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How Much Should Broadband Cost?
An anonymous reader writes "The difference in cost between broadband options seems to be the primary motivator for consumer spending, reports News.com. Frugal consumers are opting for the lower-priced DSL options, while those with more money to spend on services are opting for cable modems." From the article: "A year-and-a-half ago, pricing of DSL and cable modem service was roughly the same. But over the past year, the phone companies have launched an aggressive assault by dropping prices. At the end of 2005, the average price of DSL service was about $32 per month, roughly $9 less than cable, according to research firm IDC. AT&T has twice lowered the price of its DSL service and now offers its 1.5Mbps service for $12.99 for the first year."
I used to have cable (TW RoadRunner service). Never had a problem with billing or availability, speeds were advertised as 5M/768 and I was seeing about that. But I was paying $55/month for it, and when my local phone company (Alltel) started advertising 1.5M/768 for $30, I couldn't say no. Yeah, downloads are a bit slower, but still not bad (I generally see ~170MB/sec down, vs. 280 or so w/cable). Latency seems to be about the same. My only real complaint is that with RR, I had a quasi-static IP that I could access from anywhere. Now my DSL modem gets a 192.168.x.x address, so I'll have to pay if I want to put my web site back up... :/ Still, I figure I'm saving $300/year, so I'm happy.
Just junk food for thought...
Let's see what 29,99 can get you in France:
24mbit internet
WIFI MIMO router/set-top box, 1gb webspace
Telephone line fees included, you really have nothing else to pay
Unlimited free national and international POTS phone
200 digital TV channels over DSL, HDTV and DVB-T compatible terminal included..
This one company litterally drove the prices down and the offerings up.. Now that the prices are low enough, everybody is catching up on triple-play. They also have other plans, like building a mesh of wifi hotspots using their set-top boxes to route free wireless VoIP calls. Free cell phones, just imagine that..
In a properly working market, the price is the determined by the costs of the sellers, not the desires of the buyers. In most circumstances, this means marginal cost plus fair return on investment.
whoever taught you your economics, they should be fired.
the price is determined by the desires of the buyers first, with the costs of the sellers a close second.
You cannot market a product nobody wants, or a product everyone wants out of their price range or they dont buy, plain and simple, and thus the market collapses.
Further, if you are not pressured by consumer needs and competition for those needs (e.g. if a monopoly or oligopoly is presently stifling competition) there is no reason to develop greater efficiency and lower those costs. Therefore the consumer suffers, they do not get optimal service for their dollar, and arguably the producer and even the environment suffer, as they are not making efficient use of their inputs.
VLC FOR MAC IS DYING! IF YOU DEVELOP, PLEASE SAVE IT!!
I think it should cost as much as the consumer is willing to pay - at least that is how it works when you have a properly working capitalist system.
Actually, with perfect competition, firms would charge their marginal cost of producing it. The intuition behind this is that if they did not, and there exists free entry (a requirement of perfect competition), then another firm would charge slightly lower, and thus get all of the customers. Of course, in the broadband industry, there exist fairly natural monopolies because of the huge fixed costs of the infrastructure and "last mile" runs.
Now consider what you said: the consumer's willingness to pay. If firms are able to charge as much as each individual is willing to pay, this is perfect price discrimination. DSL and cable operators do some degree of price discrimination by offering the different tiers of speed at different prices. If I understand you correctly, I'm pretty sure having DSL cost what consumers are willing to pay is not what you want. After all, I'd certainly be willing to pay a bit more for my DSL considering how much I use it.
When is the last time you saw a new DSL provider *other* than the phone company?
I am really worried that our options are getting smaller, and not larger - thus the prices will go up, and our bandwidth will not increase with the extra cost.
Yes, in reality, internet service is fairly consolidated. If you're lucky, you'll have three good choices for broadband (many have two -- cable or DSL -- or fewer). Still, in many areas services like Speakeasy are available as alternatives in the DSL market. In my experience, options for broadband are not getting smaller, as you suggest. Some communities or apartment buildings even form their own co-op style internet service providers if they're truly unhappy with the choices. Before, when most people were on dialup, it'd be hard to convince enough of your neighbors to want to start such a service.
As for prices, we're seeing a bidding war. I would expect this to be good for consumers, so long as enough options remain. I haven't seen evidence that DSL or cable operators are selling below cost, as some have claimed. I seem to recall paying about $55/mo 5 years ago for cable internet access (in addition to the TV channels), and now prices are (much) lower and speeds are still good in most areas. The bidding wars don't seem to be driving out players like Speakeasy, so I personally just don't see such a pessimistic trend.
"The universe seems neither benign nor hostile, merely indifferent." --Carl Sagan
I use AT&T's service (the 'Pro' plan), and I max out at something like 250kbps/52kbps. They use the diffrentiation between bits and bytes to fool you into paying for shitty speeds.
A new kind of digital divide is emerging in the U.S. broadband market.
On one side are middle-income and price-sensitive households, which tend to favor DSL service offered by phone companies. On the other are more affluent families, which gravitate toward higher-speed cable modem services.
