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Cable Technology Feature Article

December 23, 2008

Broadband Duopoly Works

By Gary Kim, Contributing Editor

Cable operators are increasing the data rates of their standard high-speed Internet services without raising prices, according to Pike & Fischer (News - Alert). So are telcos, say researchers at the Pew Internet & American Life Project. In fact, despite the fear that a cable-telco duopoly would not be sufficient to cause robust competition, that seems to be precisely what is happening.
In 2004, the average monthly Digital Subscriber Line price was $38, compared to $31.50 in 2008. The average cable modem monthly price was $41 in 2004, down to $37.50 a month in 2008. International Telecommunications Union data also show that the trend of higher speeds and lower prices has been underway since 2003 at the very least.
In 2003, each 100 kbps of capacity cost about $11.50. By 2006, 100 kbps of capacity cost less than $6. Over that same period, capacity rose from 1.5 Mbps in the downstream to more than 4 Mbps.
"As Verizon has rolled out FiOS (News - Alert) 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, and to a lesser extent similar services from AT&T and Qwest (News - Alert) Communications, on an increasingly market-by-market basis," Pike & Fischer contributing analyst Mitchell Shapiro says.
As just one example, Qwest Communications is slicing its broadband access prices, at least on a promotional basis. 
Qwest Communications has chopped the cost of "Qwest Connect Quantum", its 20-Mbps broadband data service, about 40 percent, from $99.99 to $59.99 a month for new and current subscribers, for the first year of service.  has cut priced across the board for its residential access offerings.
"Connect Titanium with Windows Live", which supports speeds of up to 12 Mbps, now costs $46.99 and carries a “Price for Life Guarantee.” It applies to residential customers who don’t downgrade to another service or make other changes.
Qwest also has instituted lower promotional pricing for its 1.5 Mbps service "Connect Silver with Windows Live" from $29.99 per month to $14.99. "Qwest Connect Platinum with Windows Live", which supports speeds of up to 7 Mbps, has been cut from $36.99 to $24.99.
The company is offering a wireless-ready modem for $40, a $60 savings. Standard rates (except for Connect Titanium) will apply after the first year.
Prices for other customers will be higher. The discount will begin with the first full month of billing.
The promotional pricing expires at month’s end.
And cable and telco value-price trends do not yet fully reflect the challenge of competition from several wireless and satellite broadband providers as well. Perhaps the best example of how matters have changed since 1999 is that broadband access now costs less, in many cases, than dial-up Internet access.  Back in 1999, a 756 kbps service could cost as much as $80 a month, compared to dial-up service costing $20 or less.
Belief to the contrary notwithstanding, robust broadband competition now is providing consumer benefits for the overwhelming number of U.S. citizens.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary's articles, please visit his columnist page.

Edited by Jessica Kostek