Ok before you jump all over me, I know some US cable companies are moving to install Docsis 3, the catch is they are charging as much as $140 a month for around 50 Mbps service. Here’s the catch, they could offer if for MUCH less. It’s the lack of competition in the US that explains why they don’t. Most markets you have a choice of a SINGLE cable provider and broadband already has the highest profit margins of any product cable companies offer. Like any profit-maximizing business would do, they set prices in relation to other providers and market demand rather than based on costs.
Check out how much other countries, where there is more competition, charge. In Japan, its 160 Mbps service costs 6,000 yen ($60) per month. That’s only $5 a month more than the price of its basic 30 Mbps service. In the Netherlands it charges 80 euros ($107) for 120 Mbps service and 60 euros ($81) for 60 Mbps. The fastest consumer broadband in the world is the 160-megabit-per-second service offered by J:Com, the largest cable company in Japan. Guess what it cost them in investment to get those speeds: $20 per home.
So what gives? For one, like any business the cable companies don’t want to cut into a high profit margin service… and why should they, there’s no “competition” for broadband because there’s typically a single cable broadband provider in a given area. Here’s another spin though… really fast broadband means people will watch more on the web and less on traditional cable. The providers are afraid users will ditch regular cable services. With services like Hulu, etc coming out it’s easy to see that they’re trying to keep their traditional business model in place before it’s destroyed by the always-on, on-demand offerings that the web can offer. This also makes sense as to why the cable co’s are putting in place “bandwidth caps” right now. They argue that it’s the P2P file sharers that are taking up all the pipe… but if you look long term it seems more of a protectionist move for the inevitable: the rest of us getting our content when we want, how we want, where we want… via the Internet and not in the pre-packaged, lack of choice manner that the cable companies have been offering so far.
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