July 1, 2005 12:52 PM PDT
Broadband speed war emerges
In the past two months, cable operators have begun increasing download speeds on their broadband networks. It's little coincidence that these higher speeds are being rolled out in regions of the country where Verizon has begun offering its Fios service, which runs over a fiber network that reaches directly into people's homes.
"I wouldn't say that Verizon is leading us to offer faster speeds," said David Grabert, a spokesman for Cox Communications. "But the local competitive landscape is one variable we consider when developing our product offerings."
In May, Cox Communications boosted speeds in its Northern Virginia territory to 15mbps. It began offering a similar service in Rhode Island in June. On Thursday, Adelphia announced that it is raising speeds to 16mbps to residents in Leesburg, Va.
On Monday, Cablevision, which already has one of the fastest residential cable broadband networks in the country, announced it had demonstrated a 100mbps service over its existing cable infrastructure. The company has no immediate plans to offer a 100mbps service to residential customers, but it is offering it to business customers in Oyster Bay, on Long Island, N.Y.
"This is definitely a business service," said Wilt Hildenbrand, executive vice president of technology and engineering for Cablevision. "But it shows us where things could go in the future. This is the most capacity that anyone has gotten out of an existing cable network to date."
In each of the areas where cable companies have increased speeds, Verizon has just begun offering its Fios service, which the company claims can scale to 100mbps. Since last year, Verizon has spent billions of dollars digging up streets to lay the new fiber network in neighborhoods in half of the states where it provides local phone service. So far, it has the network hooked up in roughly 250 communities on the East Coast and in Texas.
"Fios is a serious competitive threat to the cable companies," said Mark Marchand, a spokesman for Verizon. "It's no surprise that they'd be increasing speeds to compete in the communities where we're deploying Fios."
The base plan for Fios offers download speeds of up to 5mbps, with an upload speed of 2mbps for $39.95. For $49.95, consumers can get download speeds up to 15mbps, and for $199.95, users can download at 30mbps and upload at 5mbps.
So far, at least Cox is staying competitive with Verizon on price. It's offering its 5mbps download with 2mbps upload service for $39.95 when bundled with its phone or video service. Its 15mbps service with 2mbps uploads costs $54.95 per month when part of a bundled package.
Pricing for Adelphia's 16mbps service isn't available yet. Cablevision also hasn't released pricing of its 100mbps business offering.
These super-speed broadband offerings seem to be more a bragging right than a true competitive advantage, since most customers don't need that much bandwidth. Verizon and Cox both admit that most of their customers subscribe to the 5mbps service.
But the higher-tier offering is important for technically savvy customers who want to download movies and music, they say. Adelphia claims that customers of its 16mbps service can download 100 songs--roughly 5mbps each--in approximately four minutes. The company claims the same transaction on a traditional DSL service would require 22 minutes.
"It's very important to have a range of offerings for different customers," Cox's Grabert said. "Some are more price-sensitive than others. And then there are gamers and people who want to download movies and music and are willing to pay more for the bandwidth to do it."
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