Sunday, May 17, 2009

Cox's 50 Mbps Tier in Virginia

What's Being Said dept.

Lafayette got some good press in the national broadband media* lately...not because of anything we did here but because Cox offered its 50/5 meg tier for the first time outside of Lafayette and Lafayette got mentioned as the first place it was offered. The new area is in Northern Virginia, a region which 1) has some of the nation's small areas of overbuilder competition, RCN competes sporadically with Cox cable there and in DC., 2) is one of the first areas where Verizon's fiber service FIOS was launched and where it has a 50/20 meg tier, and 3) is a commuter center for some of DC's most influential people....

That's northern Virginia, the sort of privileged place that gets Cox's latest and greatest tier second is a real testement to how much Cox must be worried about LUS and municipal broadband in general. Not convinced?

Well consider this: Cox is offering their 50/5 meg for $139.99 per month in Northern Virginia where it has substantial private fiber-based competition (Verizon sells its 50/20 tier for $94.50 a month in that area.) It's not really competing on price or speed and is thus essentially conceding the upper end of the broadband market to Verizon in the limited areas where they overlap—What this offering really achieves isn't competition, it's simply piggybacking on the excitement created by other firms about really high bandwidth offerings. Cox picks up a lucrative set of upgraders as their established customers in that region develop a taste for really big broadband as a result of hearing friends brag about the fantastic capacities Verizon and other regional powerhouses are giving their customers.

But ONLY in little ole Lafayette does Cox bother to cut its price—in Lafayette parish you can get Cox's service for $90 bucks. Washington lobbyists and congressmen get to pay $140....I'd say that tells us a lot about how Cox views the competition here. Of course LUS' 50/50 tier is only 58 dollars and Cox isn't really competitive with that — so even down here in Louisiana it is more about taking advantage of the demand some other company developed and not much about real competition. In the city anyone desiring high speed connectivity would be crazy pay a 33% premium to get a slower speed tier and higher latency.... No in Lafayette, as in Northern Virginia the real play is to get those outside the competitive islands to buy a higher priced package that has already been proven a winner by companies that pioneered those speeds. It is just that in Lafayette the local competition's price is so much lower than what Cox wants to charge nationally that it'd be more embarrassing than helpful to try an market a service for $140 dollars that could be had down the street for 58 bucks from the local public provider (and at better upload speeds and latency too...) Big broadband adopters out in the parish have a lot for which to thank LUS— availability and 50 bucks a month.

*See the coverage in Broadband Reports (the most detailed), Gigaom, and PCMag for examples.

2 comments:

David said...

According to LUS: . "As a customer-owned and operated utility, LUS customers have the power to set rates and control the standard of service. "

Many LUS customers simply dont have 50 more bucks for their monthly utility bill, and remain deprived from the vast resources we share in this digital age. These same customers would be better served by a 5 or 10 dollar a month basic connectivity package, since they do own the infrastructure and paid for it in hope and ballots and cash money. LUS probably thinks that's a crazy idea, and will continue to set fees appropriate to the "market climate," and are sending the disconnection man to your home, as scheduled.

John said...

David whose link goes nowhere,

If you don't like the current setup and are a citizen here you can complain and expect to be heard...which is a lot more than you can say for the competition.

Frankly I'm with you on the hope and votes part, but you are wrong on the money part: Nobody that doesn't subscribe will have a penny in this project it will be paid entirely out of users fees; no other money will be used. Cox and AT&T forced an economic structure and regulatory structure on LUS that pretty much forces them to act more like a "market climate" driven organization than they'd like.

LUS' logic is simple: they've got to pay for the network entirely by subscriptions, relatively early in the project. There is no room for loses like private company subsidiaries can sustain for a period and thus no room to carry users at a loss for long. (And make no mistake: they'd have to carry a 10 dollar user for more than a decade of steady service to pay back the cost of making the installation.) If they were allowed to be the utility they want to be the story would likely be different.

With you I wish it were different. And I've said so, loudly. But I do understand the background and know who to blame most.