According to a recent report published by Leichtman Research Group, about 21 percent of households earning an annual income of between $30,000 and $75,000 a year subscribe to DSL. About 18 percent of these households subscribe to cable. By contrast, 37 percent of all households with annual household incomes over $75,000 subscribe to cable broadband and 27 percent subscribe to DSL.
"Clearly price is much more important at this point in the game," said Bruce Leichtman, president and principal analyst for Leichtman Research Group. "Middle-income families making the jump from dial-up to broadband are much more price-sensitive, and clearly the phone companies' messaging on low-priced DSL has gotten through loud and clear."
A year-and-a-half ago, pricing of DSL and cable modem service was roughly the same. But over the past year, the phone companies have launched an aggressive assault by dropping prices. At the end of 2005, the average price of DSL service was about $32 per month, roughly $9 less than cable, according to research firm IDC.
ATT has twice lowered the price of its DSL service and now offers its 1.5Mbps service for $12.99 for the first year. Since ATT's prices are promotional, after the first year, the price of the service jumps to the company's regular pricing model, which is $29.99 per month. Verizon created a new tier of service, which includes 768Kbps downloads, for $14.95 per month.
Price pressure
Regardless of household income, the promise of lower prices has also convinced some cable subscribers to switch to DSL. Dan Spencer, 38, of Norristown, Pa., had been a Comcast broadband subscriber for over three years. But after he realized his family was paying over $100 per month for high-speed Internet access and TV service, he decided to abandon Comcast for EchoStar's satellite TV and Verizon's DSL service.
"My wife usually pays our bills," he said. "But one day, when I saw how much we were paying Comcast for our cable TV and broadband, I was shocked. It was outrageous."
Spencer said he now pays about $75 per month for TV and Internet access, and he estimates he is saving roughly $45 per month over what he was paying for the Comcast service.
The low cost of DSL has kick-started DSL subscription rates, helping DSL providers increase their total customer base by 39 percent in 2005, according to Forrester Research. Verizon alone signed up 613,000 new high-speed Internet subscribers in the fourth quarter of 2005, a record for the company. It continued the strong growth in 2006, having signed up 541,000 new subscribers in the first quarter.
But the phone companies' success hasn't meant the demise of cable, which in total saw broadband subscriptions grow 21 percent in 2005. In fact, cable companies have also set new records in recent quarters for the number of subscribers they've acquired.
Comcast, the largest cable operator in the U.S., added 436,000 new subscribers in the first quarter of 2006, the larg
I just received a phone line from SBC for $5.20/month. Now this is before taxes and fees, and has no long distance, and a limit on 60 local calls per month. But because I only ordered it so I could get DSL from another provider, that's alright with me.
Basic phone service for $40/month? Sounds like you're getting ripped off and/or exaggerating.
/*This is because the COST of providing water is very low, and competition assures that the price tracks these costs.*/
Huh? How is there competition in the water market? In most every city, there is a single provider working under a government enforced monopoly. The water market is probably the single most regulated market in the nation.
Also, if the cost of water reflected the costs of providing it, users in Phoenix, AZ would pay more than users in Buffalo, NY. This is currently NOT the case. The fact is, the price of water usually reflects the government subsidies, rather than actual market costs resulting in huge inefficiencies, and excessive depletion of groundwater supplies in many parts of the West.
We all know what to do, but we don't know how to get re-elected once we have done it
It's the same with me. I pay ~$30 for DSL, but to get it I have to pay an additional $22 for a landline I don't need or want. Add the BS taxes and fees, and the total is around $60. Local cable internet is also around $30, but you can get it without cable tv or anything else. Cable service sucks though, so I'm happy to pay the extra for DSL.
They may have lowered their prices on some options, but they are raising them on others. I just got a notice a month or so ago that they were raising my DSL price by 50%, but offering me "no commitment" (I had previously had 1-year contracts for 2 years). I called to investigate, and to inquire about the advertised $12.99/month deal. It turns out that the advertised special is for a new service that isn't available in my area yet, and might not be for years. So that isn't an option. ANd the company has raised prices on the old service (that I have) to encourage people to switch to the new service. But I can't switch. And after talking with three people (two different supervisors) it seems clear that they can't make any exceptions. Each person agreed it was stupid, but could offer me nothing.
So rather than simply leave me and my service alone, so I can continue to pay them every month until they have the new service to offer me, they are encouraging me to look around at other options. The only other broadband option available is Comcast. I don't like them very much, and would rather stick with my DSL, but priced over the next twelve months getting cable broadband is quite a bit cheaper. I can always reevaluate in a year.
So in some misguided attempt to encourage people to switch services, they are losing customers. ATT is going to fall quite far before it rights itself.
... There may be exceptions, but I have yet to live in an area with a provider that doesn't require a 12-month contract with a large penalty for cancellation of your DSL. The penalty is often more than just paying the remainder-- I paid $25 a month to my last provider for four months after I moved out of their area because it would have been over $200 to cancel. Not to mention, if there was a problem (like when the DSL was out for a week) they took their sweet time to send someone out... Because what was I going to do, cancel with eight months to go?
The cable provider I use now (like most other cable providers) is month to month, it costs a little more but I can get out at any time and since they are trying to keep me as a customer the service is much more prompt.
Over the past three years I've received two letters from SBC notifying me that my DSL rates are increasing. Meanwhile I've noticed that the rates for the first year of service have steadily dropped. I used to think that I was just getting hammered because here in Dallas, my options were pretty much limited to SBC and Comcast (with a touch of Earthlink and a couple of more expensive options). Nope. My parents in Spokane suffered a rate increase in the past year. My sister in San Francisco had a rate increase in the past two years. My brother in New York has also experienced a rate increase recently. Meanwhile while (unsuccessfully) looking around for a new provider, I've noticed that the rates for the first year of service have steadily dropped (just as the article claimed). The ISPs are monopolistic crack dealers - and they know it. For being a free market, I don't feel so free.
My DSL provider charges me only $5 extra per month for not having a land line telephone. Even the telcos will give you DSL-only packages these days for similar prices. Your quoted prices are from the ancient past.
Legalize recreational marijuana. Seriously.
But you see, the large telcos and cable companies have co-opted the system, and now are using legislation, and unfair practices to keep any competition from getting into the market. When is the last time you saw a new DSL provider *other* than the phone company?
If you have DSL, there is a good chance you have a choice of providers.
My ISP is AT&T (SBC). I can also buy my DSL service from Sonic.net and DSLExtreme.com and one other provider that I can't remember the name of right now. Sonic and dslextreme's promo prices are slightly higher than AT&T's promo prices, but they are still much lower than AT&T's regular month to month prices.
For three years now, I have been paying the "introductory" rate for my DSL service with SBC/AT&T. It was $39.99/mo for 3mbit service in 2004 when I first signed up, $29.99/mo for 3mbit service last year and I just renewed for this year at $19.99/mo. This year they tried to force me into switching to $39.99/mo after my contract expired and I told them to cancel my account and I would switch providers. They decided to give me the $19.99 rate.
My case is not a special one. Just about everyone is the US who can get DSL service can buy their DSL from someone other than their phone company. Most people just don't realize it.
I don't always use unix-like operating systems; but when I do, I prefer FreeBSD.
I work for a small ISP wholesaling AT&T's DSL packages. Our prices have recently dropped to $9.95/mon (1.5m down), and are expected to go down again in the coming months. The post compares apples to oranges. We offer 6m down for 45$ (USD) a month, which is very competetive with cable speed and pricing.
If you compare US broadband to broadband in Europe, aren't we still overpriced for less bandwidth dollar for dollar?
by which I took it to mean one that closely followed the perfect market model. In that case, the price is nothing other than the marginal cost of production, and has not a whit to do with the desires of buyers.
In real markets, there are distortions which allow sellers to capture extra consumer surplus. However, these distortions are much smaller than many think in most markets. As long as you have more than two or three competing sellers, marginal prices are rapidly approached.
For the same $29.99 USD you can get 100mbps symmetrical (100m both uplink and downlink) internet in Hong Kong. Comes with phone and IPTV as well. They also throw in an Ipod Nano if you sign the 2 year service contract.
http://en.wikipedia.org/wiki/HKBN
I pay for 3Mbps DSL from Verizon. I'm about 1/2 or 3/4 away from the Corporate Office to get the 3Mpbs service.
I have to say, it's been as close to as-advertised as I need. I regularly clock at around 2.7 or 2.8 when downloading.
Cable, sure I wouldn't mind the extra speed bump but Comcast cable is crap around here. Signal quality sucks, outages, etc. And the "technicians," please... they usually don't know anything. Their solution to every problem is "cut the ends of the cable, attach a new connector, and walk away" even though the problem didn't go away the LAST 4 times they were here doing the exact same thing.
Verizon, eh they may be evil but they're nowhere near as bad as the Comcast center near me.
This might be true except that they're usually the same, or have a common parent. The two largest mobile providers are Verizon and Cingular, which is owned by AT&T and BellSouth. A few of the smaller players could make providing Internet service a way to gain share, but I don't seriously see that happening. The pattern will be, large company does nothing, small company spends itself into bankruptcy innovating, large company buys small company and its innovative infrastructure at fire sale price, large company charges 2x as much for previously innovative service and places numerous restrictions on its use to ensure that the new service generates more revenue for its other business units as well, customers start to look for new innovative services to get away from large company. Lather, rinse, repeat.
What is this, a frikin ad site?
"AT&T has twice lowered the price of its DSL service and now offers its 1.5Mbps service for $12.99 for the first year."
It reads like ana AT&T add. No one (on slashdot) gives a rats ass what they charge for their "introductory period". Only their normal, non-introductory rate is what we care about. What's next, "They've lowered their rate to free for the first month! So obviously, by not mentioning what it actually costs, it's cheaper!"