Though the battle for broadband access subscribers is intense, there's no screaming price war between cable TV and telcos, and Kagan Research doesn't expect one in the foreseeable future. How can that be possible, when the U.S. consumer still receives significantly less broadband service value, when compared to the leading Asia-Pacific and European markets?
To others, this may be surprising because price wars erupt in most other corners of the digital landscape, such as telcos matching cable in consumer rates for video channels. What has emerged in broadband, however, is a two-tier marketplace. According to Kagan Research, the average price for broadband service was $39.45/month from the five top cable operators in Q1 2006 and $35.38 for four telcos.
"Consumers perceive cable modem service as being premium," notes Mariam Rondeli, analyst at Kagan Research. "There were a lot of predictions that cable's ARPU (average revenue per unit) would fall, to match DSL from telcos, but cable keeps prices relatively steady and cable markets to consumers the high performance of cable modems."
Cable systems have increased their download speeds to a maximum of 30 mbps, versus a 10 mbps top common just a year ago, to help justify premium broadband pricing. Telephone-wire based digital subscriber lines (DSL) generally have slower download speeds in the low single digits of Mbps � or million bits per second, a measure of transmission speeds.
DSL is adding customers faster than cable modem broadband. Rondeli notes narrow-band dial-up subs migrating to DSL are a big part of this surge, and those dial-up defectors are price sensitive. Pricing by telcos varies, according to Cable TV Investor. Verizon averaged $31.62/month for DSL in Q1 2006, while Bell South was by far the highest of the four telcos surveyed at $42.25/month, which is even above the cable industry average.
Rondeli cautions that while those prices for standalone broadband show little sign of price competition, it can be argued there is significant discounting when broadband is rolled up into a $100/month "triple play" package. "It would just depend on how one allocates revenue for each component of broadband, voice and TV," notes Rondeli.
So, what's the conclusion? Clearly, cable MSO's are better at articulating value, compared to the "marketing challenged" typical U.S. telco. Regardless, both groups depend upon there being a lack of market alternatives to keep their broadband prices inflated. If American consumers only knew what typical pricing was in Asia and Europe, they would be outraged. As long as the status quo is maintained, there will be minimal progressive momentum. Like that proverb says -- ignorance is bliss.
To others, this may be surprising because price wars erupt in most other corners of the digital landscape, such as telcos matching cable in consumer rates for video channels. What has emerged in broadband, however, is a two-tier marketplace. According to Kagan Research, the average price for broadband service was $39.45/month from the five top cable operators in Q1 2006 and $35.38 for four telcos.
"Consumers perceive cable modem service as being premium," notes Mariam Rondeli, analyst at Kagan Research. "There were a lot of predictions that cable's ARPU (average revenue per unit) would fall, to match DSL from telcos, but cable keeps prices relatively steady and cable markets to consumers the high performance of cable modems."
Cable systems have increased their download speeds to a maximum of 30 mbps, versus a 10 mbps top common just a year ago, to help justify premium broadband pricing. Telephone-wire based digital subscriber lines (DSL) generally have slower download speeds in the low single digits of Mbps � or million bits per second, a measure of transmission speeds.
DSL is adding customers faster than cable modem broadband. Rondeli notes narrow-band dial-up subs migrating to DSL are a big part of this surge, and those dial-up defectors are price sensitive. Pricing by telcos varies, according to Cable TV Investor. Verizon averaged $31.62/month for DSL in Q1 2006, while Bell South was by far the highest of the four telcos surveyed at $42.25/month, which is even above the cable industry average.
Rondeli cautions that while those prices for standalone broadband show little sign of price competition, it can be argued there is significant discounting when broadband is rolled up into a $100/month "triple play" package. "It would just depend on how one allocates revenue for each component of broadband, voice and TV," notes Rondeli.
So, what's the conclusion? Clearly, cable MSO's are better at articulating value, compared to the "marketing challenged" typical U.S. telco. Regardless, both groups depend upon there being a lack of market alternatives to keep their broadband prices inflated. If American consumers only knew what typical pricing was in Asia and Europe, they would be outraged. As long as the status quo is maintained, there will be minimal progressive momentum. Like that proverb says -- ignorance is bliss.