brief excerpt from CSFB's 4/6/99 125 page "In The Loop":
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xDSL Service Pricing Improving but Customer Care Needs Work
With the expiration of introductory offers (Ameritech and Cincinnati Bell), price
cuts (Pacific Bell), and the commencement of new specials (GTE and U S West),
xDSL prices changed significantly since our last survey. While the average
monthly service cost declined across the board, equipment and installation
charges moved in different directions, depending on the service tier.
The service price decline was more dramatic for higher-speed offerings targeted
at business and SOHO users (see Exhibit 19) than lower-speed service targeted
at residential customers (see Exhibit 20). The average monthly service cost for
megabit speeds (at least 1.0 Mbps downstream) dropped 19.3% from Q4:98 to
approximately $155, while the price of the lowest-speed offering declined only
4.7% to $58. The average initial equipment and installation cost also declined
significantly for megabit offerings to approximately $265, down 12.8%, and actually
fell slightly below that of lower-speed services, which rose 18.8% to $268. This
disparity was caused by the expiration of introductory offers, some of which included
a free modem and installation, which more than offset the decline owing to
new specials targeted at the consumer segment.
Although the pricing models are generally becoming more compelling, our checks
indicate that some carriers still have significant work ahead of them in educating
customer care representatives on their respective xDSL product offerings. For
example, one customer service agent at Ameritech provided us with a special
customer care number for ADSL that was not in service. On our second try, a rep
transferred our call to a voice response system that eventually disconnected us.
Our third attempt brought us to an agent who had never even heard of ADSL and
who forwarded our call to the ISDN department; there, we were put on hold for
over 20 minutes and we finally hung up in frustration.
At Cincinnati Bell, the customer service rep was relatively knowledgeable about
the product but could not confirm whether or not the introductory special was
available any longer, even though the company's web site clearly stated that the
offer had ended on December 31. In contrast, we found U S West's customer
care representatives extremely helpful and knowledgeable about the offering, current
pricing, and installation process.
Given current price points, limited service availability (we estimate the service was
available to only 6% of the RBOCs' total access lines at the end of 1998), lack of
standards-based equipment, and the need for improved customer care, we believe
that mass consumer introduction of xDSL services is still at least a year
away. The recent introduction of PC-based ADSL modem cards and America Online's
agreements with Bell Atlantic and SBC to offer xDSL as a premium upgrade
to existing AOL subscribers should help spur subscriber growth in 2000, following
midsummer and fall launches, respectively.
Data over Cable Services Pricing Remains Stable
The cost of data over cable services has remained virtually unchanged since our
last survey, with monthly service pricing flat at $40 and installation and set-up
charges at $116 on average (see Exhibit 21). This compares favorably to xDSL
services, which are $18 higher per month for the lowest-speed offering and $115
more for megabit speeds. The initial up-front cost (which includes a modem, in-stallation,
and set-up fees) continues to be higher for xDSL (approximately $150
higher) because xDSL providers require the user to purchase, rather than rent, a modem.
Only half of the major cable operators currently offer a cable modem
purchase option, in exchange for a lower monthly fee.
On an apples to apples basis (with the purchase of a cable modem), the initial
outlay for data over cable services is currently $200 higher than that for xDSL, but
the monthly service cost is $26 lower compared with basic xDSL service, and
$123 lower for megabit speeds. However, the introduction of standards-based
modems for both xDSL and data over cable services will lead to lower prices over
time and will help fuel subscriber growth for both services.
Finally, we have found that cable operators have become more conservative with
their advertised cable modem speeds. In our last survey, the average advertised
speed was approximately 6.3 Mbps downstream (to the PC) and 4.8 Mbps up-stream.
Currently, advertised speeds average 3.8 Mbps downstream and 1.0
Mbps upstream. Given the shared network architecture of cable plant, we believe
these latter speeds are more realistic.
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(let's see Scrapps give Moonray credit for this reference <g>) |
