Comcast Boosts Broadband Speeds Again
BroadBananas Michael Harris 7/12/2005
Comcast, the top broadband Internet service provider with over 7.4 million customers, announced it is increasing access speeds for its cable modem service. The company says it will begin offering broadband access at 8 Mbps/768 kbps and 6 Mbps/384 kbps (downstream/upstream) in eastern and central Pennsylvania, New England, New Jersey, Maryland, Michigan and Washington, D.C., with nearly all Comcast markets scheduled to be upgraded this summer. The 6-Mbps service will be available at no additional charge to all cable modem customers who also subscribe to at least basic cable TV service. These customers have the option to upgrade to 8-Mbps service for $10 more per month. For broadband Internet customers who do not buy cable TV, 6-Mbps service will be priced at an additional $10 per month, while 8-Mbps service will carry a $20 monthly premium. Not surprisingly, with the exception of Michigan, all of Comcast's initial speed increases are in Verizon markets, the Bell most aggressively rolling out fiber-to-the home services. In the July issue of CDN, I wrote about MSOs' speed addiction. Seems germane, so I'm reposting it here. [b]CABLE CONUNDRUMS[/b] Over the years, cable executives have passionately insisted that the one thing they would never permit is for their high-speed data networks to become "dumb pipes." Yet this is exactly what has happened. Yes, the cable industry is successfully leveraging the quality-of-service (QoS) capabilities of its DOCSIS 1.1+ networks in the growing deployment of PacketCable-based IP telephone services. But this intelligence has never been meaningfully employed with cable's core data product or translated into a consumer value proposition. Rather, MSOs have boxed themselves into the position of simply selling "megabits" rather than quality, value or services. In the face of increasingly savvy marketing efforts by telcos with DSL, cable's knee-jerk response has simply been to raise the speed of cable modem service. The message to consumers: Big dumb pipes are your best bet. Of course, in practice this is simply untrue for most users. Liberty Media Senior Vice President and CTO Tony Werner candidly conceded that the speed at which Web pages load does not improve above 1 Mbps, although it can benefit file transfers, peer-to-peer (P2P) applications and gaming services. In other words, ultra-high speeds are only useful for cable's least profitable customers. "Speed is not really an advantage to the consumer. It's just marketing," Werner said. Yet cable's megabit obsession has the North American industry headed down the same nutty path as the Asian market, where Werner notes that broadband is now worth "6 cents per 100 Kbps." That's equal to only about $25 per month for 40 Mbps service. The danger is that the "faster is all that matters" message undermines the creation of a sustainable value proposition. Speed freaks are the least loyal customers, always ready to jump at the hottest new product, which today means fiber-to-the-home (FTTH). Werner admitted as much, noting that in Japan FTTH now has a larger customer base than cable modem services, even though fiber service is slower and available to fewer homes. In the U.S., telcos are planning a similar assault with fiber. In the meantime, they are successfully convincing mainstream consumers that speed is overpriced by aggressively selling low-cost DSL links. Cable's penchant to increase and tout the cable modem speed meter has another obvious downside. Mike Hayashi, Time Warner Cable's senior vice president of advanced engineering and subscriber technology, addressed the issue on the panel. "As we ratchet up bandwidth, what stops over-the-top guys from using the pipe?" Hayashi asked his fellow CTOs. By "over-the-top guys," he meant the likes of Vonage, Skype and Movielink. The answer, of course, is nothing. The fatter the pipe, the better these services will work because, as Werner noted, "a fatter pipe lowers latency." In other words, QoS capabilities, which MSOs say differentiate their services, add value only when a pipe is truly resource-constrained. A key reason MSOs have become speed demons is that cable operators are increasingly dependent on broadband's cash-flow to offset weakness in their video business. Cable executives are terrified that if they change their cable modem service mix -- by lowering prices rather than increasing speeds or introducing low-priced, low-speed products -- profits may decline, drawing Wall Street's ire. As a result, those MSOs that go private may gain more flexibility in how they can price and position their high-speed data offerings.