One of the biggest outstanding questions for both the private profitability and social value of the National Broadband Network is how much consumers value high speed. Telstra have found out recently that few people want to pay alot for very fast (100 Mbps) broadband service. Only 200 people signed on to pay $269 per month for that service even when it included local and long-distance calls and Foxtel Premium as well. I wasn’t sure if download limits (100GB) were crimping that.
A new study by Gregory Rosston, Scott Savage and Donald Waldman uses a comprehensive survey to extract consumers’ willingness-to-pay for various aspects of broadband. They demonstrate that households may pay US$98 a month for premium service although this is contingent upon them having experienced poorer service. The good news is that experiencing poorer service actually boosts willingness to pay for better service — that wasn’t a given.
But worrying from a commercial and social point of view was the willingness to pay for speed. Coming from a slow broadband service, consumers would pay $48 per month for a move to something like 100Mbps. But if they already had 2Mbps, they would only pay an extra $3 a month for the extra speed. They would pay more for reliability. (The good news is that experience boosted values on those margins too).
If that is the case, the value of the NBN is somewhat diminished. That said, I always figured that the big benefits were competitive (at least upfront) while the fact that it will take the better part of a decade to build the network is just as well as it may take that time for demand values to improve.