Naked cable on the cheap

Buried amidst the pomp of Cox Communications' broadband speed upgrade last week was an item that didn't attract much attention, but could be of much greater significance. Cox said it would sell its budget cable broadband service to non-video programming customers for $25 a month.

No other cable provider offers naked broadband without jacking up prices. In fact, standard charges for cable modem service sans cable TV usually run $60 a month. In addition, with the exception of Qwest Communications, no DSL provider breaks broadband out of the voice bundle, meaning Cox is exploring new ground here. It's selling broadband for broadband's sake.

Don't get too concerned just yet: Cox is only doing this with its Value High Speed Internet service, a symmetrical 256 kb/s service. Its standard 4 Mb/s and premium 5 Mb/s services don't enjoy the bundling exemption. Cox's strategy is clearly to go after dial-up holdouts, charging a price comparable to what narrowband users would pay for a premium dial-up service while offering five times the speed. If Cox can win them over with the broadband gospel, perhaps those new converts will upgrade to full-fledged cable modem service and take VoIP and digital TV along on the ride.

What we're seeing from Cox may be a glimpse into the future of the cable industry if growth trends continue at the rate they are going. Cox already has one of the highest rates of penetration in the country--second only to New York metro region MSO Cablevision--and where there is competition with DSL, Cox has seven out of every 10 subscribers. The company can only go so much further in upselling its current cable customer base or stealing subscribers away from the RBOCs.

Broadband penetration is expected to reach 50% of Internet households in the next few years. If other countries' growth patterns are any indication, penetration starts leveling out at that point. That's when the carriers and cable providers will have to aggressively go after the unwashed dial-up masses. It looks like Cox is starting to sooner rather than later.

Contact me at kfitchard@primediabusiness.com.