Saturday, February 09, 2008

No Broadband Price War....elsewhere

One of the reasons that LUS has relaxed a bit about making its pricing commitments is that it is increasingly obvious that there will be no national price war on broadband. So LUS can confidently see that with its much longer pay-back time and with no need to chase large profits for impatient stockholders and investment firms it can easily undercut the pricing of corporations who have, essentially, decided to milk the customers of their established monopoly cows for the indefinite future. As AT&T and Verizion roll out broadband services that provide no advantage over cable for the same levels of speed it is increasingly obvious that the two industries have decided not to compete on price.

The latest in this "we-are-competeing-vigorously-but-not-on prices" noncompetition competition between the colliding telco and cableco monopolies in the broadband arena was AT&T's decision to raise prices on its broadband DSL customers...except in former BellSouth areas where its prices were previously higher.

That wasn't what "competition" between the cablecos and the telecos was supposed to bring. You may recall that when AT&T was trying to transfer local municipal property rights to the state level so it could get around the locals' insistence that AT&T serve all of a community with their new services in return for using the community's land they claimed that relieving them of that obligation would yield cheaper prices for the favored few that actually got "competition." Even that half-a-loaf is NOT the way it is working out...and both the cablecos and the telecos like it that way. Two competitors are simply not enough to establish a competitive market and reality is taking its toll on that tale. A few are even noticing that we've been taken:
The announced price hike didn't sit well with some observers.

Routers, modems and other equipment used to deliver bandwidth are dropping in cost as rapidly as bandwidth demands are rising, said Dave Burstein, who operates DSLprime.com, an industry newsletter. "Total cost to the company for the bandwidth it delivers is about $1 a month per customer," Burstein said. "AT&T is raising its rates because it can. It has the market power to do so. Increased costs aren't the reason."
AT&T still has to pay off the enormous costs of trying to absorb BellSouth, among others, a consolidation that our regulators allowed because it was also supposed to lower prices.

The only real price competition we here in Lafayette can expect to see will come from LUS. BellSouth and Cox exist to serve the interests of their stockholders and that means that we should pay as high a price as the company can extract from us. The industry is learning right now that they don't have to compete on prices to maintain their margins--and so they won't. Anything less would be irresponsible. LUS also exists to serve its owners...but their (our) intersts are best served by low prices for high levels of service. Both types of owners will, inevitably, get a company pricing policy based on their interests. But only LUS will actually be motivated to compete on price. (Six month specials like those you'll see from Cox in both today's Advocate and Advocate don't count—that's marketing, not pricing.)

2009, after the launch of Phase 1, will be an interesting and, I'll bet, a satisfying year for Lafayette consumers of broadband.

No comments: