from: Public Knowledge [1]

A Duopoly By Any Other Name...

by Art Brodsky on July 10, 2006

As we head into what could be the end-game for telecom legislation this year, Kagan Research has come up with some fascinating insights into just how narrow the broadband market really is.

We’ve argued that broadband is a duopoly, with Federal Communications Commission (FCC) statistics showing that just about everyone who has broadband gets it from either the telephone company or the cable company. The FCC has affirmatively pursued the policy of creating this situation, and it’s one of the main reasons we need a Net Neutrality policy. There is no real choice.

The new Kagan study shows just how un-competitive the broadband market is. Here’s the title of the study: “Cable Modem Vs. DSL: Rivals Side-Step Big Price Wars So Far.”

Not only are there only two “choices,” in supplier, there’s little evidence of competition on one factor that really counts – price. In their July 6 Insights email newsletter, Kagan puts it fairly simply: “Though the battle for broadband access subscribers is intense, there’s no screaming price war between cable TV and telcos, and Kagan Research doesn’t expect one in the foreseeable future.” You can read the report here.

Instead, what consumers are getting is duopoly pricing. Kagan surveyed five top cable operators and four telephone companies in the first quarter this year. The average price for cable modem service was $34.95 per month. For DSL, it was $35.38. Verizon was the lowest, averaging $31.62 per month, while BellSouth was the highest, with a monthly rate of $42.25. The similarity in prices exists despite the fact that cable modem service is much faster than DSL.

These figures are national in scope, encompassing all sorts of markets – some with competition between the two and some without. One other pricing strategy comes into play. Those figures are for standalone service. Discounts come into play when the cable modem/DSL service is bundled with other offerings. That’s called controlling the market, and works to constrict the choices consumers have even more.