Why Broadband Prices Haven't Decreased 336
pdragon04 writes "After a new technology is introduced to the market, there is usually a predictable decrease in price as it becomes more common. Laptops experienced precipitous price drops during the past decade. Digital cameras, personal computers, and computer chips all followed similar steep declines in price. Has the price of broadband Internet followed the same model? Shane Greenstein decided to look into it. "
Re:Nope (Score:5, Informative)
Price per Mbps has most definetly dropped down. I'm paying $2/Mbps now... I used to pay $40/Mbps 6 years ago.
Re:Why prices don't decrease (Score:5, Informative)
Not quite so.
The speed of evolution in Broadband technology prevents the bill from dropping. By the time the equipment is fully depreciated and your bill _CAN_ drop it has to be replaced with a next gen equipment. No broadband tech has lived for more than 3 years so far.
DSL with ATM backhaul, DSL with Ethernet Backhaul, DSL2+, VDSL/FTTC and before the latter is anywhere near depreciated we are marching into PON/GPON land. Same for Cable - Docsis 1.0, 1.2, 2.0, 3.0 over 12 years.
It may start dropping once we are in the land of PON. That is the first technology so far which does not look like an ephemeral stopgap.
Re:Oligopoly (Score:1, Informative)
You were LUCKY that no one else was on your cable branch. In a normal neighborhood, cable broadband is oversubscribed to the point that you're lucky to get 3-6mb/s down. With ATT, that is a dedicated connection directly from your house to the DSLAM, so it doesn't matter whether people in your neighborhood have it or not. Now, with that said, if any company oversubscribes their backbone connections, it won't matter what speed your home connection is rated.
Re:Yep (Score:3, Informative)
Lucky.
I get 3Mbps for $55.
6 months ago I got 3Mbps for $50
12 months ago I got 3Mbps for $45
5 years ago I got 3Mbps for $40.
7 years ago I got 3Mbps for $35.
What the fuck Time Warner?
Re:In short, here's why: (Score:2, Informative)
y2k bug detected in (#33575418)
Re:Er, they have? (Score:5, Informative)
Finland has half the population density of the US and far faster, cheaper broadband. NYC has huge population density, but very slow, very expensive broadband.
The key factor is competition: US infrastructure owners are allowed to block competitors from using their bits of wire. This creates an almost insurmountable barrier to entry on the market and effectively establishes local monopolies. Consumers have little or no choice, usually.
Everywhere else in the world has a regulatory framework that enforces open access: owners of infrastructure have to sell access to their cabling to all comers at non-discriminatory rates. As a result setting up an ISP is cheap and easy, there is enormous competition, and consumers get fast broadband for chickenfeed.
Here's a lecture by Lessig on the subject:
http://lessig.blip.tv/file/3485790 [lessig.blip.tv]
Re:Nope (Score:1, Informative)
Price per mHz on a CPU dropped also. So we should be buying $10,000 cpu's. Straw man argument if you are using the price per mb.
Yeah, with those new-fangled millihertz machines, yous gonna have to be spending tens of thousands on processors to get back ter that ol' 486 clock speed.
Re:Why prices don't decrease (Score:3, Informative)
Bandwidth to where? The cost of a consumer Internet connection is the cost of maintaining the last-mile infrastructure plus the cost of routing the packets after that hop. With peering agreements, the cost of routing the packets is generally close to nothing. The cost of maintaining the last mile infrastructure (including repaying the initial capital investment in building it) is much higher. This cost has not really changed much in the last ten years - if anything, deploying new fibre networks rather than using the old copper infrastructure has made it go up.
1Mb/s in a data centre near a peering point is not the same as 1Mb/s into a residential dwelling.
Re:Er, they have? (Score:4, Informative)
I live in Finland. We have 41.124 persons per square mile. You have 81.769 persons per square mile. Yet for some reasons broadband prices here are dirt cheap compared to yours. How is that possible?
Just think about it. You have extremely expensive broadband even in places such as New York which is bustling with people. We can get faster and cheaper connections in middle of nowhere (outside the few major cities).
Re:Nope (Score:4, Informative)
My parents use to pay $40 for 386kbit back in '98
I now pay $50 for 16mbit.
account for 4% inflation over 12 years and that $40 was worth ~$60 in todays money.
yep, has gone down
Re:Why prices don't decrease (Score:3, Informative)
Re:Absolutely right (Score:4, Informative)
The obligatory taxpayer rip-off broadband story [pbs.org].
Re:Yep (Score:1, Informative)
Try doing that when they're the only show in town tough guy. They tell you to fuck off.
Fixed cost amortization (Score:3, Informative)
A 16GB flash drive does not cost 3x or 4x as much to make as a 4GB flash, but is priced as if it does.
Actually at first it does cost quite a bit more. Both require up front costs to produce such as R&D, capital equipment purchases, production setup, etc. These get amortized over time but at first the cost per unit is quite high. The 4GB drive has had more time to amortize the fixed costs related to production so even if the materials for the two cost the same (which they almost certainly do not), the selling price for the 16GB will be higher because it's sold fewer units. Additionally there are learning curve effects [wikipedia.org] that have a significant effect on price as well.
To be sure there is a bit of extra margin involved but the cost of the 16GB drives actually might be several times higher at first. Once minimum efficient scale [wikipedia.org] is achieved the costs should be similar but that takes some time.
There is enough competition in flash memory (usually) that I'm pretty sure the prices actually have some relationships to the cost.
Instead what we see are price floors which reflect the real manufacturing and retailing costs. Once the value of some equipment falls below this floor, it vanishes.
