It's a simple principle of economics: competition and more customer choice results in lower prices.
And so it is true of broadband services. With about 65 percent of the U.S. population now subscribing to broadband, cable operators and telephone companies are duking it out for new customers. The companies are offering cut-throat prices and new promotions to win over new subscribers.
For consumers in areas of the country where competition is heating up, the savings can be huge. For example, Verizon Communications, which has been losing DSL customers to competitors, this week announced aggressive new promotional deals for its high-speed DSL and Fios, fiber-to-the-home Internet services, as it tries to tempt new subscribers.
New Verizon DSL customers can get six months of free Internet service if they commit to a one-year contract. The company also announced a slew of deals for Fios customers, including one that offers new Fios TV subscribers who sign up for service as part of a bundle, free multiroom DVR capability for three months.
These deals sound terrific to consumers, like me, who live in markets with at least two broadband competitors. But for millions of Americans living in rural regions of the country and for people living in some urban areas, where carriers don't find it profitable to offer service, only one choice of Internet provider exists today.
And as a general rule of thumb, these consumers aren't usually offered enticing promotional deals or discounts on service. In fact, on average they pay much more for their services than people living in more competitive markets.
A task force at the Federal Communications Commission that is developing a national broadband policy highlighted this fact as a major barrier to universal broadband access during an open meeting at the commission on Wednesday.
The group also noted that broadband service providers tend to deploy service in higher income neighborhoods where more people are likely to sign up for service over low-income areas. As a result these markets generally have only one provider. What this means is that lower-income people, who have less disposable income, are often the ones forced to pay higher prices, while people who have more money pay lower prices for service.
Big savings in the Big Apple
To test this concept and to see if I could significantly put a dent in my monthly expenses, I decided to investigate my own broadband options in New York City, where I have lived and been a cable subscriber for nearly 12 years. With a little bit of leg work, I quickly discovered, I could save nearly $700 in one year by switching broadband providers.
I currently pay about $147 a month for cable TV and broadband service from Time Warner Cable. This bill does include two DVRs, two remote controls, and HBO channels and on-demand services. But it does not include taxes or a home phone service.
I live on the Upper West Side of Manhattan and even though I have seen Verizon putting fiber underneath the street on my block and even though my inside sources at the company have told me that two central offices near my neighborhood are currently being upgraded this month to provide Fios TV service, I am still not yet eligible for Fios service.
The only option I have from Verizon right now is DSL service. With the new six-month broadband-for-free promotion, Verizon is offering a triple play package that includes 3 Mbps or 7.1 Mbps DSL, DirecTV Plus DVR package, and Verizon's unlimited local and long-distance calling plan for $70 per month for the first six months.
During the second six months of this annual plan, the bundle with up-to-3 Mbps service is $99.99 per month. And for the faster 7.1 Mbps broadband service, the price is $109.99 per month after the first six months.
Factoring in the first six months of free DSL service in this total package, my average monthly cost would be $90 per month for home phone, broadband, and subscription TV services. This is an average savings of $57 per month over my current service, and a yearly savings of about $684.
I called Time Warner Cable to see if the company could beat Verizon's price. The best price offered to me for the same exact package, which includes one set-top box with DVR service, was $119 per month before taxes. The only difference in this package is that I would not have to sign a contract, but the price would be guaranteed for a year. The representative I talked with on the phone offered to give me free Showtime service for a year to sweeten the deal. Even at this price, Verizon's offer is still $29 a month cheaper than Time Warner's revised service. In total, I would still be saving $348 for the year.
But there is one catch to Verizon's deal. Verizon guarantees the price of the bundle for a year. And if customers cancel the service during that time period there is an early termination fee. But DirecTV requires users sign a two-year contract. And pricing on the TV service is not guaranteed during the second year, which means it could go up significantly in 2011.
What's more, if Fios becomes available in my building, I can upgrade my Internet and phone services at no penalty. And I would be eligible for whatever special deal Verizon might offer me. But I would have to pay a penalty to DirecTV if I terminate my TV service early to get Fios TV.
Still, with a yearly savings of almost $400 to $700 sitting on the table, I'd be a fool not to make some kind of change now. But just imagine if there was a third or even a fourth competitor in my market? The savings could be even greater.
More competitors lead to lower prices
According to a Pew Internet and American Life Project study released in June, the more competitors there are in a market, the cheaper the price of the service for consumers. In the survey, about 21 percent of high-speed Internet users said they had only one choice in broadband provider. And on average these customers spend about $44.70 a month on high-speed Internet service. About 69 percent of respondents said they had two choices in broadband providers, and on average they spent about $38.30 on Internet per month. Average prices fell yet again for the 17 percent of respondents who said they had four or more broadband provider choices. The average amount they paid for service was about $32.10 per month.
What this tells us is that more choices matter. And when broadband service providers are forced to compete, consumers get better deals.
This basic thesis was also the conclusion of a recent study (PDF) commissioned by the FCC and conducted by Harvard University's Berkman Center for Internet & Society. This study concluded that that other countries have faster and cheaper Internet access because there is more competition. The report went on to conclude that this new competition was made possible by regulatory policy that promoted open-access rules or rules that force service providers to share their infrastructure with competitors.
"The lowest prices and highest speeds are almost all offered by firms in markets where, in addition to an incumbent telephone company and cable company, there are also competitors who entered the market, and built their presence, through use of open access facilities, " the report says.
The report has gotten plenty of criticism. AT&T and the National Cable & Telecommunications Association have filed letters warning the FCC against applying the findings to its national broadband policy. The NCTA said the FCC should be careful in accepting these results when past attempts here in the U.S. to impose open access rules have failed.
Whether open access rules really create more competition is debatable. But one thing that cannot be debated is the effect that more competitors have on prices and the quality of service in the overall market.
With this in mind, I hope that the FCC's new national broadband policy, when it's finally presented to Congress in February, will do more than simply ensure everyone in the U.S. has access to at least one broadband provider. I hope the plan also includes aggressive measures to encourage competition among two or more companies in as many markets as possible.
One in five households worldwide will be wired up to the Internet by year's end, according to new estimates from Gartner.
The number of households with fixed broadband connections is expected to reach 422 million across the globe this year, a jump of 10.5 percent over 382 million in 2008, the analyst firm said Friday. This number will further swell to an estimated 580 million by 2013.
Over the next four years, global broadband services revenue will also help offset declining voice revenue and account for 40 percent of the consumer fixed voice, Internet, and broadband services market worldwide, which is estimated to be worth $347 billion.
At the end of 2008, 21 countries had broadband connections in at least 50 percent of homes, Gartner reported. The disparity in broadband adoption was significant in Asia, where the region was home to both the world's highest penetration of 86 percent in South Korea and the lowest at 1 percent in Indonesia.
Asian households, according to Gartner, will remain among the world's most connected over the next four years. Broadband penetration for South Korea is forecast to reach 93 percent in 2013, while Hong Kong and Singapore will see 80 percent and 78 percent, respectively, of their households wired up to the Web.
Outside of the region, the Netherlands, Canada, and Denmark are expected to boast high broadband penetration rates of 88 percent, 81 percent and 78 percent, respectively.
In terms of growth, however, Brazil, Russia, India, and China will account for nearly half, or 47 percent, of the increase in consumer broadband connections over the next several years, Gartner said. China, alone, is expected to contribute 31 percent toward the total worldwide increase.
According to Gartner, fiber-based services will grow steadily over the next few years, with FTTH (fiber-to-the-home), FTTP (fiber-to-the-premises) and Ethernet connections accounting for about 20 percent of the global consumer broadband market by 2013.
Much of the growth will take place in developed markets such as Japan, South Korea and the United States. An exception to this is China, which is expected to account for the most number of new FTTH/FTTP/Ethernet connections, Gartner noted.
DSL connections, on the other hand, will remain the major contributor to worldwide household broadband connections. Traditional DSL access is expected to drop a few percentage points to just under 60 percent of all connections by 2013. DSL connections will see a 98 million increase within four years, led mostly by growth in emerging markets, according to Gartner.
Vivian Yeo of ZDNet Asia reported from Singapore.
Verizon Communications has had a change of heart about using Wi-Fi to extend its wireless broadband offering as the company announces free access to Wi-Fi hot spots for its Fios and DSL Internet customers.
On Monday the company announced that customers subscribed to its Verizon Fios Internet service with 20Mbps per second downstream and 15Mbps upstream or faster and customers who subscribe to its 3Mbps/768 Kbps or higher DSL service will be able to connect to Verizon Wi-Fi hot spots, at no additional charge as part of their broadband service.
