Price gap between cable, DSL widens

Dwight Silverman blogged This Associated Press story focuses on a survey saying the price difference between cable modem and DSL service continues to widen:

Cable-modem service was, on average, 75.8 percent more expensive than DSL during the month [of August], up from a 53.3 percent gap in July. While phone carriers cut prices - the average DSL price decreased by 9.2 percent - cable companies raised them. Leading the price decline was Verizon Communications which rolled out a slower service that cost just $14.95 a month, with a free month of service with a one-year commitment. By contrast, cable broadband service got 4.1 percent more expensive, on average. Comcast Corp. raised prices an average of 7.9 percent, while Time Warner Cable raised by 5.8 percent, according to the survey.

Cable markets itself based on speed; DSL, on price. In Houston, where Time Warner's RoadRunner is the primary cable-modem service, it costs about $45 a month, but the speed is 5 megabits a second. SBC sells its Yahoo-branded service at a fire-sale price of $14.95, with a maximum speed of 1.5 Mbps.

And that 1.5 Mbps only applies if you are almost across the street from the wire center. If you are closer to 3.4 miles from the wirecenter (the maximum for DSL), your speed will drop to 384kbps.

To my mind, these are two different audiences. RoadRunner goes for the online power users, consumers of digital media and gamers. SBC's offering is aimed at the masses, those who simply want to give up obsolete, pokey dialup and not pay much more than they are now. In the case of America Online users, you'd actually be paying less by making the switch.

At some point, expect to see RoadRunner moved to tiered pricing, where it offers slower speeds for less money. Time Warner executives have talked about doing this for years, and the price war with SBC is likely what will get them off the fence.

In Tulsa, both Cable (Cox) and DSL (Bell) offer tiered pricing. Cox's primary broadband is supposedly 4mbps, but they offer 5mbps for gamers at a higher price, and they have a much lower speed (I think it is 384kbps) priced to compete with DSL. Also I have heard that DSL has a higher priced package, but it is only 3mbps, and like the 1.5 mbps it is a function of distance from the wire center.