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Cable Technology Feature Article

August 19, 2009

Telco Bandwidth Prices Drop 40% in 18 Months

By Gary Kim, Contributing Editor

No charge seems more common than that "evil" telcos, cable providers and others cannot be trusted to compete in the market and improve consumer welfare. That isn't to say people are well-intentioned or not, markets completely perfect or not, but whether, despite their personal failing and foibles, market pressures force providers to supply more goodness.
So take note: Researchers at Point Topic say telco-supplied consumer broadband access prices have dropped 40 percent in just the last 18 months, on a megabits-per-dollar basis, while cable prices have declined 30 percent. Price-per-megabit for fiber-to-home services has dropped 17 percent in the last 18 months.
In essence, what we have here is some analogy to the Moore's Law effect, where processing power or memory doubles every 18 months while price remains the same. The analogy isn't perfect. Software and hardware follow Moore's Law; most other products in the physical world cannot.
There is no way to double the productivity of an acre of cornfield every 18 months, nor is there a way to double the speed of underground construction every 18 months, even ignoring price effects.
Still, the recent price declines suggest that concerns about "monopolistic-like" rates of innovation and value enhancement in the communications business are overblown.
Broadband operators, whether DSL or cable, are having to make big improvements to their offerings in the face of competition, Point Topic says.
"If you want to convince the average customer they should take your broadband service over the competition you have two primary selling points, price and speed,” says Oliver Johnson, Point Topic CEO.
Some critics might not call enhancements in delivered bandwidth an advantage for consumers. They might prefer actual price declines. But those have occurred as well. DSL service now costs something on the order of $45 a month for several megabits per second worth of downstream service in many U.S. markets.
Years ago, I paid $100 a month for about 756 kbps downstream. These days, $100 will buy services running in the scores of megabits range. People forget that gross prices have fallen, despite increases in value for price.
Cable operators have increased the headline speed of their entry level services by 21 percent on a worldwide average in the last 18 months, compared to increases of 15 percent for FTTH and 17 percent for DSL services in the same period.

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

Edited by Tim Gray