Mixed Signals: Is There A Broadband Price War? Is It A New Thing?

from the depends-on-who-you-ask dept

Wed, Sep 3rd 2008 2:11am — Mike Masnick

Remember just two years ago, when there were all sorts of stories about a supposed "broadband price war" in the US, where prices of DSL were even dropping below the cost of dialup lines? While that was somewhat misleading, it's difficult to see how the Wall Street Journal can suddenly claim that the idea of cut rate promotional pricing for broadband is suddenly new. That seems to go against what was being reported just a few years ago. Broadband providers have had such promotions going for quite some time -- and while the specifics of the promotion (and the ease of actually getting the promotion pricing) change over time, it's hard to see how the latest efforts are all that different. And, in the meantime, just as the WSJ is claiming that broadband prices are in some sort of freefall due to this competition, Richard Bennett is trying to make the case that we're all about to get broadband price increases thanks to the FCC's wrist slap on Comcast.

So, apparently, broadband providers are extending all sorts of promotions with cheap pricing to get people onto their network, but if you actually want to use the network, you should expect much higher pricing. That seems like a recipe for disaster.

Of course, the truth is somewhere in between. The so-called "price war" is exaggerated for effect -- as it's often nearly impossible to get the actual advertised prices in many cases. Meanwhile, Bennett exaggerates the claim that we're seeing price increases due to caps. Broadband caps will eventually be recognized as a hindrance to innovation, but they're hardly a price increase in most cases. And, if they really do end up being a huge price increase for users, then won't that create incentives for the other providers (the ones that the WSJ claims are itching to steal customers away) to get rid of the caps or change them? That is unless there really isn't competition in the market -- and Bennett himself was just suggesting that there's plenty of competition in the broadband market.

So, based on these various stories, it seems that, thanks to the FCC's deregulatory efforts, we have tremendous competition in the broadband market that is driving down prices, except for the fact that it's driving up prices due to the lack of competition in the market created by bad FCC rules. Clear?

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Filed Under: broadband, competition, price war

18 Comments

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wasnt me!, 3 Sep 2008 @ 3:13am

Miling the cow vs innovations
ISPs like all companies have 1 thing in mind income, the higher the better.

true that innovations and new products might increase said income, but it will take time before an innovation like that happens and when it does chances are there will be infrastructure upgrades and other costs needed so it can be applied.

instead they choose to take the easy and sure route: minimize cost maximize market share.

besides when something new does come up it will change the current game and that is not something they are looking for, chances are if they are truly thinking thats exactly what they want.
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Anonymous Coward, 3 Sep 2008 @ 4:37am

Cable prices have stayed pretty much constant without noticing the effect of DSL. That's because by being so much faster than DSL, they provide a better service and therefore can charge what they want for internet, as they really are the best out there. I'm hoping FIOS comes out to get deployed on a large enough scale so that you suddenly have to start worrying, but that's going to take an awfully long time.

I guess what I'm saying, there's competition between DSL providers but not between DSL and Cable, as Cable's performance puts them in a completely different competition bracket.
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Anonymous Coward, 3 Sep 2008 @ 4:38am

I think you would have to a blind moron . . .
Who has never actually purchased any broadband, to believe competition is driving the price down? If you are one of the fortunate few who can get FIOS, then you are in great shape and do benefit from competition. If you are everyone else, choose between very slow DSL or over priced cable.
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chris (profile), 3 Sep 2008 @ 4:46am

competition? wtf is that?
anyone who mentions competition and lower prices in telecommunications is lying thru their teeth. broad band services are used to prop up fading monopoly line services like cable television and telephone services. sure, you can get DSL with no phone service in a tenth of the US, but for the majority of us, IF you have a choice of providers, they are one phone company and one cable company, both requiring subscription to another service in order to get broadband.

that's not choice and that's not competition. that's two monopolies offering similar products to prop up customer lock in.

if things were truly deregulated, then it should be possible for others to enter into these markets. why hasn't anyone done that?
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Anonymous Coward, 3 Sep 2008 @ 5:12am

Huh? A broadband price-war? You have to have a competitor to engage in a price war with. Broadband has exclusive access to their customers. You get what is offered by the one company or you take dialup/dsl (neither of which is comparable and in cases where the offices aren't next door, often not available).
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feed-up, 3 Sep 2008 @ 7:01am

Price War?
Ok I'm feed-up!!! Exaggerated news to get headlines is going to kill thousands!!!!!
Thousands of real news stories.
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Karl Bode, 3 Sep 2008 @ 7:24am

The Journal conveniently omits that many AT&T DSL customers saw $5 price increases TWICE so far this year...

AT&T's price lock DSL promo is kind of a joke, given its only benefit is the elimination of an ETF and contract, both of which are relatively new ideas in the broadband sector anyway.

Verizon's promo is slightly better, but it's only on their two slowest tiers and requires a not-so-free landline bundled in.

