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Again, There's No Broadband 'Price War'
Non-price competition is the benefit of monopoly/duopoly power...
by Karl Bode 09:52AM Wednesday Oct 22 2008
About twice a year, in reaction to even the least exciting price promotions, the media proclaims en masse that there's a "broadband price war." When you look closer, that's never the case -- and in some cases customers are actually paying more. The nation's cable and phone companies operate as monopolies and duopolies, intentionally engaging in non-price competition. Occasionally carriers do offer introductory discounts, or promise savings should you bundle services. But more often than not these efforts are designed to give the illusion of value -- not actual value, and once you crunch the numbers and add all fees, your savings are negligible.

Techdirt directs our attention to a Technology Liberation Front report that claims that price drops are occurring, it's just that you aren't looking at it correctly. According to the piece, costs are falling on the price per megabit level. Citing the new DOCSIS 3.0 tiers we exclusively reported Monday, the website notes that customers are paying the same amount for faster speeds, which could be construed as price savings:
quote:
Though we may not be amidst a "price war" among ISPs per se, as Mike Masnick recently argued, there is simply no denying that price per megabit is declining rapidly. This is all thanks to competition, of course, which has pushed providers to invest in newer technologies that allow for faster broadband connectivity.
Of course many customers in less competitive markets often don't see upgrades, and not all carriers are being as aggressive as Comcast or Verizon about DOCSIS 3.0 or fiber upgrades. The piece also doesn't mention a few other markets realities, such as the fact that many carriers quietly raise prices via below the line fees so they can keep the advertised rate the same. Customers have also seen a rise in things like early termination fees and other surcharges (pay more to pay in person for example), while those same users are actually getting less service (newsgroups) and more annoyances (DNS redirection advertisements, the sale of their browsing histories).

And don't forget the growth of caps and throttling, with many carriers considering charging overage fees because the already profitable flat rate industry pricing model apparently isn't profitable enough. And did I mention the endless rate hikes for cable TV, which were supposed to end with the introduction of bell TV but didn't? If we're going to play games of relativity, it helps to look at the whole picture.

According to the latest OECD data, the United States ranks fifteenth in broadband penetration and twenty-first in price paid per megabit, a ranking that's getting worse because of a lack of competition in many areas. While Comcast's speed hikes may be nice, and there are select instances of cost savings for smart shoppers and savvy negotiators, there is no price war. It's more like a price two-step, or a price scuffle if you're feeling generous.

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pnh102
Reptiles Are Cuddly And Pretty
Premium
join:2002-05-02
Mount Airy, MD

Disagree

A lot of people (myself included) have been able to wring discounts out of broadband providers by either threatening to cancel or threatening to switch to other providers. Does this not count as a "hidden broadband price war?"
--
"At the moment of conception."

Raptor
Not a Dumptruck

join:2001-10-21
London, ON
Reviews:
·Rogers Hi-Speed

Re: Disagree

No, as I think a price war would give credit to the ISP for competing. You had to hold the "lose a customer gun" to their head to get anything out of them. It's tough to credit industry competition, hidden or not, when it likely takes an atypical instance like yours to get even the slightest actual discount.

ArrayList
netbus developer
Premium
join:2005-03-19
Brighton, MA
Reviews:
·RCN CABLE
·Comcast
said by pnh102:

A lot of people (myself included) have been able to wring discounts out of broadband providers by either threatening to cancel or threatening to switch to other providers. Does this not count as a "hidden broadband price war?"
i'd have to say no it doesn't. i've threatened to cut off service before and they just send me packing no retention nothing. at least nothing that added value to what i was already overpaying for. usually they would throw in a few months of a free movie channel or something like that and call it a $200 savings. but the thing is, i would've never had the movie channel to begin with so i wasn't saving anything. too much greed and not enough value.

