Monday, February 04, 2013

Cox Boosts Speeds, Offers 150 Mbps - 5, 25, 50 and 150 Mbps Flavors

BroadbandReports reports that Cox has radically raised its speeds; effectively lowering its price for internet access. A quick check of "Louisiana" Cox site reveals that it has done so in the Greater Louisiana market (New Orleans—Baton Rouge—Lafayette) as well.

Cox gets serious about the internet
Here's the monthly prices Cox is offering in Louisiana as of January 2013 and a comparison to the 2012 speeds and prices:

  • Essential: 5 Mbps down, 1 Mbps up @ $44, in Jan. '12: 3 Mbps/384 Kpbs @ $39
  • Preferred: 25 Mbps down, 5 Mbps up @ $56, in Jan. '12: 15/1.5 Mbps @ $53
  • Premiere: 50 Mbps down, 10 Mbps up @ $68, in Jan. '12: 25/2.5Mbps @ $65
  • Ultimate: 150 Mbps down, 50 Mbps up @ $100, in Jan. '12: 50/5Mbps @ $95
My snap judgment is that in jumping their speeds in this way Cox is declaring itself first an internet service provider and then a cable company in a solid way. All the cable companies have been making noises in that direction. And the "noise" is well-founded; providing internet service is much more profitable these days than providing cable; the time is past to begin acting like it. These speeds say that we are willing to take the hit on the cable side; we are willing to run the risk that cord-cutters will drop cable or scale back on their packages if we give them fast, affordable internet. It says that even with the limited competition we have we want to go after those few residential and business customers that might choose DSL or wireless in lieu of our landline internet product; we are more worried about losing internet customers to other competitors than we are worried about cannibalizing our own much less profitable cable video product. That's smart.

Then, right after that adulatory snap judgment the cynic in me rears his head: The dirty little secret in broadband provisioning is that the cost of provisioning a 100 extra megs to a formerly 50 meg household is minuscule. It really hardly effects the bottom line at all. Above about 15 or 20 megs adding more potential speed only very occasionally serves to significantly limit the bandwidth use any individual household uses. This is probably less true for businesses but even there I'd imagine that 50 megs is the limit for all but really large businesses engaged in a very narrow range of video or graphic business lines. The cynic says they've run the numbers and watched previous "bumps" in speed very closely. Cox no doubt knows that few people notice actual differences in their experience and even fewer bother to change the tier they have purchased to a newer less costly but only possibly adequate level of service. It is all about the first purchase decision and ARPU. That's Average Revenue Per Unit. (You are the unit.) They need to ensure that their average income per "unit" doesn't go down—and they've cleverly arranged to do little damage to that sacred number. Notice that in my list above that no one who purchased a particular tier last year would be getting better service than they thought they needed a year ago. The tiers are carefully arranged so that downgrading your speed doesn't actually give your a better experience than you wanted a year ago.  Yes, that's probably smart too.

It's smart whether you are a fan of or a cynic about Cox Communications.

LUS Fiber: How does this effect Lafayette?
It means that for the first time LUS Fiber has real competition for their internet product. That is, it has real competition for the most important and profitable leg of the triple play of internet, cable, and phone services. LUS, much more dramatically than Cox, needs to ensure that it doesn't lose customers and that it sustains its current ARPU. LUS Fiber is still pushing to move from cash flow positive to fully profitable.

Still, there is no question but that LUS Fiber must respond.

[Yes, I know, LUS Fiber is NOT offering the same product as Cox and, frankly, LUS' service is superior even aside its speed. Yes, LUS offers symmetrical bandwidth: yes, the service is more reliable; yes, jitter and latency are stunningly low. Yes, price per meg has been lower. Yes, we have a nifty 100 mbps between each of us. But those, to be frank, are geek issues. Perhaps they should be important to regular folks since they make a noticeable difference in user experience. But right now these matter to only to the few. Simple speed and the cost differential between tiers are what reasonable but untutored folks base their decisions on. Even more: LUS is community owned and controlled. The money you spend with LUS stays to enrich our community and build our capacity, not Atlanta's. That probably matters to more people than jitter; but it doesn't allow LUS to stand pat.]

It seems to me that LUS has little choice but to respond strongly. It must regain its leadership in the crucial internet portion of its business, and maintain its promise to the community to offer cheaper services than the competition. What might that look like?

Here are the figures for LUS Fiber a year ago and today:
  • Jan. 2013 3x3 for $20 (only with a special intro package); Jan:12 no equivalent
  • Jan. 2013: 15x15 for $35; Jan '12:  Fast 10/10 for $29
  • Jan. 2013: 40x40 for $50; Jan '12:  Turbo 30/30 for $45
  • Jan. 2013: 75x75 for $100; Jan '12:  Extreme 50/50 for $58
  • Jan. 2013: 100x100 for $200; Jan '12: Ultra Extreme  100/100 for $200

What you'll notice is that tier for tier, after the name and speed changes LUS had restructured its tiers so that each of the "real" tiers it has actually raised prices (except for the 100x100 speed) even if it also reduced the price per megabyte. Though only new customers have to buy the new tiers (old ones could stay with the old tiers and prices) this had the effect of likely raising the ARPU.

This time we'll have to take a page from Cox's book, at the minimum they need to raise speeds in a way that beats Cox but does the least potential damage to their ARPU. More on the morrow as I reason that through. But suffice it to say: LUS Fiber has been issued its first real challenge.

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