lowest package from Singtel was priced at under $50.
Google Fiber (NASDAQ: GOOG) had set a price threshold for 1 Gbps services by offering its plans for $70 a month, a move followed closely by AT&T, Grande Communications and LUS Fiber. However, AT&T's $70 offering requires customers to have their Internet browsing tracked. Grande offers 1 Gbps for $65 a month, while LUS, a municipal provider, offers 1 Gbps for $62.95 when purchased as part of a bundle with TV and a two-year contract.
Perhaps not surprisingly, the advent of music and video streaming is pushing the need for higher bandwidth. According to the report, video streaming services have progressed from offering 0.5 Mbps streams, inferior to standard definition (SD) TV, to bandwidth capable of supporting ultra-high 4K resolution, using 25-50 Mbps, or up to 100 times more capacity.
Deloitte predicts that there will be 600 million subscribers on networks offering a gigabit tariff by 2020, or over half of the world's connected homes.
Despite efforts by service providers to roll out 1 Gbps services, the near-term reality is that the majority of Internet users won't purchase a 1 Gbps service.
"While Gbps subscriptions should surge this year (albeit from close to nothing to niche) the sharpest inflection point for the service may be in terms of perception," said Deloitte in the report. "For homes, the perceived reasoning for Gbps service will likely evolve from meeting the needs of a single application running on a single device to meeting the aggregate demand from multiple devices. Although a Gbps connection for a single device may be overkill, consumers are likely to continue accumulating connected devices in the long term."
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