That's right and not surprising. As prices fall for higher capacities, demand will dry up for lower capacities. The costs however do not continue to fall indefinitely. At some point there is so much competition and so little profit that makers of low capacity flash memory either exit the market or have to move to higher capacity products.
I see no reason for the price of Internet service to stay as stubbornly high as it has, except lack of competition.
I'd agree there is insufficient competition but I don't think you are acknowledging that you are in all likelihood getting a faster internet service than you were just a few years ago. The equipment to provide this faster service is not free. The phone company has to upgrade its equipment the same as you do to enable faster service. Verizon has spent billions of dollars on their FiOS rollout and AT&T has spent billions rolling out their high speed internet services. These are costs that need to be recovered. The phone line to your house might be the same but the equipment behind the scenes looks NOTHING like it did even 10 years ago. I've been in numerous central offices and can verify this myself. Just because you can't see the capital expenditures doesn't mean they aren't occurring.
There are also government subsidies for laying new line.
Not as much as you might think. The vast majority of costs for the telecom networks are borne directly by the operators of those networks.
Furthermore your analogy to your ethernet cards and other equipment is flawed because the cost structures aren't the same. There are maintenance costs to the phone/cable network which do not apply to your personal equipment. Once the ethernet card leave a manufacturer, the manufacturer no longer owns it. Warranty costs have already been factored into the price and there is no upkeep. The phone network however is owned by the folks that made it, they have to pay depreciation on it and they have to fix it when it breaks, bill customers for service and incur lots of ongoing fixed costs that don't apply to a consumer electronics product.
Comment removed (Score:3, Informative)
Re:Nope (Score:4, Informative)
Try again:
http://www.pcworld.com/article/13806/compaq_prosignia_150_amd_k62475.html [pcworld.com]
The Compaq Prosigna with an AMD K6-II @ 475 MHz and 64 MB of RAM listed at $2299 in November 1999. Even if you discounted the software and 32 MB of RAM (which was actually not that expensive by 1999) we're not even in the sub-$1000 range.
Re:Yep (Score:3, Informative)
I don't know where you're getting these numbers, but as someone who works for TWC and services Rochester, that's dead wrong.
RR Lite 768Kbps is 22.95, 24.95 if it's your only service.
RR Basic 1.5Mbps is 29.95, 32.99 if it's your only service.
RR Standard 10x1 is 42.95, 49.99 if it's your only service, 44.95 if you only also have basic cable (broadcast basic, which is about 12 channels, not standard cable with about 80)
RR Turbo 15x1 is 9.95 on top of the price of standard.
RR Extreme is 30x5 and is $20 on top of the price of standard, with free wireless.
Wideband internet is 50x5 and is $99.95, with free wireless.
These are all residential class, but I do not believe business class has a 3Mbps offering either.
Competition (Score:3, Informative)
If I want to buy a digital camera, I can get a Canon, Olympus, Fujifilm, Kodak or a dozen other brand names. These various companies are all vying for my digital camera dollar and so will try to give me the best feature-set for my money.
If I want to buy a computer, I could get a Dell, Hewlett-Packard, eMachines, etc. Same rule applies as above.
If I want to get broadband Internet access, I can go with Time Warner Cable or.... or.... Well, Verizon has DSL which they aren't supporting as well anymore. No FIOS in my area. Other than that, nothing. Most areas have two or less providers. With that, companies know that a person shopping for broadband has a 50-50 chance or 100% change of choosing them (with 2 or 1 providers respectfully). This means they have to do pretty much nothing to get your dollars. They can spar gently with the opposing company (if one exists) to get their churned users, but otherwise they have no incentive to give users great speeds at low prices. Now, if there were a dozen broadband companies serving each area, you'd see low prices and better service.
Re:Nope (Score:2, Informative)
Re:Nope (Score:3, Informative)
Don't know about the previous poster, but in a lot of the New York area you can get Cablevision. They offer 15/5 service for about $45/month. An extra $15/month doubles the rate. There's also 100Mbps down for something around $90-$100 a month. Those numbers all go down a little if you have the triple play package. The lowest end package is fine for me, so I never looked too hard into the specifics on the higher options.
Re:Yep (Score:4, Informative)
$12/mo for 100Mbps full duplex fiber, uncapped worldwide
Bucharest, Romania, Eastern Europe
Actually it's my dad's connection, and he has the 50mbps package for $9/mo. 100mbps is available, but he says 50 it's more than enough for his needs.
Meanwhile, I pay $60/mo for 30/5 mbps here in the good ole US of A, the birthplace of the Internet.
Re:Yep (Score:1, Informative)
San Jose, CA
1.5Mbps/384Kbps for $27.50 from AT&T.
They INCREASED prices last month $2.50 for the same service. Not only that, I can't get faster than 1.5Mbps (in Silicon Valley no less) from anyone via DSL in my zip (which is in a largely populated area). If I check outside of my zip, I can get 3Mbps for the same price and 6Mbps for 5-10 more. I really hate AT&T, mainly for increasing my fees.
Re:One word (Score:3, Informative)
Don't do without, and don't call to bitch.
Call them and request to cancel service. You'll talk to a perky retention department representative who will be happy to help you terminate your service. While they're pulling up your account information, they'll inquisitively ask why you wish to cancel your service with them. When you say that the price is simply too high, and you'll get by just fine with the cheaper and slower DSL, the representative will suggest that they can reduce your monthly bill to whatever the current "new customer" promotional rate is. They'll then cheerfully thank you for allowing them the opportunity to provide you service at a much lower price.