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Killing the fixed-to-mobile substitution myth

Opponents of the National Broadband Network (NBN) have been arguing that mobile access will replace demand for faster fixed-line connections. The latest ABS statistics tell a different story.
Written by Phil Dobbie, Contributor on

commentary Opponents of the National Broadband Network (NBN) have been arguing that mobile access will replace demand for faster fixed-line connections. The latest ABS statistics tell a different story.

You've probably heard the argument: wireless broadband access is growing at such an alarming rate that there is no need for the NBN to be built using fibre. Who wants a fixed-line connection when you can have the flexibility of wireless access? It's a weak argument, though, because the statistics make it clear that people want both: fixed-line access for speed and big downloads, and mobile access for, well, mobility.

Proponents of the mobile argument are quick to point out that the growth in demand for DSL has slowed to a trickle while mobile access is growing. That's because broadband access has reached saturation point and wireless access is being bought by people who already have internet at home.

How do we know that? The clearest sign that we've reached saturation point for internet access is that most people who don't have it also don't have a computer. ABS figures show that in 2008/9, 22 per cent of the country's 8.3 million households didn't have a computer, and only a further 6 per cent didn't have internet access. That figure of 28 per cent of homes without internet halves for households with children under 15. It's also, as you might expect, heavily influenced by income; some people living on Struggle Street just can't afford to get hooked up. In 2008/09, 57 per cent of households with incomes less than $40,000 didn't have internet access, compared with just 6 per cent of those with an income of $120,000 or more.

Those figures were from two years ago, and we eagerly await the latest comparable data on household penetration from the ABS. On Friday, the government released its Internet Activity Report for December 2010, which demonstrated the continued monumental rise in wireless internet connections. In the last three years, wireless access (excluding mobile phones) has gone from 474,000 connections to 4.3 million connections — a ten-fold increase. Despite this, there was no loss in DSL subscriptions. So unless the poor and computer-less suddenly felt compelled to get online, it's fair to assume that these new wireless broadband users were already accessing the internet via a fixed-line connection and now use both types of connectivity, not substituting one for the other.

If you're still not convinced of this — for example, if you are Tony Abbott or Malcolm Turnbull — let's have a look at speed and data usage. The number of people accessing the internet at less than 1.5 Mbps fell 27 per cent over the 18 months to June last year. At the same time, those accessing at 1.5 Mbps and above increased by 64 per cent, with a 58 per cent increase in those racing along at 8 Mbps or more. So there's a sharp move to faster speeds — speeds far in excess of what is capable on most wireless networks. We've been soaking up applications that want more oomph — primarily high-definition video — and it looks like we'd happily take up more speed if it can be given to us.

Of course, price has a significant part to play. We will go for speed if it doesn't cost too much more. And that's what has happened with DSL pricing; basically, what you paid a few years ago now buys faster speeds and more downloads. It's safe to assume that we'll take even faster access if the NBN can deliver it to us, provided it doesn't cost us any more than we're already paying.

The ABS data also shows how we will happily download more when our allowance increases. In the quarter to December 2010, users of most ISPs (those with 1000 subscribers or more) downloaded 174,665 terabytes of data over fixed-line connections — 55 per cent up on the same period a year earlier. Wireless data, which is considerably more expensive, grew just 19 per cent over this period, and accounts for just 8 per cent of all data downloaded. That doesn't seem to indicate that people are turning off their DSL connections and turning on their mobile devices.

So there's a clear trend: wireless access has mushroomed to the point where it's almost on par with DSL, but it still accounts for less than a tenth of the usage. Meanwhile, take-up of fixed-line connections has virtually stagnated but data usage is skyrocketing. The data clearly shows wireless is supplementary technology, and its substitution effect may be down to niches such as group households and a sprinkling of mobile workers with no interest in downloading intensive applications.

For those who still feel there is a counter-argument for a wireless future, we'd love to hear your thoughts in the comments section below. When you're ready, Malcolm.

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