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Why Broadband Prices Haven't Decreased
pdragon04 writes "After a new technology is introduced to the market, there is usually a predictable decrease in price as it becomes more common. Laptops experienced precipitous price drops during the past decade. Digital cameras, personal computers, and computer chips all followed similar steep declines in price. Has the price of broadband Internet followed the same model? Shane Greenstein decided to look into it. "
I have a pertinent comment - but I can't afford the bandwidth surcharge
In 1997 we got a 30/3 cable modem service, shared with the neighborhood. Since we were the only people on it, we had a 30/3 connection for $60/month. Now I get a dedicated 24/2 connection from U-verse for the same price. I guess it's better now?
Oligopolys don't have the same sort of competition that drives down prices. Even if they don't fix prices, they don't have an incentive to get into a bidding war. For this reason, the price of cell phones is high, and has remained high. Maybe the Walmart thing, and further work by Cricket or Metro PCS will eventually push prices down.
Competition.
Where I live I can have dial-up, or cable.
Broadband is more a like service than a commodity. The infrastructure support costs (particularly labor) simply don't respond to economies of scale the way repetitively manufactured items do.
No folly is more costly than the folly of intolerant idealism. - Winston Churchill
I'm old enough to remember when broadband to the home was new. DSL was $50/month. At my apartment, they wanted $80/month for 1.5Mbps. I now can get 8Mbps for $40/month. DSL was down to $15/month. So, prices did drop. Now they are bundling and offering "faster" service to keep prices up. I think this is totally inline with declines in tech prices. Every year new PC's are brought out at the same price points but with more or faster or better. PC price drops have stopped too. I don't see any conspiracy or screwing.
Price per Mbps has most definetly dropped down. I'm paying $2/Mbps now... I used to pay $40/Mbps 6 years ago.
You must have competition there. We dont.
---- Booth was a patriot ----
i remember the days when 33kpbs dial up was $30 or $40 a month. today i'm paying $120 a month for cable TV, digital unlimited phone over my cable, a DVR and the lowest level of broadband from time warner which averages out to 5mbps on average. sometimes hits 10 depending on time of day. DSL which was close to $50 when it first came out can be had for $15 a month these days.
otherwise there is a big difference in the business models. to build a laptop you need very little resources for the engineering and most of the cost is buying the parts and software. even in the 1990's companies like alienware and falcon northwest started very small because other than the engineering/QA costs your biggest cost is buying the parts which are repaid when you sell the computer.
the ISP/telecom business is different. you need a huge capital investment to lay the wires and upgrade your network. this is usually financed by long term bonds where you pay 8% or so interest on average. in the case of Verizon that spent $10 billion or so to deploy FIOS the interest cost is approximately $800,000,000 PER YEAR. if i'm wrong about the figures then find them yourself and calculate the interest. then you have to buy the equipment whether it's cable modems or FIOS modems or whatever which is very expensive when you are first deploying new tech. i've read estimates that Verizon spent $400 per customer for the equipment. and don't forget about each hick town forcing you to finance a yarn museum or some other nonsense because you are huge company that is going to make a killing on the poor residents and you should pay up
it's almost like the console business where the initial customers are money losers and you make your profits later on
Not quite so.
The speed of evolution in Broadband technology prevents the bill from dropping. By the time the equipment is fully depreciated and your bill _CAN_ drop it has to be replaced with a next gen equipment. No broadband tech has lived for more than 3 years so far.
DSL with ATM backhaul, DSL with Ethernet Backhaul, DSL2+, VDSL/FTTC and before the latter is anywhere near depreciated we are marching into PON/GPON land. Same for Cable - Docsis 1.0, 1.2, 2.0, 3.0 over 12 years.
It may start dropping once we are in the land of PON. That is the first technology so far which does not look like an ephemeral stopgap.
