As I work in various parts of the country, I help new ISPs choose the speeds and the prices to offer on fiber networks. Part of that research begins with looking at what other ISPs charge in the region. I should probably stop being surprised, but I’m still taken aback when I see fiber-based ISPs offering what can best be described as stingy speeds. Just the other day, I ran across an ISP that is offering a range of speeds between 25/3 Mbps and 100/20 Mbps on fiber. Earlier this year, I ran across an ISP that has fiber products as tiny as symmetrical 10 Mbps.
This frankly mystifies me, and I always wonder why somebody with fiber would offer broadband products that are similar to their competitors. I figure that part of the reason is what I would call old thinking. Somebody offering that kind of speed is likely a small telco that used to offer DSL or a small rural cable company that didn’t have fast speeds. DSL products were set at a range of speeds up to 25/3 Mbps because that’s what the technology would allow.
I can’t imagine the thought process that says the slow speeds are adequate. According to OpenVault, 75% of U.S. Households are currently subscribing to download speeds of 200 Mbps or faster. That includes over 14% of homes nationwide that are subscribing to a gigabit product. It’s clear that people want faster broadband.
I think another part of the reason that an ISP would set low speeds is a fundamental belief that customers that buy faster speeds will somehow cost the ISP a lot more money. But after having seen the impact of hundreds of ISPs that have upgraded to faster speeds – I know this is not true. There is a one-time increase in broadband usage when you unblock a community that has had restricted broadband. The people in such communities start using broadband like everybody else, and that looks like a one-time big increase in usage – but people are just catching up to the ways that most of the rest of country uses broadband. After that short burst to catch up, usage then grows like everybody else.
Another reason behind offering slow speeds probably goes back to the day when buying Internet backbone connections was extremely expensive, and operators feared that a burst in usage would cost a lot. That’s also not true anymore in most places. Wholesale broadband prices have tumbled over the last decade. I know ISPs that are buying eight or ten times more bandwidth than a decade ago, at basically the same cost. I know that there are still some small ISPs located deep in rural areas that are paying far too much for broadband from the local telco.
There was a time when most of the industry tried to throttle customer usage. I remember quotes from the CEOs of the big cable companies and telcos saying that people didn’t need faster speeds. However, folks like Verizon FiOS and a handful of early fiber overbuilders exploded that concept and the cable companies did a 180 and now routinely increase customer speeds as a way to keep folks satisfied.
This same thinking also manifests in pricing. An ISP that offers 25 Mbps on fiber might also offer a gigabit product – but at a price that nobody can afford. I still run across gigabit broadband on small fiber ISPs priced at $175 per month or higher. These prices are set to make sure that only a few people buy the faster broadband. This thinking comes from the underlying belief that faster speeds are a luxury. But that’s really odd thinking for somebody that operates a network that can easily provide symmetrical gigabit broadband at an affordable price.
And that’s what gets me the most – these ISPs are losing revenues by being stingy. If they offer a slow broadband product at $50, they would likely have a lot of customers willing to pay $70 or $80 per month for gigabit broadband. I can tell by looking at the offerings that most ISPs with slow speeds are making less than their peers.
I understood these speeds and prices somewhat a decade ago when fiber networks were new and buying backbone Internet was expensive. But I can’t understand ISPs that have these stingy pricing plans when their peers a town away have normal broadband pricing.