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Cheap DSL threatening Cable?

Comcast logoDSLreports links to an article from CNET on AT&T’s (T”) and Verizon’s (VZ) $14.95/month DSL service first offered last summer. It offers some color behind the Verizon subscription numbers, namely that they couldn’t keep up with subscriber demand.

These pricing levels are converting the last users of dial-up technically savvy enough to make the transition, though with WiFi routers and embedded WiFi in laptops getting online has never been easier. Dial-up is dead. Why isn’t cable getting in on the action?

Om Malik from GigaOm sees this pricing as a desperation tactic by the bells. I think its smart marketing, selling tiered services from 768kb/s DSL all the way to 15Mb/s FiOS. It allows the conversion of people with a fixed $15/month broadband budget to convert to higher speeds, and squeezes more revenue out of the telcos fixed cost base. We also have strong beliefs about why the telcos are willing to fight to the death for market share in the broadband arena… to be shared later.

How long until Comcast (CMCSA) and other cablecos need to offer a low-priced tier to retain existing customers and harvest new ones with lower marginal pricing? Why haven’t they already done this? From the CNET article:

Comcast and other cable operators say they’d rather compete on the value of their service than strictly on the price. As a result, they tend to bundle multiple services, such as high-speed Internet access, telephony service and TV, all in one package. Plus, Comcast’s 6mbps service is much faster than Verizon’s 768kbps service.

Major alarms going off here on the bullshlt detector.

Customers would rather pay less for the service they use. This might also explain why Comcast new subscriber growth was weaker than expected last quarter.

Either Comcast is incredibly incompetent (I don’t think so) or there is some sort of financial, political, or technical barrier to them offering this service. If we don’t see an announcement from the cablecoms matching this pricing within the next month (no silly 3-month offers either) things are looking pretty fishy.

Anyone want to take a shot at what that barrier might be?


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  1. One reason I was never swayed by the “cheap DSL” pitch is that yeah the DSL portion may be only $14.95, but I’m also stuck keeping the $36.00 basic phone service plus whatever I was spending on long distance.

    When I did the numbers VoIP + basic cable + cable Internet was cheaper than DSP + PSTN + LD and that was even though I didn’t initially have cable television.

    Posted by T. Carter | May 10, 2006, 3:40 PM