The Industry

Should DSL Cost Less Than Fiber?

As I was going through my pile of unread articles, I found an article from the Associated Press that asked how big ISPs can get away with charging the same prices in urban areas for both slow and fast broadband. The article was about Shirley Neville, in New Orleans, who found that she was paying the same price for 1 Mbps DSL from AT&T as other city residents are paying for a fiber connection.

It’s a great question, and I was surprised that I hadn’t thought to write about it before. I investigate broadband prices around the country, and it’s not unusual to find the price for fiber broadband in a city set close to the price charged for DSL.

It would be easy to justify charging the same price for both technologies if AT&T was in the process of converting everybody in New Orleans to fiber. In fact, if that was the reason, I’d be impressed that AT&T wasn’t charging more for the technology upgrade. But this is not the situation. It’s clear that the AT&T fiber business plan is to build fiber to small pockets of cities, but not everywhere. The chances are high that Shirley Neville’s neighborhood and many others will not be getting fiber soon from AT&T, if ever. For every neighborhood that gets fiber, there will be many that will never see AT&T fiber.

Another possibility is that AT&T’s low price for a fiber connection is an introductory price to lure people to switch from Cox, the cable company. Perhaps when the introductory price expires the fiber price will be higher than DSL. This still doesn’t feel like a great answer to Shirley’s question since AT&T is willing to give a fiber customer a big break.

The most likely answer to the question is the ugliest. AT&T doesn’t feel like it needs to reduce the price of DSL in the city because DSL customers are a captive audience. Cox has some of the highest broadband prices in the country, and that gives cover for AT&T to charge whatever it wants for DSL as long as the price is lower than Cox.

Another reason that AT&T can charge the same for DSL and fiber is that there isn’t anybody to tell the company that it shouldn’t do so. The FCC eliminated broadband regulation and the Louisiana Public Service Commission doesn’t assert any authority over broadband prices. Folks like Shirley Neville don’t have anybody looking out for them, and the big ISPs can overcharge customers with impunity.

As the article points out, Shirley’s question is germane today because of the FCC’s investigation of digital discrimination. The article cites an investigation by The Markup, which analyzed over 800,000 broadband offerings from AT&T, Verizon, Earthlink, and CenturyLink in 38 cities across America and found that the four ISPs regularly offer broadband speeds at 200 Mbps or faster at the same price as broadband with speeds under 25 Mbps.

The Markup analysis shows that the neighborhoods with the worse speed options have lower median household incomes in 90% of the cities studied. Where The Markup could gather the data, it also looks like the big ISPs offered the worst deals to the least-white neighborhoods.

USTelecom responded to the issue by stating that the high cost of maintaining old copper networks justifies high prices for DSL. The article cites Marie Johnson of USTelecom writing that “Fiber can be hundreds of times faster than legacy broadband—but that doesn’t mean that legacy networks cost hundreds of times less. Operating and maintaining legacy technologies can be more expensive, especially as legacy network components are discontinued by equipment manufacturers”.

That’s exactly the response I would expect to defend monopoly pricing. Nobody expects the price of DSL to be hundreds of times less than fiber – but DSL should cost less. The big telcos have argued for decades that it costs too much to maintain copper networks. But they never finish that statement by telling us how much money they have collected over the years from a customer like Shirley Neville – possibly hundreds of times more than the cost of her share of the network.

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