|30-40% Will Pay (A Little More) For Faster Than 10 Megabits|
|Friday, 08 July 2011 16:29|
Between 21% and 40% of Britain's Virgin cable customers are paying extra for speeds faster than 10 megabits, Merrill Lynch calculates. Virgin charges £13.50 for 10 megabits and £18.50 for 30 megabits. The £5 ($8) difference is enough to dissuade 61% of new customers from taking the higher speed. Only 8% take the 50-100 megabits service, although the price (£25-£35) is half what U.S. cablecos demand for similar
The real but modest demands for higher speeds corresponds to empirical data since 2008. In Japan, 26% were willing to pay about $5 more. In the U.S., nearly no one is willing to pay $99 for 50 megabits. Cablevision, facing FiOS, has lowered the premium for high speeds from $50 to $10, because nearly no one was buying at the higher price.Results aren't in yet, but I hope one of the analysts asks Dolan in the next call.
On the other hand, cable at 10 mbps has long led DSL at a typical 3 mbps in the U.S. The ratio is 56-44% and (slowly) increasing despite generally higher prices for cable. Virgin has 42% of the broadband customers in the half of the U.K. they serve, despite facing more competition. Britain has 4+ major carriers, the U.S. only two. The result: prices 20-50% lower than the U.S., but not quite as low as France.
Wilton Fry downgraded Virgin to underperform after the stock has climbed from a low of $3.50 to above $30. He sees "looming structural issues." People are abandoning landlines, there's little room to grow triple play because they've sold it to most customers already, and BT's "up to 40 megabit" upgrades are becoming a factor.
Here's a larger version of the chart.