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. "
Oligopoly (Score:5, Interesting)
In 1997 we got a 30/3 cable modem service, shared with the neighborhood. Since we were the only people on it, we had a 30/3 connection for $60/month. Now I get a dedicated 24/2 connection from U-verse for the same price. I guess it's better now?
Oligopolys don't have the same sort of competition that drives down prices. Even if they don't fix prices, they don't have an incentive to get into a bidding war. For this reason, the price of cell phones is high, and has remained high. Maybe the Walmart thing, and further work by Cricket or Metro PCS will eventually push prices down.
Because it's NOT a commodity? (Score:5, Interesting)
more bang for the buck (Score:1, Interesting)
You're looking at it wrong. Compare bandwidth/cost. A decade ago my isp offered 256K, 512K, and 768Kbps plans. Now we have 3 5 or 10Mbps and up, but pay about the same. IOW we pay a LOT less per bit than a decade ago.
It has gone down big time (Score:1, Interesting)
I remember looking into getting a T1 (or speed equivalent connection) 15 years ago for my house. It would have cost around $10k in initial costs (getting the wire from the street to my house) + $300/month. Now I pay $60/month. So it all depends on how far in time you consider prices.
Europe is different! (Score:1, Interesting)
7 Mpbs ADSL is about EUR 15 / month.
Re:Nope (Score:3, Interesting)
Re:the study is bogus (Score:3, Interesting)
applies to NYC as well. someone wants to build a new sky scraper and they agreed to spend $100 million on improving local public transportation and subway stations. happens all the time here. most of the NYC subway escalators are paid for by private industry as a condition of getting permits to build something
Re:Nope (Score:3, Interesting)
Re:Yep (Score:5, Interesting)
Rochester, NY
My options are:
1Mbps/256Kbps for $40 from Clearwire.
3Mbps/512Kbps for $55 from Time Warner.
The telephone company offers DSL at similar speeds and price to Time Warner, but I have had only unpleasant dealings with them in the past, and have heard* that they used to "accidentally" disconnect the CLECs until they all stopped offering competing services.
* off-the-record comments from people who dealt closely with CLECs. I do not know if it is true or not.
Why can't I get anything better than 768K up? A few times I have asked and they responded with an angry "Why? Are you doing a lot of file sharing?". I tried to explain that I back up my data to a VPS and I work from home and push a lot of data through a VPN, but I got the impression that they think anybody who wants a good upload speed is a pirate.
Re:Yep (Score:3, Interesting)
Huh, beat me
30$ for 100Mbps full duplex country wide, capped to 10Mbps for overseas.
Riga, Latvia, Eastern Europe :)
Re:Oligopoly (Score:3, Interesting)
http://stopthecap.com/2010/07/12/you-win-consumers-fighting-back-help-kill-municipal-broadband-ban-in-north-carolina/ [stopthecap.com].
And trust me, they try again and again!
Prices (Score:3, Interesting)
I'm fine with my, currently cable, broadband bill. As long as it does not go up and they continue to increase the speed I see it as win win. I'm paying for them for a) their own profit, b) the actual service and all that goes with that, and c) them upgrading their infrastructure as tech advances.
As long as all of those 3 things are happening then I have no issue. I think where some people take issue, and rightly in some cases, is that either not all 3 of those things are happening or that point C is not happening fast enough.
Re:Nope (Score:3, Interesting)
where the hell do you people live?
i pay 50$ a month for 5Mbps/512k
i'm not a stickler looking for more bandwith - it'd rather have lower cost - hell 20$ for 1Mbps would be fine.. i never need more than that really, its the low latency i need.
Re:Nope (Score:3, Interesting)
It's tempting to point out that that's a factor of three drop in price per performance unit over 10 years, while CPUs, consumer gadgets, and other high technology goods have fallen in price by factors of 10 or more. However, there's no reason to compare the perishable commodity of bandwidth provided through government subsidy, to the durable goods of CPUs, cameras, etc. provided without artificial production stimulus.
The cost of copper landlines in North America have not changed by more than a factor of 2 over the last 30 years, falling somewhere in the $10-30/month range. That's a feature of non-scale-free infrastructure with sunk costs, unlike bread or televisions where the cost to produce each unit doesn't vary much with the total number of units produced. Ten bread factories cost 10 ten times the cost of 1 bread factory to operate. Ten phone or broadband head-ends cost ten times the cost of one head end, plus a fancy Cisco box or two, plus a more expensive upstream SLA. Plus, bread and television factories can ramp up or down production rapidly to meet changes in demand, and also produce related goods for varied geographies, while broadband providers must pay (and charge) for most of their (oversubscribed) capacity to produce a single kind of immobile good even though most of it is unused for half of each day.
