1 Gbps presence drives a $27 per month decrease in broadband plan pricing, says study

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Google Fiber may have paused its 1 Gbps FTTH rollouts, but it’s clear that where the service provider and others currently have a presence, broadband prices are dropping.

In a new study (PDF) conducted by Analysis Group that was commissioned by the FTTH Council revealed that the presence of a gigabit service in a Designated Market Area (DMA) is associated with a $27 per month decrease in the average monthly price of broadband plans at speeds greater than 100 Mbps and less than 1 Gbps.

Analysis said this is equal to a nearly 25% reduction of the monthly standard service price.

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In markets where there are more broadband competitors, pricing declines even further.

“We find especially strong effects of the number of competitors on gigabit internet pricing,” Analysis said in the study. “In particular, if a DMA moves from having one to two providers of gigabit internet, we estimate that the standard monthly price for gigabit internet will decline by approximately $57 to $62, which is equal to a reduction in price of between 34% and 37%.”

What’s more, Analysis said that the presence of 1 Gbps internet services in a DMA is associated with a statistically significant decline in the overall monthly standard broadband price for lower speed services under 50 Mbps.

The study forecasts that broadband pricing will decline $13 and $18 per month for plans starting at 25 Mbps and up, or a 14% to 19% reduction in the cost of service.

Case in point is AT&T and Comcast’s response to Google Fiber’s $70 1 Gbps pricing in cities including Atlanta. Comcast began offering a $70 price for its 1 Gbps service for customers willing to sign a three-year contract, or $139.95 per month without a contract. Likewise, AT&T lowered the price of its 1 Gbps service in markets including Austin to $70 a month.

Besides seeing lower broadband pricing, Analysis noted that new competition drives cable MSOs and telcos to conduct more broadband upgrades.

"We find that each additional competitor offering broadband in a higher speed category will increase the probability that other broadband providers in the market will offer broadband at those higher speeds by 4% to 17% on an annual basis," Analysis said.

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