Verizon has partnered with the Wi-Fi service Boingo to offer access in thousands of locations throughout the U.S. including hotels, airports, restaurants, coffee shops, retailers, convention centers and public locations across the U.S. The company has a Web page where customers can locate these Verizon hot spots. For example, in New York City, the service is available at many Barnes & Noble bookstores, as well as at JFK airport, and in some Starbucks locations.
For the past few years, Verizon has downplayed the importance of Wi-Fi. The company experimented with deploying its own Wi-Fi hot spots several years ago in New York City, turning old phone booths into wireless hot spots. The service never took off, and Verizon dismantled the hotspots. The company was also a vocal critic of many municipal Wi-Fi projects, including the one in Philadelphia.
Instead Verizon has always pushed its 3G wireless network and more recently it's soon-to-be-built 4G wireless network as a perfect solution for its subscribers on the go.
But as other broadband providers start offering Wi-Fi access for free with their services, it seems that Verizon has decided to jump on the Wi-Fi bandwagon. AT&T has been offering free Wi-Fi to its high-speed Internet customers for more than two years. And cable operator Cablevision, which competes in Verizon's territory, launched its Wi-Fi service last year. Cablevision and Comcast have teamed up to provide free Wi-Fi access to their subscribers who commute by offering the service on train platforms .
Verizon spokesman Eric Rabe argues that the Verizon offering is better than what cable offers because it is available nationwide. The cable Wi-Fi networks are only available regionally where the cable providers operate.
Rabe stopped short of admitting that Verizon has changed its tune when it comes to Wi-Fi. He said the company is merely answering the demand from its customers.
"I would call this an expansion of the way we see mobility," he said in a phone interview. "We are broadening how people access the Internet when they aren't at home. And we're doing it because our customers have told us it's what they want."
Rabe does not think that the new Wi-Fi offering will cut into the company's wireless broadband business, which requires a monthly service and contract to get access to the company's 3G wireless network on laptops. This service costs about $60 a month for up to 5GB of Internet usage a month. While the speeds on the 3G network are slower than when using a Wi-Fi hot spot, the wireless broadband card offers access to the Net wherever Verizon's 3G cellular network is available.
"Our cellular 3G network allows people to be truly mobile," he said. "And you can't do that with hot spots. So I don't think it will compete at all with our wireless broadband service. There will still be a lot of users, particularly business customers, who still want the reliability and ubiquity of 3G wireless."
Verizon has also been touting its new 4G wireless network, which will be in trials later this year in Seattle and Boston. The new network, which uses a technology called LTE, or Long Term Evolution, will go live commercially in 2010. The company expects to have the entire network built out by 2013. Verizon's plan is for the 4G network to provide wireless connectivity to a whole range of devices other than cell phones, laptops, and Netbooks.
Rabe said that any Wi-Fi device that can download "access credentials" from the Verizon Web site, should be able to access the Wi-Fi hot spots. Some Windows Mobile phones may be able to access to the Wi-Fi hot spots, but he isn't certain that that is the case. And he could not confirm whether the Apple iPhone would be able to connect to the Verizon hot spots. AT&T , which is the exclusive U.S. carrier for the iPhone, already offers free Net access to iPhone users in its more than 20,000 hot spots.
More people throughout the world are hopping onto the high-speed bandwagon.
Global broadband access jumped by 16.6 million lines in the last quarter, reaching a total of 429.2 million lines throughout the world, says a report released Tuesday by industry group Broadband Forum.
Despite the sluggish economy, growth was slightly higher in the latest quarter than over the prior three months, according to the report.
In this past quarter, broadband access grew by 10 percent in 20 different countries. The biggest gainers were India at 13.4 percent, the Ukraine at 15.2 percent, Egypt at 10.6 percent, and Mexico at 10.3 percent. Access in North America rose 3.87 percent, reaching 93.5 million lines, the report said.
China ranks at the top of the list for highest number of broadband lines at 88 million, while the U.S. is number two with 83.9 million lines, the report said.
Among broadband technologies, DSL is still the most popular with a 64 percent slice of the market. Cable is next at 20 percent. Fiber is pulling up fast, capturing more than 3 million new lines to gain a 12 percent market stake, the report said.
Based in California, the Broadband Forum is a worldwide group of around 200 companies involved with telecommunications, computing, and networking. The broadband report was prepared for the forum by industry research firm Point Topic.
