“Price War Erupts For High-Speed Internet Service”

The Wall Street Journal carries an interesting story about broadband—one pitched at the level of titans—and the emerging battle between the cable and phone companies for customers’ retail business. The story’s title is a little misleading since there has only been a bit of movement toward price competition. The Wall St. Journal maven, however, sees price competition in his tarot cards based largely on the fact that in the last quarter the cablecos scored a big win over the telecos, bringing in 75% of new subscribers.

Normally this story wouldn’t qualify for an LPF comment but the implications for our community’s fiber network turn out to be interesting….and heartening. The analysts think that winning at internet connectivity is the key. (And, hey, we think so here too.) The juicy parts:

As bandwidth-hungry applications like video downloads grow, customers prefer the generally faster speeds cable offers. Cable companies have also been marketing more aggressively in recent months, analysts say.

“Phone companies can’t just sit back and let cable companies take that much of the broadband market, or they will eventually cede everything,” says John Hodulik, an analyst at UBS.

Winning broadband customers has enormous strategic consequences for both cable and phone companies. It gives them a foot in the door to sell other services, such as pay-TV and phone service.

The reason that internet subs are so strategically crucial?

Mr. Hodulik says customers are most apt to get phone and TV services from the same company that provides them with their broadband connection. And broadband services are also the most profitable of the bundled services.

So on this analysis, people are deciding which service to go with based on who can give them the best (and cheapest) broadband connection. Then they buy onto the other offered services.

That bodes well for LUSFiber which will have, without question, the best and cheapest data network in town.

Looking forward to January?

2 thoughts on ““Price War Erupts For High-Speed Internet Service””

  1. Thanks to the Palo Alto dark fiber ring we’ve been able to make it possible for individuals and very small businesses to get access at reasonable prices. Please feel free to contact us if you want to know how it’s going. The press release below tells the story.

    Cheers, Liza

    Fiber High Meets the Market for High Speed/Low Cost Office Space

    September 16, 2008 – Palo Alto, CA: After years of promises of multi-megabit communications from major telecommunications providers, Fiber High LLC, a local 3-person outfit, is now actually delivering. By combining low-cost, no- or short-term lease, shared office space and direct links to the country’s fastest public optical fiber network, Fiber High brings serious connectivity within reach of low-budget entrepreneurs and start-ups.
    “Our fiber and copper network puts 40 to 100 Mbps on every desk,” says managing partner and network designer, David Gjerdrum. “For people who need to move large graphic files or databases, speed is a necessity,” Gjerdrum comments. “For others, it’s just plain addictive.”
    Fiber High’s style is totally without bling. Its founders noticed that many of their business neighbors moved out of Palo Alto in search of lower cost square footage as landlords spiffed up their aging buildings and raised the rent. As Fiber High’s first tenant, a computational chemist developing an ‘in silico’ predictive toxicology tool with NIH SBIR funding, put it, “I don’t need anything fancy, just a place I can afford to hunker down with my three servers, work on method development and grow my client base. Given the early stage of my business … I’m not in a position to sign a multi-year lease but want to focus on the commercialization stage with the flexibility to move on or expand based on changes in ‘market’ conditions.

    The Fiber High business model is to facilitate small, creative, highly-connected communities. Top capacity at the 989 Commercial St. location is twelve cubicles housing not more than thirty people. Its server room and electrical service can accommodate about 120 rack computers in addition to the desktops. “If we’re oversubscribed we’ll get an additional building,” notes Fiber High partner, Liza Loop. She and Gjerdrum point out that fiber connected distributed computing facilities using existing HVAC equipment to handle a smaller number of machines is truly a “green” alternative to the huge collocation sites that are being built in Silicon Valley. They believe that small, collaborative workplaces will foster the kind of innovation the Bay Area is famous for.
    For more information please visit: http://www.fiberhigh.com or contact Managing Partner, David Gjerdrum, by phone at 650 714 7667 or email at david@fiberhigh.com

    Fiber High, LLC
    Partners: David Gjerdrum, Brian Skiba, Liza Loop
    989 Commercial St.
    Palo Alto, CA 94303
    Tel: 650 964 5623
    email: Fiberhigh@gmail.com