Frontier Communications, which mutated from being a decent regional carrier into a debt-laden mess, thanks to Global Crossing, has decided to fall back to the revenue-generating strategy beloved of all duopolies: fucking the customer.
In the town of Mound, MN, they’ve decided that anyone who exceeds 100 GB/month of usage will be charged $100/month. Those exceeding 250 GB will be charged $250/month. By comparison, most broadband providers do not charge by usage, though some (like Comcast) reserve the right to cap users after 250 GB has been reached.
Broadband is a mainly a fixed-cost business, and the variable cost item (Internet access) is getting cheaper, not more expensive. Last year, when Time-Warner tried a similar stunt, analysts had a field day pointing out that Time-Warner’s cost for broadband actually decreased by 12% in the quarter that they were trying to raise prices for “heavy users”.
The problem isn’t the cost of broadband — it’s the telecom and cable companies’ broken business models. As people abandon wired telephones and cable TV, carriers look to broadband to recoup lost revenue by grossly overcharging for their cheapest product. Unfortunately, their broken business model is about to become the nation’s problem, if they can get away with anything like these kinds of prices.
In Hong Kong, where they have real competition, one carrier is offering a gigabit of bandwidth for $26/month. Obviously, the fixed cost in Hong Kong is not the same as Mound, MN. But it can’t be 10X more for 1/100th the bandwidth.
Update: That last point wasn’t clear: I meant to say that the cost of delivering an Internet connection in Minnesota cannot cost ten times more than a connection in Hong Kong, especially when you consider that the Minnesota connection delivers 1/100th of the bandwidth as the one in Hong Kong.