So if you define "price war" as DSL operators engaging in some fairly uninteresting promotions while rising normal prices for most services and bundles -- yeah, it's a price war.
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Anonymous Coward, 3 Sep 2008 @ 7:24am

Sort of...
I'm fortunate enough to live in an area where fiber optics is available around the city. The fiber was all laid and paid for by city tax payers, in promise of high broadband at cheap rates. Because of this, at least in my area, it has created a bit of a price war. 10mbps Comcast, which was not even offered for a long time, is now only costing $48/mo. When I inquired why, they said it was because I was in a "competitive market". I wouldn't call it a price war exactly, but in some ways it is. Qwest is even getting in on the action now, too. Not that either could compete with 50mbps fiber anyway... Hehe.
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RabC, 3 Sep 2008 @ 7:36am

South Korea
In South Korea the competition for customers has hotted up to such a degree that 100mbps Fibre is actually free : you are only expected to start paying once you have downloaded your first 1200gb. After that its equivalent of $1.20 per month. And they offer all equipment free, homeplug routersx4, modem (wireless of course), free installation.
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Anonymous Coward, 3 Sep 2008 @ 8:06am

Comcast: Same ol $50 a month and now an added cap.

If thats a price war, it is being fought like Bush fights in Iraq.

Yawn!
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Nick, 3 Sep 2008 @ 8:25am

Re: South Korea
It's pretty easy to do stuff like that when your whole country is the size of Ohio.

The US is in a unique situation with broadband competition singularly because our country is so damn big.

It's simply unreasonable to compare the situation with broadband in the US to places like South Korea, Netherlands, Japan, and other small countries that have very advanced services.

Please don't get me wrong - I'm not trying to disparage those countries, but it's a simple fact that our land mass is so large that we have a completely different (and significantly more expensive) set of problems to deal with.
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Yakko Warner, 3 Sep 2008 @ 8:30am

Re: competition? wtf is that?
Amen.
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DaveW, 3 Sep 2008 @ 9:12am

Re: Re: South Korea
Nick, kneejerk patriotism aside, your argument makes no sense in the real world. Chicago, NY, LA and the rest of the cities where most Americans live are nowhere near the size of Korea, Japan, Holland, or the rest of the advanced countries of the world. Cable/Net service is local, not national -- providing first-world-level communications in NYC is in fact a much easier set of problems than wiring all of Holland, for example.

The difference between the US and its communications betters is not land mass. It's governments that set parameters designed to produce first-class communications infrastructure and service, instead of maximum enrichment for telcos/cablecos.

To take your example, if it's so "easy to do stuff like that when your whole country is the size of Ohio", how come stuff like that sucks so bad in Ohio?

The only area where you argument makes the slightest sense is in the case of connecting very isolated dwellings/towns. But that only applies to a tiny minority of Americans. It has nothing to do with the reality that even our densest metro areas pay 1st-class prices for 3rd-world service. How much did the CEOs of Korea's comcos get paid last year?
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Anonymous Coward, 3 Sep 2008 @ 10:06am

Re:
"Comcast: Same ol $50 a month and now an added cap.

If thats a price war, it is being fought like Bush fights in Iraq. "

ROFL thats sig worthy
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Adam, 3 Sep 2008 @ 10:27am

I must be one of the few lucky ones...
My RR Premium (standalone, no TV) price dropped from $80 to $60 recently while the speed was doubled from 512k/10M to 1M/20M.I live in Queens, NY.

Adam
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Anonymous Coward, 3 Sep 2008 @ 12:53pm

no competion? Suck it
alas, Comcast has launched a super-high speed tier in some parts of the country with the onset of DOCSIS 3 technology... Cable can't be compared to already inferior DSL, but when wideband is readily available, it'll match the speeds of fios and since it won't cost the cable company much more then it already does with very minor backbone upgrades, while with fios, the company's that offer it or similar, have to front a premium price to certify the home for fiber and get it in there.

all in all, i've had my cable for 5 year now, started at 1meg 128k up, after several speed increases (whithout increasing the same 45.95 after promo including the rental modem price)...
now I have service at up to 16m down 1.5m up with actual speeds that sometimes go into the mid 20's m down and up to 3m up.... i love internet these days,
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Ryan Radia, 3 Sep 2008 @ 6:04pm

Broadband may not be getting cheaper, but it's definitely getting faster
Prices may not be going down, but price per megabit is declining every year.

For about $40 a month with Qwest, 6 years ago you could get 1.5/896. Then, 3 years ago, you could get 5/640 for the same price. Now its up to 12/896, all for the same $40.

For a while, Comcast's fastest residential tier was 8/768 for about $50 a month. Now a huge portion of Comcast subs can get 16/2 for roughly the same amount.

So while your broadband bill might not be getting much lighter, there's a very good chance that you're getting much more bang for your buck.
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Ticked Off Rural Net User, 4 Sep 2008 @ 12:00pm

Rural prices per unit escalating as tiny cap is proposed
I don't see where the price of DSL here is declining. Used to be "unlimited high speed access" with Frontier, but now it's capped at 5GB per month. Well so far it's "guidelined" at 5GB a month while Frontier I guess is trying to dodge lawsuits. The policy says it's a cap. Frontier says enforcement is not being done "at this time."

Anyway, figuring I would NEVER have signed up for DSL if it came with a five gig cap (one HD movie and spare change to read your email with?), I opted out. That process took a FEW conversations. I am back to a 56k dialup. I'm dying while web pages load, but soon enough I'll get used to it and those red Netflix envelopes are already popping up in my snailmail. Am I happy? Nope. Will the PSC and the FTC and FCC (those mostly lame dudes!) and anyone else I can think of be happy when they get my opinion of a FIVE GIG cap? Nope! Is Frontier happy to lose my business? Sure, why not? I was using 20 to 40GB some months, probably. And why not, I thought I was using the internet of today, not some BBS of the 80s.
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