Constraints on access network will affect consumer Internet more than business Internet market

Implications: - Though not perfect, a number of bandwidth and technology options are available to the businesses on access to the Internet, backed by end-to-end SLAs - Access network constraints will affect the consumer Internet market, but they wont necessarily affect On Demand software or Software-as-a-Service market 

Analysis: The access network, or commonly called "last mile", has been a bottleneck for data networks, in general, for a number of years. This is not a constraint specific to Internet or IP networks. Though the backbone network (the "core") capacity increased exponentially in the late 90's and early 2000's because of investments during the "bubble" period and innovations in optical technologies. Same level of advances never materialized on the access side because of the regulatory environments on the local network, lack of innovations from the Incumbent Local Exchange Carriers (ILEC), delay in technology advances on the cable networks and a number of other factors.

I do agree with most of the findings in the Nemertes' report, from a directional perspective. It is true that access network constraints will have an impact on individual consumers, but not necessarily on the business customers. Access network deployment into large cities and areas where business facilities are concentrated, have been a priority for local network providers, whether they are ILECs, CLECs or other alternate providers. A variety of bandwidth and technology options are available currently to most of the businesses, especially in North America and western European markets. Also, end-to-end Service Level Agreements (SLAs) are becoming the norm in business world ensuring the service quality on the access line also - which wasn't the case a decade back. Because of these reasons, it is hard to foresee any doom and gloom outlook for business market targeted services around the Web, like On-Demand software or Software-as-as-Service (SaaS).

The story is a bit different in the consumer market. In the residential market the choices are limited - whether it is technology, bandwidth or services. There is no concept of end-to-end SLAs in the consumer market (yet), and the business models are generally based on sharing the bandwidth at neighborhood level. (That is why recent multi-billion dollar investments by providers like Verizon (NYSE: VZ) and at&t (NYSE: T) on Fiber-to-the-Home (FTTH) infrastructure, and increased focus from cable providers like Cablevision (NYSE: CVC) and Comcast (NASDAQ: CMCSA) to augment their technologies make good business sense - even after considering the competitive landscape with wireless technologies in the mix.)

However, specific to the question raised before, constraints on the consumer Internet access will have very limited impact on On-Demand or SaaS software/services as these s/w and services are primarily targeting the business base.