Earlier today, the New York Times’ Bits Blog reported that starting next month, New York-based cable provider Cablevision will offer 101Mbps (downstream) service to the 5 million people in its service area at a cost of $99.99 per month. While $100 per month for Internet service is not quite what most of us would consider a deal, Cablevision’s latest service offering–which will be the fastest Internet service available to consumers in the United States–looks a lot more affordable when juxtaposed with comparable services. Both Verizon and Comcast currently charge $140/month for 50Mbps downstream service (Verizon charges less in a few highly competitive markets), which means that with Cablevision, you’re getting more than double the downstream bandwidth for around 70% of the price. Sure, a cost to speed ratio of $0.99 per megabit might not seem like a great value when compared to speeds and prices overseas but for the U.S., Cablevision’s announcement represents a big step forward for the affordability of high-speed broadband. How can Cablevision afford to offer such fast service at such a relatively low price?
Here’s the answer: DOCSIS 3.0. Unlike Verizon, whose upgrade path involves rolling out fiber to the home–a costly and time-consuming process–Cablevision needs only to upgrade its existing cable hardware to take advantage of the faster speeds and greater capacity that DOCSIS 3.0 offers. Sure, there are some hidden costs involved, namely, the conversion of a few video channels to Internet channels, but even these costs are trivial when compared to the expenses associated with deploying fiber. According to the Bits piece, Cablevision’s DOCSIS 3.0 upgrade will cost roughly $97 per existing customer or $60 per household, if you count all of the households in the area served. While Comcast has declined to reveal how much it will expend in order to upgrade to DOCSIS 3.0, we can only assume that Comcast’s costs are similar to Cablevision’s, as its upgrade path is extremely similar. So why, then, is Comcast’s service so much more expensive per megabit?
One word: competition, or rather, the lack thereof. It’s no coincidence that Comcast offers its 50Mbps service for $140/month–that’s the exact same price Verizon charges for its 50Mbps service. In the absence of any other competition in the high-speed market, Comcast had little incentive to offer consumers a better deal–though it likely could have. Citing the high cost of upgrading to DOCSIS 3.0, Comcast matched Verizon’s pricing and in so doing, likely reaped a healthy profit. However, now that Cablevision has thrown down the gauntlet and revealed that DOCSIS 3.0 service can be offered to consumers at a significantly lower price, Comcast will be forced to drop its prices dramatically, at least in areas where it competes with Cablevision. With any luck, this could mark the beginning of real competition in the high-speed broadband services market in this country.
Ultimately, it’s still too early to tell whether or not Cablevision’s 101Mbps service will be a game-changer. Until the company starts rolling out the service to end users, we won’t know what the difference between advertised and actual speeds are. We also don’t yet know if the $99.99/month price is a temporary or promotional price that is subject to change. We do know, however, that unlike other cable carriers who threatened to put the brakes on DOCSIS 3.0 rollouts unless they were allowed to indulge in consumption billing or carriers who deployed high-speed DOCSIS 3.0 service only to put a cap on how much users could download, Cablevision has committed to roll out a fast service at a competitive price, with no consumption billing, download caps or discriminatory network management in sight. I don’t know about you but that sure sounds like progress to me.