Google competition makes AT&T cut cost of gigabit service in some areas

Why does AT&T charge $110 for its “GigaPower” Ethernet service in Chicago and only $70 in San Antonio? The company won’t say, but I have a pretty good idea: competition.

Cities in which Google offers its $70-a-month high speed Internet service enjoy AT&T’s rival offering for about the same price. However, in cities where AT&T is the only option, or at least the only large provider, the company charges more.

Competition and price gouging

AT&T has every right to charge as much as it wants, and consumers can, and should, shop around for better deals. The problem, though, is that in many major markets there’s little or no competition. In fact, the vast majority of American homes have access to only one, or sometimes two, broadband providers, according to the FCC, and the faster the speed the fewer the competitors.

In June, AT&T announced, for example, that it would offer GigaPower service in Charlotte, N.C., for $70 a month. Google also plans to deploy fiber in Charlotte. However, it’s a different story in Miami. Consumers there got the news this week that AT&T will reduce the cost of GigaPower service to $110 from $120 — but that’s still $40 more than the same service costs in Charlotte. A quick glance at Google’s gigabit coverage map shows that Miami, along with the rest of Florida, are conspicuously absent.

The same scenario is playing out in Chicago, where customers pay AT&T $110 for GigaPower service. Consumers in Austin can pick between AT&T and Google, and pay just $70 a month.

The pattern is clear, and it underlines a point that the FCC and many others (myself included) have repeatedly made: A lack of competition in the ultra-high-speed Internet market keeps prices high, and areas with competing providers see lower prices.

Here’s a related comment from an AT&T spokeswoman:

“We’re connecting customers in 17 major metro areas in the United States with AT&T U-verse with GigaPower, which offers AT&T’s fastest speeds up to 1 gigabit per second along with competitive pricing options. Great value is evidenced by our sales continuing to exceed our expectations.”

It’s worth noting that an increasing number of relatively small, independent broadband providers are starting to offer similar high-speed broadband. In San Francisco, for example, Sonic.com offers gigabit service for $70 per month, but it’s available only in a few neighborhoods. Even the large ISPs generally only offer 1 gbps service in specific parts of cities, and that’s doubly true for the smaller providers.

It’s a slow process, but competition is finally pushing ISPs to provide U.S. consumers with the speeds our counterparts in Asia and Europe have enjoyed for years.