Will bigger AT&T spur a broadband TV price war?

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that they can deliver a package of services: high speed Internet, telephony and TV. Verizon is extending its fiber network directly to people's homes, while AT&T is extending fiber farther into neighborhoods. The end result of these upgrades will be new access networks that will allow phone companies to deliver TV as well as dramatically faster Internet access.

The network strategy has already started to have some impact on cable. In communities where phone companies have upgraded their networks, cable companies are responding with aggressively priced promotional packages and faster download and upload speeds on their broadband service.

In the New York City suburbs of Long Island where Cablevision competes with Verizon's Fios fiber-optic service, the cable operator is offering a package of cable, high-speed Internet and phone service for $90 per month for the first year--very close in price to Verizon's Fios triple-play package, which costs $105 per month.

In Keller, Texas, the first city where Verizon offered TV service, the local cable operator, Charter Communications, is charging $70 for the first six months for a 3mbps broadband and cable service. This is exactly the price Verizon charges for its new 5mbps high-speed Internet access and TV offering.

Touting speed over price
Instead of cutting prices, most cable companies have simply increased the speed of their services. Last year, Cox Communications boosted speeds in its Northern Virginia territory to 15mbps. Adelphia, whose assets will be divvied up between Time Warner and Comcast later this year, raised speeds 16mbps to residents in Leesburg, Va., another city where Verizon's Fios competes. Verizon offers three tiers of service, with download speeds of 5mbps, 15mbps and 30mbps.

The cumulative effect of phone companies closing the broadband subscriber gap, coupled with competition in TV, could spur cable to slash prices--eventually. Cable operators have a long tradition of increasing prices rather than decreasing them. Between 1998 and 2003 cable TV rates rose 3.5 times faster than the rate of inflation, according to a report from the Federal Communications Commission.

What's more, phone companies have been slow to deploy TV service. Verizon is offering Fios TV only in 24 communities. AT&T has rolled out its TV service to a limited number of customers in San Antonio, Texas. The company plans to spend $4.4 billion through 2008 to upgrade networks in 13 states. By the end of 2008, AT&T hopes to have 18 million Internet Protocol TV customers.

A big hurdle for the phone companies is obtaining cable franchise agreements, which requires companies to negotiate contracts with individual communities. AT&T has argued it should not have to apply for cable franchises because it is just upgrading its existing network. But this stance has caused controversy. And AT&T has sued the city of Walnut Creek, Calif., because it wants AT&T to pay a franchise fee.

Even if AT&T doesn't have to secure franchise agreements in every community, at the very least it will likely have to get some sort of approval from cities to offer its service. Just this week, the company struck a deal with Anaheim, Calif., that gives AT&T permission to build its system.

Some experts also wonder how much the phone companies will be able to undercut cable operators' prices, since obtaining TV content accounts for about 40 percent of a TV broadcaster's operating budget, said Penhune.

"Verizon's broadcast packages are cheap," said Penhune. "And they're having some impact in a small number of communities. But the rollouts have been slow, and the phone companies could be constrained in how much they undercut cable prices to win new customers."

[technewsjunkie]

My Cable bill is outrageous!

I hope price cuts come sooner rather than later. I'm miffed that
COMCAST is sticking it to me. Sheesh, $100 a month for Internet
and BASIC cable!?!

[terminalfrost]

My Cable Bill is Outrageous too!

Our cable company is Insight, and while the service is reliable, the cost is very high,$100 a month for basic and internet service. My biggest complaint is that with all the channels available, there are only a handful worth watching. Most people that switch from dial-up would never go back, and you can bet the cable companies know that!

[pjonesCET]

Fat Chance!

Years ago AT&T was broken up by the Federal government because there was only one and only Phone company. There were many little Phone Front companies that all they did was local maintainence, and collected money for Ma Bell. getting a cut just for employee pay to mind the store. Sprint and other were trying to compete becasue they simply weren't allowed.

Now AT&T wants witha Republican officialed Federal government's blessing owning every telephone in america again.

They only thing it will do is kill off all competition, and remove any inovation what-so-ever.

If anything companies like AT&T and Microsoft should be broken into a thousand little pieces. That way is a small fish comes up with something wonderful it can come on the market and have just as much chance of Making it as the next guy. Big with in reason is okay but when you get to the 800 pound Gorilla size like AT&T and Microsoft, then no one else can hurt you. You have absolute power to screw the customers as hard as you please.

[JoJo Pumpkin]

I can't forsee a 'price war'...

Typically price wars come with the ability to choose. Last I checked, most places don't have a choice so people will pay what they're told to with out option. I'm currently paying $109/month with Charter for Digital Cable and Internet. Though I'd be willing to pay a little more for Comcast. I had Comcast in the past and the On Demand features blow Charter out of the water. I had 7MB DL/768UL with Comcast. Now with Charter I have 2MB DL/256 UL and it's dreadful with XBOX Live and PC Gaming.