Why do broadband providers sell “internet speed” while mobile data providers sell “internet amount”?

Question

I noticed all broadband deals come with how fast the internet is and all mobile data deals come with how much internet can be used up. I am aware that the amount of broadband data for a household can be huge and 3G/4G speed can be less than perfect, but that does not mean those cannot be modified to specific consumers by the providers to my understanding.

So, what is the catch?

In: Other

Answer 1

This is actually a very interesting question to solve. It requires thinking about the differences in the competitive markets for home internet vs. cellular internet.

Fact 1 everyone has to understand is that the marginal cost of providing an extra 1GB of data transfer is practically zero, whether you are talking about landline or cellular. Yes the ISPs need to build out the capacity to handle peak bandwidth demand, but once it is built the marginal cost of actually transferring each GB is nearly nothing. Some people will make the argument that metering by data transfer reduces peak bandwidth demand and therefore *does* save the ISPs money, but that is an incomplete answer because it only justifies metering during peak periods, it doesn’t justify metering at the same price per GB during off-peak hours when there is plenty of available network capacity.

Here is my best guess: The marginal cost of installing an additional user with a landline is relatively high vs. the marginal cost of starting up a cellular user is low. With the landline, for each customer you need to wire the “last mile” to the house, which can cost the ISP thousands of dollars. With cellular service, you need the same amount of cellular towers regardless. You need to cover your service area and one additional phone doesn’t really add a marginal cost. *A lot* of marginal phones might require you to upgrade the equipment at your towers, but that is still cheaper than establishing the towers in the first place, so it’s a sharply decreasing marginal cost per additional customer. **This means that charging people upfront for unlimited service could be better aligned with the business model of the landline internet business, which has to make enough revenue off each customer to justify their investment in the physical infrastructure. Whereas a cellular customer doesn’t add any marginal cost, so if the new customer only pays for 1GB that is fine to the cellular ISP, it is all profit to them.**