I expected to see more reaction to the Wall Street Journal’s recent observation of a surprising shakeup in the broadband industry. Vishesh Kumar reported that
Verizon Communications Inc., which last quarter became the first company ever to see a drop in DSL subscribers — some of whom went to its faster FiOS service — is now offering customers six months of DSL service free if they sign up for the company’s phone and Internet package. That makes the bundled package $45 a month, vs. $65 prior to the offer. AT&T Inc., meanwhile, is now guaranteeing its current prices, ranging from $20 to $55 a month, for two years.
I cite this because I always claim that less regulation of a highly-regulated industry promotes competition, consumer choice and ultimately lower prices. Occasionally someone claims that prices do not appear to be falling. And depending on the point in time they may be right. Of course, if you don’t have to lower prices to attract and retain customers you won’t. But good times never last forever.
Until the second quarter of this year, the cable and telephone industries were adding roughly equal numbers of broadband accounts. Then something changed, and the cable companies are now signing up three-quarters of new customers. Maybe the marketing efforts of some of the companies are better than others, or maybe the phone companies’ main broadband product, DSL, can no longer compete on speed, quality and/or features.
In any event, when all else fails, you have to slash your prices.