There Is No Broadband 'Price War'
More like a broadband 'playground scuff up'...
Yesterday the Wall Street Journal insisted
there was now an erupting broadband "price war," simply because AT&T and Verizon were offering some relatively minor promotions to battle last quarter's dismal quarterly additions. The Journal's piece led to a flurry of articles
that seemed to agree: yes, we're either in the midst of, or on the cusp of, a very exciting broadband industry price war -- which would be really very interesting, were it actually true.
For some reason the press feels compelled to insist we're in the midst of a broadband price war, even at times when customers are actually paying more
. In reality, incumbent ISPs do everything in their power to avoid competing directly on price, instead using promotions with oodles of fine print and restrictions whose primary purpose is to create the illusion of value.
AT&T's new price lock guarantee
, the Journal's primary piece of evidence to suggest a bloody broadband Gettysburg, is hardly a particularly exciting promotion (or a new idea
). Its primary draw is the elimination of an early termination fee and long term contract, both of which are relatively new phenomenon in this sector anyway. In reality, AT&T has raised the price of their DSL services twice this year for most customers.
Verizon's new offer (and the Journal's exhibit B), six months of free DSL, is a slightly more interesting proposal, though alone is hardly enough to constitute a "price war." The service requires that you bundle (not so free) landline phone service. As we've noted, Verizon's FiOS service continues to see price hikes whether we're talking stand alone products or bundles
In other words, the Journal's entire evidence for a broadband price war comes from one phone company offering a limited time promotion on their slowest tiers. In reality, the United States is twenty first in average amount paid per broadband subscription (OECD data
), while limited competition in many markets continues to allow carriers to keep prices high. Just a tip: you'll know there's an actual broadband "price war" when the cable industry participates.
·Comcast Digital ..
Not down here in Atlanta AT&T's version of offering you a good deal is locking you in at their current regular price for 2 years.
Even Steve Wonder can see through that bull. At least ComCap hook you with $19.95 for x months and then drop the regular price on you.
God saved me from myself! Thank you, Lord, in the Name of Jesus!
3 quarters from now may be a slightly different story. If broadband ISPs really impose stealthy fee increases through ridiculously low caps like the 5 GB proposed by TW and Frontier, then I think 3 quarters from now you'll see their financial reports showing not just stagnating numbers of subscribers but actual drops in subscriptions. If that happens, then you might see a slight price war. We've seemed to enter a period of stagflation, last seen in the 70's when OPEC imposed the embargo. Global economies are slowing, including China's and India's (although granted they were in double or triple digit growth spurts so the slow down isn't hurting them much, now). Although a slow down in theory should help control inflation, that's not happening yet. If food and energy prices don't drop as the world economy cools, then expect to see consumers tighten belts much, much more. I keep saying this, broadband isn't essential , unlike food, shelter and energy. If I were a stock holder in TW or Frontier, I'd be very worried about the adverse impact their proposed fee increases disguised as caps will have on retaining customers.
goal posts... don't let traditional media or isp interests set the goal posts..
for internet access the goal posts are:
offering more speed/value for the same or less price (usually, but not necessarily less than your competition). you need to understand that sometimes prices increase and that means who's providing the greatest value with the last mile pipe infrastructure it's delivered on. you can't claim that a 3, 6, 9, 15, 20, 30, 50 megabit connection is the same on dsl, cable, or fttp because they're not. both dsl & cable can have a 20-33% fall off in overhead & traffic shaping due to the nature of their last mile delivery. fttp offers no overhead on the download but a 5% throttle on the upload (or at least Verizon's version of it). real competition is getting more for you money, however this will unfortunately not be a race to the bottom as in not making a profit.. it will be who controls price (holding the line) or increases less while offering more bandwidth for your money. the days of internet bills being below $50 a month even for entry level service are numbered... however, that entry level speed will end up being somewhere in the 10-50megabit speed range while the higher tiers will push 100megabits... provided that last mile providers invest in the technologies to deliver such a product. not only the last mile must be increased, but the supporting backbone infrastructure needs to see a parallel increase in provisioning.
a word to industry forces; traffic shaping, by the byte monthly allotments, terms of service, and other dirty tricks affect the price/value of services delivered. this is a factor which helps the consumer determine where to subscribe and what price they want to pay. if there is a choice of providers.. you have a hand in the behavior of your isp's service offerings. if they aren't giving you want you want, you need to cancel service and tell them exactly why your canceling... no doubt, Comcast will hear an earful about 250gb caps as much as Verizon hears POTS surcharge cramming and price increases.