Wednesday, February 06, 2008

AT&T Needs More Money

image AT&T decided yesterday to increase the price of DSL service by $5 per month for subscribers that do not purchase U-verse (AT&T jacks up DSL price $5 per month | Tech news blog - CNET News.com) except in the old BellSouth territory where they promised the FCC and regulators that they would not raise prices for a certain period of time.  Apparently revenues are not increasing enough for them in their wireline and wireless businesses, and they are fearing a slowing economy.  Expect a similar price increase shortly from the cable companies in AT&T's territory.

Instead of offering some value like a speed increase, AT&T just raises the price.  There is almost no incremental cost of providing greater bandwidth because customers will not change their surfing behavior much.  Competition is suppose to create greater value for customers and lower the price; therefore, I conclude that AT&T does not have any significant competition other than MSOs.  Duopolies function similarly to monopolies in most cases.  AT&T should be finding new and innovative services to offer customers that increase their revenue.  This price increase may help AT&T's financials in the short-term only.

Lack of true competition for residential services is why the U.S. continues to lag in broadband penetration which will manifest itself in other ways throughout the economy.

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