Cablevision Systems announced that starting May 11, it will offer the nation’s fastest home broadband service, Optimum Online Ultra, delivering 101 megabits (Mbps) downstream and 15Mbps upstream for a list price of $99.95 per month before fees and taxes, using the new DOCSIS 3.0 cable infrastructure standard.
“Optimum Online Ultra firmly solidifies Optimum as the fastest Internet service in the home, at work and through the air over Optimum Wi-Fi,” said Tom Rutledge, Cablevision’s chief operating officer, in a statement. The company is also increasing its wireless speeds to 3Mbps, which is faster than current mobile speeds but less than Wi-Fi is capable of delivering.
Still, Ultra won’t make up for the lag in U.S. broadband. A report from
Point-Topic earlier this month noted that although the U.S. leads the world in cable services, the highest speeds are in fiber, and about 80 percent of the world’s residential fiber broadband is in Asia.
Around the world, from Amsterdam to Tokyo, fiber customers can get 100Mbps symmetrical speeds. Latvia’s telco plans to deliver 500Mbps speeds by the end of the year, according to a Latvian blog.
In the U.S., however, Cablevision’s (NYSE: CVC) 101Mbps Ultra will be faster than fiber. Verizon’s (NYSE: VZ) FiOS, the company’s fiber-based offering, which previously held the mainstream U.S. speed record, tops out at 50Mbps downstream and 20Mbps upstream. Other U.S. telcos offer slower speeds over fiber. Qwest’s (NYSE: Q) service maxes out at 20Mbps downstream, and the Web site doesn’t even mention upstream speeds. That’s because in some cases, Qwest’s upstream is less than 1Mbps.
What the people want
Verzion said that the announcement is clearly a response to FiOS and that it is inadequate. “Cablevision has been lagging behind FiOS Internet speeds for many years. As you know, DOCSIS gives them the chance to upgrade their speeds, but they do not deliver those speeds to all customers. They run out of capacity long before serving them,” said Eric Rabe, Verizon spokesperson and vice president.
Verizon could roll out faster speeds if it wanted to, but customers don’t want those speeds yet, he claimed. “We’ve had 50 Mbps service in all areas that we serve since last year, and we deliver it over a dedicated pipe that assures that customers get the speed they expect. The system we are deploying today has the capacity to deliver 400 Mbps. However, we have not seen market demand for more than the 50 Mbps we are currently offering. So this is essentially a parlor trick by Cablevision,” said Rabe.
As long as we’re talking residential customers, that’s true, said Bruce Leichtman, president and principal analyst of Leichtman Research. He said that the offering will see virtually zero demand from consumers (except from hardcore users) but that it makes sense as an offering for business customers, especially for small business customers, many of whom are not in locations served by fiber.
Most home users remain stuck at slower broadband speeds, served neither by fiber nor by the fastest cable offerings. 1.5Mbps, the norm for most DSL and a few cable customers, is barely better than dial-up, ISP-Planet has argued. Call it “dial-up 2.0“.
Late last year, Cisco published a report
that said that of all the nations in the world, only Japan is prepared to deliver the services of the future.
Next page: Are customers satisfied with what they have?
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But maybe people have the speeds that they want. “In our surveys, about 70 percent of customers don’t even know what broadband speed they have,” said Leichtman.
Those that know what they have and want faster speeds are not willing to pay for them. “About one-quarter of customers want more but few are willing to even pay $10 for more bandwidth,” he said.
Perhaps that’s because in the past, the cable companies managed to increase speeds without increasing prices. “Cable companies offered 1.5 Mbps, then 6Mbps, then 9Mbps, then 12Mbps — all at virtually the same price,” Leichtman noted.
In Amsterdam, customers who have the option of paying for 100Mbps often choose the cheaper 20Mbps option, a recent BBC blog note found .
The price of Cablevision’s offering is a problem, said S. Derek Turner, research director of media diversity advocate Free Press. “These days, lower prices are just as important as faster speeds,” he said.
He added that he hoped Cablevision would deliver on today’s announcement.
“We are encouraged by Cablevision’s plan to set a new high-speed bar of service for the cable industry. If they will actually deliver the speeds and unlimited capacity they advertise, this is a long overdue step in the right direction.”
The broadband services of the future
Cablevision has won nothing today if it cannot sell its new service. If operators want to sell fat pipes, they need to sell the applications that require them, and they can do that if they’re willing to change. While the cable and phone companies duke it out, they have a lot to learn from each other, said Michael Khalilian, chairman and president of the NGN and IMS Forum, which works on improving the delivery of applications over the networks of the future.
Phone companies have learned how to deliver stable bandwidth with QoS
Cable companies have figured out how to deliver bandwidth to the home.
“The last mile in the majority of ILEC
In contrast, he noted, cable companies have deployed fiber to the curb in many areas, and to the head end in most.
But cable companies never had to worry about QoS in their cable business.
“Cable companies didn’t care if the channel got fuzzy or if the picture went in and out. But if the same thing happens to voice, the call is dropped. You cannot do that,” Khalilian said.
“Unless the telco and cable groups figure out how to work together, we’ll get all our content from our mobile devices,” he said. “The future will go to Google, Yahoo, Skype, and the new upcoming mobility groups.”
He pointed to the success of Apple’s iPhone store, which has
recorded over a billion downloads and offers over 35,000 applications after just nine months in business.
The key to its success, he said, is the availability of free apps. “Half of the apps are free. I can promise you that if all were paid, you wouldn’t see that much creativity and you wouldn’t see the iPhone hype. The fact that a lot of the apps are free motivates people to buy the iPhone. It’s a differentiator,” he said.
Cable and phone companies, then, need to find their differentiators. They are struggling with their business models and considering usage-based pricing for bandwidth.
Khalilian said that they need to give something away. Usage-based pricing would limit creativity and growth. “They need to adopt some give and take logic. If I give away the bandwidth these applications need, I can charge for applications and services.”
