[LINK] Why Broadband Prices Haven’t Decreased

Kim Holburn kim at holburn.net
Wed Sep 15 08:20:31 EST 2010

Although this is a US study, some of the findings and arguments have  
bearing in Australia.

Note particularly:
> Meanwhile, once companies have installed the lines, their costs are  
> far below prices. "At that point, it becomes pure profit,


> Why Broadband Prices Haven’t Decreased
> Creating the first broadband consumer price index
> Based on the Research of Shane Greenstein And Ryan McDevitt

> After a new technology is introduced to the market, there is usually  
> a predictable decrease in price as it becomes more common. Laptops  
> experienced precipitous price drops during the past decade. Digital  
> cameras, personal computers, and computer chips all followed similar  
> steep declines in price. Has the price of broadband Internet  
> followed the same model? Shane Greenstein decided to look into it.


> Pricing Policy
> It might seem like the cost of obtaining access to broadband  
> Internet service would be prohibitive for many, but Greenstein notes  
> that cable television wires already pass by more than 95 percent of  
> US homes, while 75 percent of homes are close enough to a telephone  
> switch for a DSL provision. "Any place with a population above  
> 50,000 is not going to have a problem getting service," Greenstein  
> says.


> Meanwhile, once companies have installed the lines, their costs are  
> far below prices. "At that point, it becomes pure profit,"  
> Greenstein says. A company might spend around $100 per year to  
> "maintain and service" the connection, but people are paying nearly  
> that amount every other month. Greenstein says that it is not  
> surprising that prices were high during the buildout phase in the  
> early and mid-2000s, since the firms were trying to recover their  
> costs. "However, we are approaching the end of the first buildout,  
> so competitive pressures should have led to price drops by now, if  
> there are any. Like many observers, I expected to see prices drop by  
> now, and I am surprised they have not."


> The most surprising discovery, Greenstein says, is that national  
> decisions are being made without the type of data that he created in  
> the consumer price index. "As an observer of communications policy  
> in the U.S., I find it shocking sometimes how often government makes  
> decisions by the seat of their pants," he says. Without real data  
> and statistics, decisions are based solely on who has better  
> arguments—in essence, a debate. A better consumer price index will  
> help produce better decisions for the future of the Internet and its  
> users.

Kim Holburn
IT Network & Security Consultant
T: +61 2 61402408  M: +61 404072753
mailto:kim at holburn.net  aim://kimholburn
skype://kholburn - PGP Public Key on request

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