The Broadband Price War That Isn't

[David Farber <dave () farber net>]

Begin forwarded message:

From: "Robert J.Berger" <rberger () ibd com>
Date: July 17, 2005 7:35:17 PM EDT
To: Dave Farber <dave () farber net>
Cc: Dewayne Hendricks <dewayne () warpspeed com>
Subject: The Broadband Price War That Isn't


The Broadband Price War That Isn't
Posted on 2005-07-14 13:41:39
Written by Karl Bode
http://www.broadbandreports.com/shownews/65510

Comcast speed increases have caused the newswires to rattle with talk  
of a "broadband price war" despite the fact some Comcast customers  
are now actually paying more. This Associated Press headline proudly  
proclaims "Competition slashing costs of broadband" - But is it?.

Last week tech journalist Dana Blackenhorn railed against FCC chief  
Kevin Martin for his self-congratulatory Wall Street Journal  
editorial (reg. required) on the fine state of the industry.
"The fact, Mr. Martin, is that I am paying $110/month for 1+ Mbps  
downloads -- that's $50 for DSL and $60 for the phone line. The  
alternative from cable is equally pricey -- $70/month for the cable  
and $40/month for the cable modem service."
While he puffs up the numbers for melodrama's sake (or he's the worst  
comparison shopper alive), his point still hits its mark: that a  
lumbering duopoly using elaborate pricing schemes are being dressed  
up as vibrant competition.

Thanks largely to bundling, the broadband industry has become a  
consumer market where you need a lawyer and scientific calculator to  
determine if you're actually getting a good deal. Most of these  
articles on "price wars" simply aren't doing the math or reading the  
fine print.

The SBC $14.95 DSL deal prompted talk of a price-war with cable. Few  
mentioned that price didn't include the cost of a mandatory phone  
line (and associated fees). Fewer still mentioned it was a 12 month,  
new-customer only on-line promotion. Even SBC investors, concerned  
they were giving away the store, had to be soothed by SBC chief Ed  
Whitacre that this was PR aimed at dial-up laggards.

At least the bells have been lowering prices over the past several  
years. Looking for cable price-cuts in this "price war" outside of  
promotional deals? There aren't any.

In fact, take a good look at the actual detail surrounding the recent  
Comcast speed increases. If you don't subscribe to Comcast cable  
service, you'll pay $57.95 for 4Mbps downstream service. The new  
8Mbps tier for those who say - have satellite TV - will cost you  
$77.95. Comcast actually raised prices for the same speeds in some  
instances.

In fact, you can expect even higher cable prices once the FCC begins  
a rewrite of the 1996 Telecom act, and starts forcing the cable  
industry to contribute evenly to the Universal Service Fund. Price War?


---
Robert J. Berger - Internet Bandwidth Development, LLC.
Voice: 408-882-4755 eFax: +1-408-490-2868
PGP Key: http://www.ibd.com/html/rbergerPublic.gpgkey
http://www.ibd.com



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