POB
Res Firma Mitescere Nescit
Premium
join:2003-02-13
Stepford, CA
said by pnh102:

A lot of people (myself included) have been able to wring discounts out of broadband providers by either threatening to cancel or threatening to switch to other providers. Does this not count as a "hidden broadband price war?"
Sorry, the old, a lot of people including myself story just is not credible. I want to see actual proof that your alleged "threats" to cut off services with your BB provider resulted in something tangible/credible and not a round of laughter from your ISP.
--
The Toll

Tracking Lord Stanley

pnh102
Reptiles Are Cuddly And Pretty
Premium
join:2002-05-02
Mount Airy, MD

Re: Disagree

said by POB:

Sorry, the old, a lot of people including myself story just is not credible. I want to see actual proof that your alleged "threats" to cut off services with your BB provider resulted in something tangible/credible and not a round of laughter from your ISP.
Would before-and-after bills do it?
--
"At the moment of conception."
SilverSurfer1

join:2007-08-19

Re: Disagree

said by pnh102:

said by POB:

Sorry, the old, a lot of people including myself story just is not credible. I want to see actual proof that your alleged "threats" to cut off services with your BB provider resulted in something tangible/credible and not a round of laughter from your ISP.
Would before-and-after bills do it?
Yes. I'd like to see scanned before & after threats to disconnect invoicing with personal information of course redacted. Somehow I don't buy your story either that making threats to disconnect somehow induces an ISP to discount services.

I'm inclined to agree with marco that making such threats elicits a round of laughter or five since there really isn't any "competition" to speak of. What're you going to do if you disagree with your ISP...threaten to go to DSL instead? That presupposes that you live close enough to the switch get service. Fine if you do, but if you don't, then you really have no leverage whatsoever since your only other choice is dial up. Service providers already know this since they bought off donated campaign cash to the necessary politicos to ensure that there isn't any meaningful competition among providers in any given market.
AEKDB

join:2004-03-07
Towson, MD

1 recommendation

said by POB:

said by pnh102:

A lot of people (myself included) have been able to wring discounts out of broadband providers by either threatening to cancel or threatening to switch to other providers. Does this not count as a "hidden broadband price war?"
Sorry, the old, a lot of people including myself story just is not credible. I want to see actual proof that your alleged "threats" to cut off services with your BB provider resulted in something tangible/credible and not a round of laughter from your ISP.
I couldn't be bothered to copy my bill for you, but I called Comcast a few months back, threatened to switch to Verizon Fios and they reduced my internet bill to 19.99/nth for 12 months.

pnh102
Reptiles Are Cuddly And Pretty
Premium
join:2002-05-02
Mount Airy, MD

Re: Disagree

said by AEKDB:

I couldn't be bothered to copy my bill for you, but I called Comcast a few months back, threatened to switch to Verizon Fios and they reduced my internet bill to 19.99/nth for 12 months.
Nice. I think I will try that next time!
--
"At the moment of conception."

Cheese
Premium
join:2003-10-26
Naples, FL
kudos:1

1 edit
said by AEKDB:

said by POB:

said by pnh102:

A lot of people (myself included) have been able to wring discounts out of broadband providers by either threatening to cancel or threatening to switch to other providers. Does this not count as a "hidden broadband price war?"
Sorry, the old, a lot of people including myself story just is not credible. I want to see actual proof that your alleged "threats" to cut off services with your BB provider resulted in something tangible/credible and not a round of laughter from your ISP.
I couldn't be bothered to copy my bill for you, but I called Comcast a few months back, threatened to switch to Verizon Fios and they reduced my internet bill to 19.99/nth for 12 months.
Gee, I wonder why, think they would have done that if FIOS was not in the area? Hell no....
bzmeteorite

join:2006-02-15
San Luis Obispo, CA
said by POB:

said by pnh102:

A lot of people (myself included) have been able to wring discounts out of broadband providers by either threatening to cancel or threatening to switch to other providers. Does this not count as a "hidden broadband price war?"
Sorry, the old, a lot of people including myself story just is not credible. I want to see actual proof that your alleged "threats" to cut off services with your BB provider resulted in something tangible/credible and not a round of laughter from your ISP.
Not sure why you are so distrusting.

