First, I agree with that observation and I’ve heard the same thing. The majority of households today are happy with a speed of 50 Mbps, and when a customer that already has enough bandwidth is upgraded they don’t immediately increase their downloading habits.
I’ve lately been thinking that 50 Mbps ought to become the new FCC definition of broadband, for exactly the reasons included in the question. This seems to be the speed today where most households can use the Internet in the way they want. I would bet that many households that are happy at 50 Mbps would no longer be happy with 25 Mbps broadband. It’s important to remember that just three or four years ago the same thing could have been said about 25 Mbps, and three or four years before that the same was true of 10 Mbps. One reason to offer faster speeds is to stay ahead of that growth curve. Household bandwidth and speed demand has been doubling every three years or so since 1980. While 50 Mbps is a comfortable level of home bandwidth for many today, in just a few years it won’t be.
It’s also worth noting that there are some households who need more than the 50 Mbps speeds because of the way they use the Internet. Households with multiple family members that all want to stream at the same time are the first to bump against the limitations of a data product. If ISPs never increase speeds above 50 Mbps, then every year more customers will bump against that ceiling and begin feeling frustrated with that speed. We have good evidence this is true by seeing customers leave AT&T U-verse, at 50 Mbps, for faster cable modem broadband.
Another reason that cable companies have unilaterally increased speeds is to help overcome customer WiFi issues. Customers often don’t care about the speed in the room with the WiFi modem, but care about what they can receive in the living room or a bedroom that is several rooms away from the modem. Faster download speeds can provide the boost needed to get a stronger WiFi signal through internal walls. The big cable companies know that increasing speeds cuts down on customer calls complaining about speed issues. I’m pretty sure that the cable companies will say that increasing speeds saves them money due to fewer customer complaints.
Another important factor is customer perception. I always tell people that if they have the opportunity, they should try a computer connected to gigabit speeds. A gigabit product ‘feels’ faster, particularly if the gigabit connection is on fiber with low latency. Many of us are old enough to remember that day when we got our first 1 Mbps DSL or cable modem and got off dial-up. The increase in speed felt liberating, which makes sense because a 1 Mbps DSL line is twenty times faster than dial-up, and also has a lower latency. A gigabit connection is twenty times faster than a 50 Mbps connection and seeing it for the first time has that same wow factor – things appear on the screen almost instantaneously as you hit enter. The human eye is really discerning, and it can see a big difference between loading the same web site at 25 Mbps and at 1 Gbps. The actual time difference isn’t very much, but the eye tells the brain that it is. I think the cable companies have figured this out – why not give faster speeds if it doesn’t cost anything and makes customers happy?
While customers might not immediately use more broadband, I think increasing the speed invites them to do so over time. I’ve talked to a lot of people who have lived with inadequate broadband connections and they become adept at limiting their usage, just like we’ve all done for many years with cellular data usage. Rural families all know exactly what they can and can’t do on their broadband connection. For example, if they can’t stream video and do schoolwork at the same time, they change their behavior to fit what’s available to them. Even non-rural homes learn to do this to a degree. If trying to stream multiple video streams causes problems, customers quickly learn not to do it.
Households with fast and reliable broadband don’t give a second thought about adding an additional broadband application. It’s not a problem to add a new broadband device or to install a video camera at the front door. It’s a bit of the chicken and egg question – does fast broadband speeds promote greater broadband usage or does the desire to use more applications drive the desire to get faster speeds? It’s hard to know any more since so many homes have broadband speeds from cable companies or fiber providers that are set faster than what they need today.