Here’s some wisdom from the hardworking innovator running Frontier Communications:
Burr said there are no plans to offer the super-high speed fiber network in Rochester, known as FiOS. She said most customers do not need speeds that fast, and Frontier’s broadband service is available in 95 percent of the market.
Greenstein says that a 2003 decision to leave regulation up to the broadband companies themselves has caused much of the stagnation in broadband service prices. In most urban markets, only two wireline providers supply the vast majority of homes, and the remainder are served by a range of wireless Internet providers. Revenue from homes makes up 70 to 80 percent of revenue in wireline Internet access market, while business demand makes up the rest.
“So if you were in such a market as a supplier, why would you initiate a price war?” Greenstein asks. With no new entries on the market, suppliers can compete by slowly increasing quality but keeping prices the same. According to Greenstein, quality is where providers channel their competitive urges.
Meanwhile, once companies have installed the lines, their costs are far below prices. “At that point, it becomes pure profit,” Greenstein says. A company might spend around $100 per year to “maintain and service” the connection, but people are paying nearly that amount every other month. [Emphasis mine]