Beware of broadband speed overkill

Certainly, Internet users switching from a 56Kbps (kilobits per second) dial-up connection to any flavor of broadband can immediately see what they were missing.

But it can be a different story when making the leap into premium services. Though data-intensive utilities like high-definition video could one day place a heavy burden on the Net pipes into the average consumer's home, some analysts say many current Internet users don't even come close to using all the bandwidth that's offered to them in a standard broadband service.

"Unless you live with five Internet addicts, it's hard to come up with a use case for some of these high-end bandwidth packages," said Joe Laszlo, an analyst with JupiterResearch. "The cable operators are trying to keep up with Verizon's Fios service, and they can't look like the slowest guy on the block."

Laszlo's reality check comes as cable operators and telephone companies compete to offer the fastest, most expansive broadband service around.

The company with the network to beat appears to be Verizon Communications, which is extending fiber directly to homes to carry a triple play of services including high-speed Internet access, television and telephone service. It currently offers three tiers in its Fios service: 5Mbps (megabits per second) downstream/2Mbps upstream for $34.95 per month; 15Mbps/2Mbps for $44.95; and 30 Mbps/5mbps for $179.95.

In March, Comcast, the nation's largest cable operator, doubled download speeds of its fastest broadband service in four cities to 16Mbps for downloads and 1Mbps for uploads at a cost of $52.95 per month. It offers 8Mbps downloads in the rest of its territory.

Cablevision, which also competes with Verizon, offers consumers two tiers of service: 15Mbps/1Mbps for $49.95 or 30Mbps/2Mbps for $64.95.

Time Warner has also jacked up the speeds of its service. In certain areas of the East Coast it offers a 7Mbps/384Kbps package for $39.95. In other Time Warner regions, users get 5Mbps/384Kbps for $39.95.

Of course, it's not all a speed competition. Though consumers may not yet need all that broadband, carriers argue that customers tend to make their buying decisions based on speed.

"If you look at what is happening in Europe and Asia, where they have more advanced services than we do here in the U.S., you see that whoever wins the broadband war in terms of the highest speeds has the highest penetration and leads in market share," said John Schommer, director of Fios product management for Verizon.

Cable operators and phone companies also justify boosting speeds (and sometimes prices) by pointing to all the new multimedia applications people are using. They say their customers need more bandwidth to listen to music, watch videos and play games on the Internet.

But JupiterResearch's Laszlo said most of the services that tout faster speeds are overkill for the majority of broadband users today because the multimedia applications that consumers use only consume a fraction of the available bandwidth.

For example, a good quality video streamed from CNN.com, Comedy Central's MotherLoad or even CNET's own site only takes up between 500Kbps and 600Kbps worth of bandwidth. Streaming audio consumes even less bandwidth. A service such as Real's Rhapsody music player, which offers near CD-quality sound, uses about 128Kbps to 256Kbps. Then there is Internet telephony, which only uses about 56Kbps.

Downloading music and video takes up even less bandwidth. It could take 10 to 12 seconds longer to download a song from iTunes using a 768Kbps connection compared to using a 6Mbps connection.

"It may be that if you throw speed out there people will find a way to use it," said Jim Penhune, an analyst with Strategy Analytics. "But once you get beyond a certain point, it's hard to see how much better the experience will get."

Laszlo argues that most consumers don't see speed as a compelling enough feature to pay more for their service. In fact, only about 14 percent of people surveyed by JupiterResearch in December 2005 said they'd be willing to pay $10 more per month for faster downstream service. And only 10 percent said they were willing to pay $10 per month more for faster upstream speeds. Roughly 85 percent said they felt the current speed they subscribed to was sufficient.

"What this says to me is that it's tough to sell a service based on speed alone," said Laszlo. "There is a small fraction of the population that always wants more, but most people are happy with what they have."

Laszlo says he believes most households with one or two computers sharing a broadband connection would be fine with between 1Mbps and 2Mbps of download capacity. He said the real need for speed increases is in upload speeds rather than download speeds.

"We're starting to see people chomping at the bit for faster upstream speeds," he said. "Given the increasing popularity of digital video sharing, we might get to the point where there may be more demand for faster upstream connections."

Both AT&T and Verizon offer plans with relatively low-speed connections for less than $20 per month. Verizon offers 768Kbps for $14.95, when ordered online. AT&T is offering its 1.5Mbps service for the first year of service for $12.99 per month.

While cable operators have resisted cutting prices or even offering a lower-speed tier of service, they do provide deals on their faster services if they are bundled with other services. For example, Cablevision offers a $90 package if subscribers sign up for its 15Mbps broadband, digital cable, and phone services.

But what about the future?

Even though today's average users likely don't need the 5Mbps, 10Mbps or even 15Mbps download services that are being offered, more bandwidth-intensive applications are on their way. Some experts suggest that as many as 45 percent of homes with Internet access in the U.S. have two or more computers. Connecting those computers and other devices, such as TVs and media centers, together will increase bandwidth needs.

"Verizon's 768Kbps might be sufficient for today," said Albert Lin, an analyst with American Technology Research. "But it will be inadequate for the majority of users in two years."

But the biggest driver for super-fast broadband connections will likely come from high-definition video. Depending on the compression technology used, one high-definition stream on one TV eats up between 10Mbps and 20Mbps of bandwidth. Standard definition broadcasts use between 2Mbps and 6Mbps per channel, depending on the compression technology used.

AT&T, which is upgrading its network to offer IPTV (Internet Protocol TV) service, will need to offer consumers a minimum of 20 Mbps into the home, said Laszlo. Cable operators and Verizon, which will also offer HDTV, have built their networks so their high-speed Internet service is separate from the capacity that delivers TV. But as more content providers like Walt Disney's ABC offer programming directly over the Internet, consumers will need faster connections to handle the streams.

"I remember the days when people said they couldn't imagine who would ever need 64Kbps of RAM on their PCs," said Verizon's Schommer. "Those days are long gone. As new applications are developed for the Internet, user behavior will change, and people will find ways to use all that bandwidth."