Re:Missing something (Score:4, Interesting)
Most of the US has a de facto oligopoly in the provision of broadband services so the suppiers feel no market pressure to improve services and/or lower prices
Most of the US has a de jure monopoly in cable and telecom due to exclusive franchises granted by local public utility commissions, although this is changing slowly (for example in Opelika [oanow.com]).
Contact or better yet get on the board of your local cable commission...
What a bad Assumption (Score:3, Interesting)
Broadband prices *HAVE* decreased. A lot. You're just using more of it now. Now the average person uses 50 "broadbands," and pay what they paid for 1 "broadband" 10 years ago.
Anyone remember CompuServe? (Score:3, Interesting)
I used to pay $5 (off peak) to $22.50(peak) an hour to use compuserve at 300baud (that's a little less than 1/3 of 1kbps for those that don't know what 300 baud means)
I think the prices have come down a bit. (no pun intended)
Granted that wasn't internet service, but the end result (communication and finding information using a computer) was comparable.
My mom was PISSED when she got that first bill. I was 13 and didn't realize what I was doing.
Re:Oligopoly (Score:3, Interesting)
Four sellers doesn't have to be an oligopoly, but that's how they've chosen to behave.
Actually, they do have to be an oligopoly. I can't remember the reference, but the book "Raising Less Corn, More Hell" included citations of an economist whose data suggested that when 4 or less competitors control 65% or more of a market they will automatically collude to control prices. Note that I say automatically and not [necessarily] intentionally; the source contended that market forces will affect each company such that, if profits are their main priority, then even without collusion they will effectively set prices and maintain them rather than compete on them. The source claimed the effect was so strong that they wouldn't undercut one another even if they didn't know each other *existed*. Markets with few sellers don't work out well for consumers, even when the sellers aren't money hungry pricks, and cell phone companies clearly are.
Re:Nope (Score:3, Interesting)
>>>Nine years ago I paid $50/month for 640kbps.
I pay $15 for similar speed (750). And you're right - that qualifies as a drop. I don't see how anyone could disagree. I think this article is yet another example of "lying with statistics" to make a point. I said as much in the comments (that DSL dropped from ~$100 to $15 during this decade), but I bet it will never appear.
BTW is anyone else surprised by Dialup's revenue? According to the article they earned $5499 million in 1999, and $10982 million in 2006. Double. I thought dialup was supposed to be dying out, not growing?
Re:Nope (Score:4, Interesting)
The free market fallacy strikes again (Score:4, Interesting)
The authors of TFA say they are "surprised" that despite the payoff of infrastructure and the age of the technology that prices have not come down.
It's as if they think rich people don't like money.
The only reason a rich person gives up money is if he thinks he will lose more if he doesn't give up a little -- or if he thinks it will lead to getting even more money back. I.e. competition. And progressive taxes.
There's zero reason for telecommunications companies to reduce rates. This notion that "they make enough now, therefore they should lower/stop raising rates" is so silly, it's like trying to argue that greed = benevolence.
And yet this very principle is the underpinning of the libertarian free market religion. But like those of all other religions, it is utterly flawed, unfounded, and unrealistic.
Factor no one mentions... (Score:2, Interesting)
I worked in an IT department for a major telco around 2006 and picked up a few things. For starters, and I haven't seen this mentioned yet, the telco I worked for as well as all the others in the industry are all unionized. That means the unions don't want anything too radical to happen to competition or whatever else that could affect their pensions/retirements/existing contracts. So the major corporation makes donations to one party whilst the unions make donations to the other. I don't think either party is really going to mess with the status quo.
In support of this was a TV/radio spot that was running around 2008 I believe in my area (Northern California). There was some kind of reform bill coming up that would have done something to further open broadband to competition. So this ad was running that absolutely no sense obviously aimed at union members of the various companies (all I remember of the ad was a lady mentioning the bill and saying something like "it's supposed bring...*choice* to Californians" ...then the rest of it was very much against the bill but less than specific as to why said "choice" is bad).
Anyway my thesis remains the unions of the comcasts/verizons/(insert large telco here) of the world have as much to do with this as anything else I think.