Cable TV companies have been charging substantially more, probably an average of $40 a month, for their broadband because they could offer higher speeds – 6 Mbps and up. The telcos, with slower speeds – 512 Kbps to 1.5 Mbps, were forced to compete by lowering prices, as low as $15 a month, but typically with the least-expensive offering below $20 per month.
The telcos have been upgrading their network technology so they could offer higher speeds on their existing copper wire networks. The pricing structure for cable TV operators may be about to change as a result, according to a report from Pike & Fischer.
The report says that for an increasing number of homes, AT&T and Qwest can now better match cable TV offerings with downstream speeds up to 7 Mbps over their existing copper wire networks. Verizon, which is building its fiber-based FiOS network as fast as possible, can exceed cable modem speeds at competitive prices in a growing number of markets – speeds up to 50 Mbps. This represents a significant shift in competitive dynamics, Pike & Fischer says in its annual review of high-speed Internet marketing and pricing.
For customers signing a contract, FiOS delivers speeds of 5 Mbps to 10 Mbps downstream and 2 Mbps upstream for $40, and 15 Mbps to 20 Mbps downstream and 2 Mbps to 5 Mbps upstream for $50. Verizon has also begun offering FiOS “triple-play” service bundles priced below $100 that include not only the higher broadband speeds but also wireline phone and basic pay-TV.
Pike & Fischer’s study confirms what Verizon executives have been saying for some time – where Verizon launches FiOS, the local cableco responds with higher data speeds at the same if not lower prices. In many case the local cable TV company also reduces the prices for its bundles and for its pay TV services. Cablevision led the way by being the first to offer a triple-play service for $99 in the parts of New York that it covers.
Pike & Fischer confirms that cablecos are also offering discounts for multi-service bundles, as well as short-term promotional prices for broadband as low as $20 per month. In response, Qwest and Verizon have introduced “price for life” offers intended to highlight the short-term nature of cable promotions. These tactics are likely to increase, according to Mitch Shapiro, author of the report and contributing analyst to Pike & Fischer’s Broadband Advisory Services.
“As broadband growth comes to rely increasingly on penetrating price-conscious market segments – and especially if the nation enters a serious and prolonged housing slowdown and/or a recession – the market could begin to see more significant downward pressure on prices,” Shapiro said.
The “High-speed Internet Packaging & Pricing, 4th Edition” report goes for $549.
Cable TV companies are fighting back with new technology that will allow them to offer broadband speeds upwards of 150 Mbps over their existing