The Right Price for ADSL

Two new reports on ADSL pricing show that prices continue to vary widely around the world. Significant pricing differences highlight differences in marketing, geography—and government regulation.

by ISP-Planet Staff [April 24, 2003]

Until recently, the success or failure of an ADSL buildout was all about technology. Technicians rolling out the service were deploying a new technology, and encountered many unforeseen problems in the field.

Today, when deployment is so simple that most telcos want their subscribers to do it, a nation's rate of uptake is more about its companies' pricing and marketing than about the technology.

This is particularly clear in the case of the U.S.—the technology was invented in the U.S. and first deployed in the U.S., but other nations are far ahead of the U.S. in terms of per capita DSL uptake.

ADSL, the technology used for residential customers who are more likely to want to download from the Web than upload to it, is sold at a variety of different prices in Europe, North America, and Asia.

Two recent reports highlight the connection between price and residential uptake of the technology, but note that the correlation between the two is not exact. The latest DSL price numbers from UK-based Point Topic shows that nations with the highest rate of broadband penetration, such as Taiwan, South Korea, and Japan, tend to have the lowest DSL prices.

Point Topic calculated the "first year cost" of DSL by amortizing the equipment, installation, and activation charges over 12 months, arriving at a monthly fee for the first year of broadband that includes those one-time charges. Prices ranged from $20.69 at Chunghwa in Taiwan to $67.44 at UK's BT. SBC rang up $38.91 and Verizon $43.15, putting them in the middle of the report's price range.

Point Topic noted that Japan's case is particularly intriguing for observers of the broadband marketplace. The report notes that while prices in Japan are now at about $30 per month, "in 2000, before regulatory intervention to kick-start the market, the Japanese had the highest costs of any DSL market, at around $90 per month."

Taking home some broadband lessons
A recent report from Jupiter Research, part of Jupitermedia Corporation, the parent company of this website, analyzed why prices are not the only factor dictating broadband uptake. The report, "Global Broadband Landscape: Learning Lessons from Abroad" (available here to Jupiter Research subscribers), focuses on finding successful marketing strategies used in other nations that could be applied by ISPs in the U.S.

The report notes that although the world's broadband leaders make it look easy, 2003 will bring new challenges, including the consequences of successful subscriber growth, to U.S. broadband providers.

Although the report identifies several factors that have led to near-universal broadband adoption in South Korea, including the nation's geography, where a few, dense cities have most of the population, the "take home" lesson comes from South Korea's regulator, which supported competition while also subsidizing broadband buildouts. The report notes, "the Bell companies say they have no incentive to invest capital in broadband networks they would have to share. The [U.S.] government could overcome this objection by supporting the cost of further infrastructure investments, while requiring sharing of networks."

DSL providers in Australia and Canada share the challenge of geography faced in the U.S., where many potential customers are in geographically dispersed rural areas, or in small urban areas. Both nations have led the world in capping monthly downloads. Caps range from 500 MB per month to 20 GB per month. One major provider does not charge users that breach the download cap—it simply throttles their connection speeds down to 28.8 Kbps. The report advises that capping should be used to regulate a small but expensive minority, not to generate new revenues.

Jupiter Research notes that in Japan, providers have offered an ever increasing variety of promotions, ranging from concert tickets to frequent flier miles to more traditional discounts such as a free month of service or a free wireless LAN card. The report notes that only two U.S. providers have made similar offers: SBC-Yahoo! and Speakeasy.

For overpriced markets such as Belgium and the UK, or for underserved markets such as the U.S., the UK, and France, the answer is clear: the markets lack competition, regulation, innovation, or some combination of all three. Although some nations, such as the U.S., Canada, and Australia, have challenging geography, that can be overcome by wealthy companies and competent regulators, as the example of Canada clearly illustrates.

— End