There has been a few times that our AT&T DSL prices increased due to the promotional period ending (back when they had contracts). Each time that happened, we simply called them up and told them that if we couldn't get back on a contract and get the promotional pricing again, we would switch to Charter. They did this each time, one time even a bit lower than the promotional price; mind you, on the first rep or when we asked for a manager. No laughing.

Maybe they aren't fairing well against Charter in the area? Maybe we were lucky? Either way, don't discredit that no one can do this, because, obviously, it does happen (for whatever reason). Perhaps you have an uncaring ISP, one that is doing quite well in your area, or they have really low profit margins and would rather lose you.

Now you'll probably ask for me to scan in bills, for one, I won't, and two, I'm telling the truth (is there any particular reason why I wouldn't?).
--
What happens when you combine common sense and an outspoken personality?
nasadude

join:2001-10-05
Rockville, MD
Reviews:
·Verizon FiOS
said by pnh102:

A lot of people (myself included) have been able to wring discounts out of broadband providers by either threatening to cancel or threatening to switch to other providers. Does this not count as a "hidden broadband price war?"
three strikes and you're out! No, "wringing discounts" by threatening to cancel/switch is not a hidden broadband price war.

You either have to have a choice to switch to or you have to not care whether you have broadband or not. The number of people in either of these groups is probably pretty small.

a price war that only effects a small group of people is not much of a price war.

KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK
Not really. That's more like a "Customer retention" thing.

Some Broadband wants to lock you into terms to so you can't switch.
moonpuppy

join:2000-08-21
Glen Burnie, MD

Just like cereal...

Pay the same amount for less. Cereal prices haven't gone up, the box sizes have come down.

88615298
Premium
join:2004-07-28
West Tenness

I will say this

2 years ago you paid $48 a month for bellsouth/at&t 6 Mbps tier now it's $43. 2 years ago you paid $50 for 5 Mbps and $70 for 10 Mbps from Charter in my area. Now 5 Mbps is $44 and 10 Mbps is $50. I also remember 7-8 years ago that 1.5 Mbps DSL and 1.5 Mbps cable internet was $40 a month.
iansltx

join:2007-02-19
Austin, TX
kudos:2
Reviews:
·Time Warner Cable
·Verizon Online DSL

Re: I will say this

Back home TWC used to have 5/512 (or was it 5/384?) service for $45/month. It's now 7/512. Problem: possible caps.

The local WiSP has increaed speeds from 384/128 to 512/??? for roughly the same price (maybe $1 less) but no more static, or even public, IP...

Comcast is doubling download speeds and, in the case of the low-end package, upload speeds, in some areas. Since the low-end package will now have more andwidth than the highe-end option did a little while ago, I'd say that's an $8-$10 price drop. "Blast" is now $10 cheaper as well. Problem: network managment and caps. if you're on a DOCSIS 2 package you still have to share bandwidth with everyone else on the node, which with the faster tiers may or may not be a good thing.
iansltx

join:2007-02-19
Austin, TX
kudos:2
But I'd still like to see sub-$40 high speed internet. There's really none of that here. Comcast is $45+, Qwest is $40+...
hihi9

join:2007-05-06
Port Orange, FL
Price is not what I am concern with its the speed that is most important
10/10 for 19.95
20/20 for 29.95
30/30 39.95
40/40 49.95
asymetrical sucks!
bjbrock9

join:2002-10-28
Mcalester, OK

AT&T dropping price and increasing spped.

We have about 75 branch offices with AT&T DSL. On those close enough to the DSLAM, AT&T has actually been calling us with an offer to increase from 3/512 to 6/768 and dropping charges by between $10 and $20 per location. Blows my mind but it is sure enough happening.

KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK

Re: AT&T dropping price and increasing spped.

Nice. They aren't doing that here, although they keep pushing their low speed stuff as cheap.

sbrook
Premium,Mod
join:2001-12-14
Ottawa
kudos:13
Reviews:
·TekSavvy Cable
·WIND Mobile

Let's Price Competitively

Wringing out a good deal with arm twisting does not make a "price war" ... lowering your prices to lure customers from your competition is a price war!

