Mailbag: Triple-play services and voice services

David Green, a reader who lives in a small town in South Carolina, wrote us in reply to our recent newsletter about “triple-play services” and how they affect voice tariffs. We questioned the need for the current tariffs in place and their usefulness. 

Green writes: “If you live in an area with multiple providers (like Larry does), then competition can keep the rates in check and provide universal services coverage (for that area, at least). But if you live in an area where the cable TV, telephone and Internet services are all provided by a single company (like I do), then even tariffs can’t protect you from price gouging!”

Green notes he is paying about $80 per month for the combination of 80 channels of TV (analog) and broadband cable modem service. (It’s about $40 each.) His local phone service “starts out costing more than Vonage for less features, then tacks on surcharges for calling locations just a few miles away.” 

He proposes a solution that ensures competition for triple-play services is in place before tariffs are dropped, including real competition from either wireline providers or wireless providers. 

Green makes a great point and one that is validated by price differences between densely populated metro areas and sparsely populated rural communities. Of course, the rural area investment question leaves service providers in a quandary. If a provider has to invest in broadband access in areas with only a fraction of the “subscribers per loop mile” as compared to denser cities, then the provider must either charge more per subscriber or choose to invest the capital budget in areas with a better payback. 

One ray of light at the end of the tunnel: As broadband access becomes better, faster and cheaper, perhaps carriers will one day be better able to supply rural areas, thereby increasing competition. Witness the trend in wireless for “low average revenue per user (ARPU)” – wireless carriers can still make a profit in India and sub-Saharan Africa even when ARPU hovers around the $5 per month mark. But they can only do so based on lowered capital costs for mobile access combined with low labor costs. Or perhaps non-traditional providers such as cities or co-ops will increasingly move to supply wireless broadband services. 

Bottom line: Maybe we aren’t ready to abandon tariffs that guarantee local service just yet, but market and technology forces may decide the question long before regulators catch up. 

If you’d like to add your two-cents’ worth, please drop us an e-mail and let us know if we can include your comments (attributed or anonymous) in a follow-up newsletter.