Study Crashes Broadband's ARPU Party

Even as US broadband subscriber growth shows signs of slowing, the average revenue per unit (ARPU) among those customers continues to rise as consumers buy or upgrade to speedier, more expensive high-speed Internet service tiers.

That trend has helped ARPU figures reach record levels at cable operators such as Cable One. But a new study pokes some big holes in that trend and questions whether most households really need the higher speeds they are paying for.

Results of that study, issued this week by The Wall Street Journal, indicate that many consumers are probably overpaying for the speeds they are getting.

The study, involving 53 WSJ journalists over several months across several major US cities conducted with researchers at Princeton University and the University of Chicago, shows that typical US homes get only "marginal gains" by upgrading to faster speed tiers.

In the studied cases, users needed just a small fraction of their available bandwidth to watch OTT services from the likes of Netflix and YouTube, even in cases when they viewed many of them at the same time. The study also found that improvements on picture quality and streaming startup times were negligible at higher speeds.

A Comcast official held that demand for speed and capacity continues to grow, telling the paper that "Video is only a piece of the speed story." The study focused on "major streaming-video applications," and did not focus on other apps and devices, such as web cameras and online gaming, whose performance is typically aided by low-latency rather than raw speed.

Of course, the speeds advertised by broadband service providers represent the maximum marketed speeds, as it's rare that consumers require sustained speeds at the maxed-out levels they are paying for (a running joke is that SpeedTest is the killer app for 1-Gig broadband services). And the idea here is to overprovision that capacity to ensure that there's always enough headroom to accommodate all users and avoid slowdowns and network congestion.

Still, the study argues that most usage is woefully below those advertised maximums and that many consumers would be perfectly fine with slower, less expensive speed tiers than they have presently.

The study's findings put a bit of a damper on the broadband business growth models of many cable operators and other ISPs and could rekindle the debate over usage-based data policies.

For more about the study, a closer look at the Internet data trends among ISPs and consumers and a review of some next-gen technologies that are gunning for multi-gigabit speeds, please see this story on our sister site, Light Reading: Consumers Overpay for Broadband – Study .

— Jeff Baumgartner, Senior Editor, Light Reading