All I see in the way of a price war is "Who can raise prices the most and get away with it?" They to be "competitive" everyone else sneaks their prices up one way or another to pretty much match the competition ... "If they can get away with it, so can we"

The free market is not bringing prices down ... just like it hasn't for telephone ... just like it hasn't for TV. Just like it hasn't for the big box stores (unless you want to buy "cheap" products like melamine milk.)
jaminus

join:2004-10-14
Arlington, VA

Re: Let's Price Competitively

Comcast has charged $42.95 for its standard broadband tier for over 4 years without any increases due to inflation.
But during that time, speeds have gone up considerably. In real terms, prices have gone down more than 15 percent while service speed has gone up more than 300 percent.
hihi9

join:2007-05-06
Port Orange, FL

Re: Let's Price Competitively

They went from 6/384 to 6/1
Not too shabby
Smokes DSL speed. heh?

jmn1207
Premium
join:2000-07-19
Ashburn, VA
kudos:1

Service Like Politics

It is, at best, a duopoly in many areas, just like our choices in politicians. We rarely vote for the person we like, it's often just a decision over which one is not as bad as the other. Same with my internet choices. At least I do have a choice. Too bad the differences are more or less in the marketing and advertising only, while underneath they are basically the same product and price. Kinda like our politicians.
jaminus

join:2004-10-14
Arlington, VA

Re: Service Like Politics

There are some notable exceptions to the duopoly marketplace that exists throughout most of the U.S.

What about RCN, an overbuilder which competes with cable and telecoms in several major urban areas including Chicago and DC? What about LARIAT, a small, independent wireless ISP based in Wyoming? What about Sprint's Xohm--which offers 4mbps downstream in real world testing--and will soon be available in three major metropolitan areas?

More ISP choices are coming to the rest of America (or the populated parts of it, at least) but it will take some time. Demand is growing for fast, unfettered broadband, and in 24 months I bet the competitive landscape among ISPs will look strikingly different than it does today.

jmn1207
Premium
join:2000-07-19
Ashburn, VA
kudos:1

Re: Service Like Politics

Yes, well, there are a Green Parties and Libertarians in politics, too, among a smattering of others. And like these, the few alternate internet options are relatively unknown by most people, they don't have the resources to compete fairly, and some areas don't have them at all due to legal issues or bullying. Although, these smaller internet companies are most likely much better options than either of the 2 huge conglomerates that control your region.

CylonRed
Premium,MVM
join:2000-07-06
Bloom County

I would be willing to bet

that the threats to leave don't work for a lot of people and any price decrease is usually for a limited time. I think to qualify as a price war several things would be present:

1) ISP's lowering the price against each other for new customers without time limits. By time limits - the new price would not expire.

1a) Lower the price for current customers as well.

2) Be done without going thru a retention dept and a threat for you to leave.
--
Brian

"It drops into your stomach like a Abrams's tank.... driven by Rosanne Barr..." A. Bourdain
mrvid

join:2007-06-19
Levittown, NY

4 edits

my position, war is weak cause of voip/wireless competition

When Verizon came to Long Island, N.Y. a few years ago with their price package; if they charged $105 with a 2 yr contract including a free HDTV, that would have been a great deal but they charged $95/mo.

People I have read articles from, seem to think more competition is better; I can tell you right now, you couldn't be more wrong. Losing customers to voip & possible wireless competition will likely cause providers to have to shift more of their costs to the internet. Its not to milk you; its just, no matter what is sent over that pipe, it still costs the same to keep it up.

True though, that at first, a predominant duopoly environment may cause competitors to initially raise their prices a little to make sure they'll get a return on their investment, but neither can afford to lose customers to the other so you can bet their will be price competition. Less competition means a good return which means it pays to both build out as well as build the best, most reliable networks.

Just my honest opinion here.