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J:COM 26% pay (a little) more for 100 megabits downloads
Thursday, 23 October 2008 00:00
30 meg is not enoughWill customers pay more for 100 megabit service? The experience is Japan says yes, 30,000 in Q2 decided to pay $5 more for the (up to) 160 megabits ($60/month.) That's 26% of new customers while the rest are satisfied with (up to) 30 megabit downloads.

In June, they had 55,900 high speed customers, with the faster service available to about a quarter of their 3M customers. J:COM went with Motorola after initially trialing Arris, Jeff Baumgartner writes. They now offer 100+meg down in every territory they serve. J:COM, owned by John Malone's Liberty in Denver, was one of the first to deploy downstream bonding, needed to compete with the 100 megabit fiber from NTT and very low DSL prices from Yahoo BB and eAcesss.

Pricing of higher speeds varies widely, with non-competive markets exorbitant. J:COM is at $55 and $60, Numericable in France around $25 as part of a bundle, and Comcast in the U.S. at $149.95. Comcast's price is presumably high in order to discourage customers, since the gear and operations procedures are not yet reliable.
The cost of giving customers high speeds isn't well defined, but on cable is quite modest. J:COM's capital spending went down from $203M to $172M despite the beginning of the buildout. (Their depreciation is over $300M - Mike Fries is operating for cash flow.) Cablevison put out a $100 per home estimate for DOCSIS 3.0 upgrades, but everyone is still negotiating contracts. Tony Werner at Comcast finds that on new gear, 100 megabits cost him about the same as the old 10 megabit system. A senior J:COM engineer estimated early in the deployment that a customer upgrading to the higher speed uses about 1/3rd more bandwidth, which costs less than 50 cents U.S.. Cable modem service is extraordinarily profitable, with margins as high as 70-80%. The incremental cost for the higher speeds is very low; even a $5 premium is profitable.