Verizon Communications said Wednesday that it's extending its agreement with Yahoo to provide Verizon Internet users with Yahoo's Web portal.
The companies' multiyear agreement replaces a similar arrangement the companies had in place since 2005. Verizon didn't offer details about the duration or financial terms of the new deal. But it did say Yahoo's portal will be the first choice offered to subscribers of its DSL and Fios high-speed Internet service. Verizon will also offer its own branded portal and the MSN portal from Microsoft.
The deal between Verizon and Yahoo appears to only cover Verizon's wired broadband services. The companies made no mention of a deal that included services for Verizon Wireless, which is jointly owned by European carrier Vodafone and Verizon Communications. Recent news articles have reported that Verizon Wireless is close to striking a deal with Google on mobile search and advertising. Yahoo also offers mobile search and advertising products that Verizon Wireless could use as well. AT&T, which has a similar broadband portal arrangement with Yahoo that Verizon has, also has chosen Yahoo as one of its mobile partners.
Verizon Wireless hasn't yet announced any kind of arrangement with Google, so it will be interesting to see if Yahoo can parlay its broadband deal into anything for mobile. Yahoo has a strong portfolio in mobile and it has done well so far in the mobile market. Like Google, it has adapted some of its traditional Web services, like search, for the mobile market.
Earlier this year, Yahoo redesigned its mobile home page and announced Yahoo Go 3.0, an open platform for widgets created by outsiders. It's also been rolling out new partnerships for mobile advertising. In addition to providing search and display advertising for AT&T, Yahoo has also won big deals with other carriers such as Vodafone and T-Mobile in Europe and Rogers in Canada.
Verizon Communications' wireless business continues to boost the company's profits as its landline business sputters, according to second-quarter earnings reports.
On Monday, Verizon reported a 12 percent increase in second quarter net income. The company reported that profits jumped to $1.88 billion in the second quarter from $1.68 billion during the same quarter a year ago. This increase came as the company only slightly grew its revenue, which was $24.12 billion for the quarter up from $23.27 billion a year ago.
Wireless once again proved to be the big growth engine for Verizon, which jointly owns Verizon Wireless with European phone company Vodafone.
During the quarter, Verizon added 1.5 million new subscribers bringing its total to 68.7 million. This is an important achievement given the fact that more than 80 percent of all Americans already own a cell phone. AT&T, Verizon's chief rival, added 1.3 million wireless subscribers during the second quarter.
Currently, Verizon lags behind AT&T by only 4.2 million subscribers. But that will soon change after Verizon completes the $28.1 billion acquisition of Alltel, which has 13 million customers. Once that merger is complete sometime later this year, Verizon will be the largest wireless operator in terms of subscribers in the U.S.
But as Verizon's wireless business continued to grow unabated, the company's landline business was much less impressive. Revenue for all of wireline fell about 1.8 percent to $12.1 billion. As expected the company saw declines in its residential phone lines. During the quarter, Verizon lost 920,000 access phone lines, which was about an 11.4 percent drop from a year ago. But this drop in access lines has largely been expected as residential customers cancel second phone lines and use alternative services such as wireless or voice over IP services.
While it was expected that Verizon's traditional phone business would continue to fall, it was somewhat surprising that the company also saw some weakness in its newer broadband services. For one, the company missed some analyst targets for signing up new Fios TV customers. Fios TV is Verizon's answer to cable TV, and it's delivered over the company's all-fiber network.
Verizon reported it had added 176,000 new customers for the service. But this fell short of some expectations. For example, Dow Jones News reported that Bank of America had projected Verizon would add 260,000 new Fios TV customers.
This news comes just as Verizon launches Fios TV in New York City. The company sees densely populated urban areas like New York City as a big opportunity as it expands the Fios service. And adding the video to its package should help the company compete more directly with cable operators, such as Time Warner Cable and Cablevision.
But it wasn't just Fios TV that disappointed. Verizon also lost a considerable number of DSL subscribers, about 133,000 to be exact. The second quarter is typically weaker in broadband because college kids go home for the summer and cut off their broadband service. But it looks like the company is hitting a slump in DSL subscribers as it pushes its Fios service. Meanwhile, Fios Internet took up some of the slack adding about 187,000 new customers.
- prev
- 1
- next
