Competition in gigabit internet market can significantly reduce prices

Americans have long put up with expensive broadband service that’s slower and more expensive than what is enjoyed in much of Europe and parts of Asia. Even when big ISPs announce that they deployed gigabit broadband in a new market, all too often the claims are exaggerated or restricted to just a few neighborhoods.

In the last few years, however, a number of ISPs, Google, and a few U.S. cities made ultra-fast connections available via a technology called “Fiber to the Home” (FTTH). When there’s only one ISP in a city or town that offers gigabit broadband, it tends to be very expensive. When a second or third company decides to compete, prices come down sharply. A new flavor of cable technology called “DOCSIS 3.1” is just starting to enter the market, and it delivers very high speed service over existing cable TV wires at much lower prices than fiber-based internet.

A soon-to-be-released study of the 100 largest markets in the United States found that when a new broadband provider offers gigabit connectivity, prices for service drop significantly — and not just at the fastest and most expensive tiers. If, for example, a new gigabit service becomes available in your area, prices for high speed plans of 100Mbps or more are reduced by approximately $27 dollars per month , or  about 25 percent less than the standard price. That’s according to a study commissioned by the Fiber to the Home Council, a trade group that represents 35 companies, mostly equipment manufacturers.

From the new survey:

• If you just look at gigabit speed plans, the effect is particularly significant  —  one gigabit provider to two providers reduces prices by approximately $57 to 62 per month, or between 34 percent to 37 percent.
• Even when including plans with other speeds, there is a substantial effect. When looking across all broadband plans (with speeds of over 25Mbps), prices go down between $13 and $18 per month, or 14 percent and 19 percent.

The industry group choose not to include names of the actual providers in its report, so there’s no way to know which companies offer the best deals.

Gigabit speed without the digging

The largest barrier to FTTH service is the high costs of digging up streets or running fiber-optic cable on telephone poles to homes. This process is not only expensive, it requires permits from various authorities and makes a mess of neighborhoods.

The DOCSIS tech circumvents fiber by using various technological tricks to enable speeds of up to 1Gbps over existing cable TV lines. Unfortunately, a drawback exists. Unlike FTTH, DOCSIS connections are asymmetrical, so its downloads are much faster than uploads. For most consumers, however, that tradeoff is a good one.

Comcast, which has started to deploy DOCSIS 3.1 in a number of markets, offers a promotional plan for $70 a month, with a multi-year contract. The service, called Gigabit Internet, provides download speeds of 1Gbps and upload speeds of about 35Mbps. If you don’t want to sign a contract, you’ll pay twice as much for the service.

In comparison, Comcast’s FTTH service, called Gigabit Pro, costs $300 a month, and it offers speeds of up to 2Gbps, both upstream and down. The high-speed services are currently only available in a limited number of markets, but it’s likely that Comcast will expand gigabit internet service fairly quickly.

DOCSIS 3.1 is new, so finding a compatible modem can be difficult. And if you search specifically for “DOCSIS 3.1 modems” on Google, Amazon and other outlets return results for DOCSIS 3.0 modems, which won’t work with the new standard. Until the manufacturers catch up, interested customers might have to rent modems from Comcast for $10 a month.

A number of additional players are also deploying FTTH, but Comcast appears to lead the pack when it comes to DOCSIS 3.1. Hopefully, other companies will jump in, and consumer will see an effect on pricing that’s similar to the benefits documented in the Fiber to the Home Council report.