The competition between cable operators and telcos over broadband connections to the home is coming down to speed versus price. As telcos lower prices, cable operators are countering by increasing the speed of their Internet connections.
Many think cable is playing a losing hand-that most customers will easily choose a lower price over a speed jump from 1.5 to 3 Mbps. Though cable still officially leads over the DSL (digital subscriber line) technology offered by phone companies, the gap may be rapidly closing as DSL prices drop and cable rates remain stable.
By year's end, cable is projected to have 13.3 million subscribers as compared to 7.5 million for DSL, says market researcher In-Stat/MDR. However, those statistics don’t recognize the substantial recent price cuts for DSL and the researchers say their projections may be revised.
Internet users have long been lured to faster connections from slow 56 Kbps dial-up connections. But once they’ve acquired a taste of broadband, it’s not known whether they’ll see a speed increase above 1.5 Mbps as a good reason to pay more than for competing services.
For several years broadband connections, regardless of provider, have been priced at about $50 a month. Cable companies want to keep it that way, with fees remaining at a price between $45 and $55 a month. Telcos, on the other hand, are cutting DSL prices-some promotions dropping below $30 a month. DSL services in many areas are now priced on a regular basis at below $40 a month.
Outside of gamers who want extra speed, some analysts are betting the telcos have the right strategy for most Internet users.