Baker's Law: Misery no longer loves company. Nowadays it insists on it
http://www.sigsegv.cx/
The title should say "Why Broadband Prices Haven't Decreased in the US"
For which the answer is:
- Most of the US has a de facto oligopoly in the provision of broadband services so the suppiers feel no market pressure to improve services and/or lower prices
The reasons for the oligopoly are:
- High barriers to entry due the cost of laying new cables/fibre, especially for the last mile. The difficulty in getting rights of way raises these even further.
- Entrenched suppliers with fully paid-up infrastrutures. To add insult to injury, most of that infrastruture has been paid for with taxpayer's money.
- Bought up and paid for politician which not only do not take any measures to open the market up for competition (like those that were taken in Europe) but activelly stop new competition from coming to the market (by blocking municipal projects, not assigning rights-of-way for laying new cables/fiber and in general maintain a climate of regulatory uncertainty).
The rest of the world has been hapilly getting better speeds for less money thank you very much.
I'm sure prices will drop soon.
It's like after music CDs were introduced that cost a whole 12-13 dollars each. But that was only because manufacturing plants were scarce and demand was low. Once production ramped up and demand increased then prices naturally went ....
Oh bother.
He took a duck to the face at 250 knots.
I thought I was subsidizing that with my $70 dial-up landline with all the options - for twenty fucking years.
How is the cynical answer not accurate here?
The article states that in most locations, broadband access is controlled by a duopoly of businesses that are unwilling to initiate a price war. This state of non-competition means prices are NOT being controlled by outside forces. The only thing that makes this duopoly better than a monopoly is that each non-competitor doesn't have the balls to actively exploit their position by raising prices.
Think the telecom industry is a bastion of good ol' American competition? Think again. These guys have been running circles around the FCC for years. They've taken massive tax breaks and incentives to build out broadband, and by any reasonable standard they have failed to make good on that promise. In the early 2000s, they succeeded in getting the Supreme Court to buy into the idea that they could box out newcomers like Covad, while anticompetitive tactics ran rampant. At the very same time, they were dragging their heels rolling out DSL. The irony is that the Baby Bells only exist in the first place because the government created them by breaking up the original AT&T.
Taxpayers have been getting reamed by US telecom companies for decades, the FCC is far too close to the industry it regulates, and the courts have done a very poor job of safeguarding a level playing field. The entire industry needs an enema.
Read the EFF's Fair Use FAQ
Finland has half the population density of the US and far faster, cheaper broadband. NYC has huge population density, but very slow, very expensive broadband.
The key factor is competition: US infrastructure owners are allowed to block competitors from using their bits of wire. This creates an almost insurmountable barrier to entry on the market and effectively establishes local monopolies. Consumers have little or no choice, usually.
Everywhere else in the world has a regulatory framework that enforces open access: owners of infrastructure have to sell access to their cabling to all comers at non-discriminatory rates. As a result setting up an ISP is cheap and easy, there is enormous competition, and consumers get fast broadband for chickenfeed.
Here's a lecture by Lessig on the subject:
http://lessig.blip.tv/file/3485790
Rochester, NY
My options are:
1Mbps/256Kbps for $40 from Clearwire.
3Mbps/512Kbps for $55 from Time Warner.
The telephone company offers DSL at similar speeds and price to Time Warner, but I have had only unpleasant dealings with them in the past, and have heard* that they used to "accidentally" disconnect the CLECs until they all stopped offering competing services.
* off-the-record comments from people who dealt closely with CLECs. I do not know if it is true or not.
Why can't I get anything better than 768K up? A few times I have asked and they responded with an angry "Why? Are you doing a lot of file sharing?". I tried to explain that I back up my data to a VPS and I work from home and push a lot of data through a VPN, but I got the impression that they think anybody who wants a good upload speed is a pirate.
Go green: turn off your refrigerator.
I live in Finland. We have 41.124 persons per square mile. You have 81.769 persons per square mile. Yet for some reasons broadband prices here are dirt cheap compared to yours. How is that possible?
Just think about it. You have extremely expensive broadband even in places such as New York which is bustling with people. We can get faster and cheaper connections in middle of nowhere (outside the few major cities).