Slashdot Mirror
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."
Most neighborhoods have a free wireless broadband provider... Apparently called "Linksys"...
"At the end of 2005, the average price of DSL service was about $32 per month, roughly $9 less than cable, according to research firm IDC."
DSL is still more expensive than cable unless you have a landline already. Home telephone service is around 40$/month here, which would make DSL (assuming I could get 32$/month anyway, which seems low) that would put me at over 70$. Compared to cable which is under 60$ and comes with "free" basic cable, since there's no way not to pay for that too.
I've already got a cellphone and don't have any use for a landline. Maybe if the DSL providers were actually any better than comcast (local cable monopoly), but until they are it's not worth the extra cash.
The Farewell Tour II
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
Why cable companies haven't changed their marketing to reflect this, I have no idea. Behind the times, I guess.
--triv