"Comcast is engaging in what economists call price discrimination" in its high-speed Internet services, writes Washington Post (and formerly Philly-based Ars Technica) telecom writer Tim Lee in this story.
"Comcast says its fastest speed tier," which delivers 505 megabits per second, "requires Comcast to install special 'commercial grade equipment' at the customer's premises. So it makes sense that the company would charge a premium price - $399 per month - for it," writes Lee.
"But Comcast's next-fastest tier, clocking in at 105 Mbps, runs on the same infrastructure as the slower 50 Mbps and 20 Mbps tiers. There's no technical reason Comcast couldn't provide 105 Mbps service to everyone currently subscribing to the cheaper 50 Mbps and 20 Mbps tiers."
Comcast charges $115/month for that 105 megabits/second service, which Lee calls "underwhelming" vs., say, the $70/month Google charges for its much faster Kansas City service, or the $70/month municipal one-gigabit service in Chattanooga, Tenn.
"The hallmark of competitive technology markets is that consumers are routinely given more than they think they need. Even entry-level smartphones today are dramatically more powerful than the best cell phones of a few years ago," he adds. "Competition forces companies like Apple and Samsung to produce the most powerful phones they can build without worrying about whether customers 'need' the faster speeds...
"Comcast's strategy only works because Comcast faces limited competition in many markets. If Comcast had more competitors, they would pressure Comcast to cut the price of its highest speed tiers and raise the speed of its cheapest offerings."
If Lee's right, markets like Austin, where Google is going head-to-head against AT&T, will soon enjoy faster service at cheaper prices, as they are starting to in K.C.
But where there's no effective competition, "consumers are not getting the fastest speeds," but rather "options (which) are designed to maximize the cable company's bottom line."