[IP] Broadband: Pick Cheap or Speedy
Delivered-To: dfarber+@xxxxxxxxxxxxxxxxxx
Date: Sat, 04 Oct 2003 17:11:23 -0700
From: Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>
Broadband: Pick Cheap or Speedy By Staci D. Kramer
Story location: <http://www.wired.com/news/business/0,1367,60699,00.html >
02:00 AM Oct. 04, 2003 PT
Millions of broadband subscribers are getting a boost in speed -- without a
concurrent rate increase -- as cable operators contend with intensified DSL
competition from local phone companies by increasing service instead of
decreasing price.
At the same time, DSL providers like SBC Communications are banking on
customers who care more about saving money than time.
As Merrill Lynch analyst Jessica Reif Cohen told clients in a research
note: "DSL vs. cable is less like Pepsi vs. Coke than Honda vs. Mercedes."
A pair of recent events involving three of the largest broadband ISPs
underscores the different approaches to marketing. Early this week, SBC
Communications dropped the online subscription rate for SBC Yahoo DSL to
$27 a month. A few days later, Comcast and Adelphia Communications , two of
the largest cable operators, announced separately that they are boosting
standard downstream speed for broadband customers to 3 Mbps from 1.5 Mbps.
Both will continue to charge cable subscribers $43 a month for the service.
Top speed for Comcast Pro ($95 per month) goes to 4 Mbps from 3 Mbps;
Comcast Home Networking ($53 per month) subscribers move to 4 Mbps from 2.5
Mbps.
SBC's cheapest DSL plan, meanwhile, promises at least 384 Kbps, more than
80 percent slower than the speed Comcast is now offering for its standard
service.
Comcast isn't the first cable ISP to hit those speeds for standard
subscribers, although with 4.3 million cable modem subscribers it is the
largest. Cox Communications has offered 3 Mbps from the beginning.
By focusing on speed, cable is playing to its technical strengths. Comcast
is spending about $40 million nationally to equip its systems to handle the
higher speeds in some regions.
Comcast estimates that the majority of its customers will have the
pumped-up service by the end of the year. Subscribers in 14 Comcast
regions, including Detroit, Atlanta and Dallas, can get it now by
unplugging their cable modem for 60 seconds and plugging it back in.
For DSL providers, technical constraints make it more difficult to be able
to promise consistent delivery speeds to all customers. SBC's plan, for
instance, promises 384 Kbps to 1.5 Mbps, depending on the distance to the
central office, household wiring and other factors.
Limitations of the copper-wire telephone infrastructure keep SBC and other
local DSL providers from reaching all of their traditional phone customers
in most regions. (The St. Louis suburb of Florissant is one of only two SBC
municipal service areas in which every resident can get DSL.)
SBC is increasing availability and speed by installing neighborhood
broadband gateways, remote terminals that allow DSL to reach more
households with a broader signal. The goal is to increase availability from
60 percent of phone customers to 80 percent by the end of 2004.
In the meantime, SBC would rather focus on delivering enough bang for few
bucks, aiming much of its marketing at potential customers who think their
cable bills are too high. The company has more than 3 million DSL
subscribers, picking up more than 500,000 in just the past two quarters.
SBC tested an even lower rate of $25 a month in some markets earlier this
year but $27 is the lowest rate the company has made available nationally.
To lock in the rate, customers have to sign a 12-month contract.
SBC spokesman Joe Izbrand argues that most consumers don't need more than a
few hundred Kbps.
"Does it matter to a user that doesn't really have any applications that
need 3 megabytes? We don't see a reason for consumers to spend more money
for that speed," he said.
At Cox, Steve Gorman, executive director of marketing for high-speed
Internet, said his company didn't feel an impact from the low-price SBC
trials in Cox markets. He attributes that in part to inertia, particularly
in markets where Cox was entrenched long before SBC or other local phone
companies ramped up their DSL efforts.
"The No. 1 reason people buy is speed and that hasn't changed," said
Gorman. As for whether or not consumers need speed, he adds, "When you talk
about the dynamics of price, speed and applications you can't discount the
fact that consumers learn how to consume bandwidth."
But the cable operators aren't all reading from the same playbook. Charter
Communications ' newest offerings include a $30 option for 384 Kbps
downstream and $40 for 2 Mbps downstream. Current customers are getting a
complimentary boost to 2 Mbps through March 2004 as part of a "thank you"
campaign that also serves as a preview of the faster service.
Archives at: <http://Wireless.Com/Dewayne-Net>
Weblog at: <http://weblog.warpspeed.com>
-------------------------------------
You are subscribed as roessler@xxxxxxxxxxxxxxxxxx
To manage your subscription, go to
http://v2.listbox.com/member/?listname=ip
Archives at: http://www.interesting-people.org/archives/interesting-people/