Broadband Competition Fosters Price Cuts, Faster Downloads

Published March 1, 2009

Competition among Internet service providers is giving consumers more bang for their buck in broadband services, according to a new report from market research firm Pike & Fischer.

The report, “High-speed Internet Packaging and Pricing Strategies: 5th Edition,” by Mitchell Shapiro of the Silver Spring, Maryland-based tech consulting firm, points out cable broadband prices have remained steady through 2008 even though operators have been increasing speeds. The firm attributes this trend to more competition from Verizon’s all-fiber network, FiOS, which offers high-speed broadband at competitive prices.

Average prices for cable modem service have remained steady at about $40 to $45 a month, according to the report. That’s happening even though standard cable modem speeds have climbed from an average of 3 megabits per second in 2004 to 10-15 Mbps today. Some markets have 50 Mbps service.

Increasing Variety

“As Verizon has rolled out FiOS Internet and TV services in more and more communities, the market has seen an increasing variety of prices and data rates, as cable operators respond to FiOS launches on an increasingly market-by-market basis,” according to a statement by Shapiro.

Meanwhile, cable TV prices continue to rise, according to the report, released late last year. For example, TimeWarner plans to increase the price for its cable TV service by more than the hike for its full Triple Play Starter Pak, which includes phone and Internet. Triple Play will rise to $116.95 from $114.95, while the monthly cost of standard cable TV service will increase from $43.25 to $46.30 in most areas, according to a rate card distributed to customers.

Fostering Competition

Other countries are fostering improvements in services and prices by allowing competition among different entities over the same infrastructure, such as cable, said André Weber of Simon-Kucher & Partners, a German-based marketing firm with its U.S. headquarters in Boston.

That approach would foster better competition in this country, Weber said, though “by inviting competition on existing networks, that doesn’t give companies [current network owners such as Comcast] enough incentive to upgrade.”

Programmers Charging More

The main reason the pricing for television is going up while other types of broadband are staying steady is that TV programmers, such as ESPN, are increasing the prices they charge cable providers, said Steve Titch, a telecom analyst with the Reason Foundation in Los Angeles.

“Consumers have shown a willingness to pay for certain programming,” Titch said.

Municipalities running their own cable systems have learned prices have to rise when cable networks increase their prices. By granting additional cable franchises, municipalities could foster more competition, as is already the case with broadband providers, said Daniel Ballon, a technology policy fellow at the San Francisco-based Pacific Research Institute.

Phil Britt ([email protected]) writes from South Holland, Illinois.

For more information …

“High-speed Internet Packaging and Pricing Strategies: 5th Edition,” December 2008, Mitchell Shapiro, Pike & Fischer: