May 29, 2002 5:00 PM PDT

Consumer broadband prices keep rising

Consumers just keep paying more for high-speed Internet access, according to recent research.

The average monthly price for cable broadband Internet service increased 4 percent to $44.95 at the end of March 2002 from $43.21 in December 2001, according to a study by La Jolla, Calif.-based market research firm ARS.

DSL (digital subscriber line) Internet access ticked up 1.4 percent during the same time frame to $51.82 a month from $51.09.

The increase built upon last year's price increases, which also reached record levels at the time.

ARS said that 91 percent of broadband companies that have been in business since the beginning of 2001 have raised their rates. The firm added that the consolidation of service providers last year will ultimately mean fewer provider choices and higher prices for consumers.

"We expect that this trend of increasing prices will hamper the widespread adoption of broadband services and that the vast majority of users will continue to access the Internet via dial-up connections for the foreseeable future," ARS analyst Mark Kersey said in a statement.

The firm attributed the rise in prices to monthly rate increases from providers such as Cablevision Systems, Cincinnati Bell and Cox Communications during the first quarter. Cable providers control about 62 percent of the consumer broadband market.

Kersey said that rates will probably not get much higher this year since high-speed Internet service providers have already pushed prices up to their limits.

"I'm not sure there's enough room to raise prices further," he said.

Kersey expects prices to stay level for most of this year as more cable companies move toward tiered pricing to attract customers. This pricing system levies the highest fees on those who want faster access and multiple features.

Casual Internet users who just surf the Web and use e-mail will probably benefit the most from this arrangement, said Kersey, because they will get broadband speeds for the smallest price increase. So-called bandwidth hogs who want to use the Internet for bandwidth-heavy activities such as streaming video, streaming audio and file sharing will see their rates jump the most.

"These guys are effectively going to be singled out by cable providers, and they will not be happy," Kersey said.

The price increases come as Comcast and AT&T Broadband seek approval for their merger, a deal that would make the combined company the largest cable TV service provider, with more than 21 million subscribers.

Kersey does not see harm in the merger in the short term because the two companies will have to pay attention to pricing as regulators decide their fate.

"Certainly one company controlling so many subscribers has the potential to do harm," he said. "But these companies were not competing against each other, so I wouldn't expect the merger to have a big impact on pricing."

 

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