Cable Giants Are Using Anti-competitive Tactics To Stifle Sales Of Cable Modems

Retailers say cable giants are using anti-competitive tactics to stifle sales of

cable modems for high-speed Internet service in favor of their own modem lease deals.

Unfair pricing and slow product certification, they say, could drive up prices and hamper innovation.

In a letter last week to Federal Communications Commission Chairman Michael Powell, Best Buy CEO Bradbury Anderson cites a "disquieting trend" of "technical and economic discrimination.

anderson wrote on behalf of Circuit City, RadioShack and others. The letter echoes the claims of some modem makers to the FCC. "People should have a choice, " says Frank Manning, CEO of modem maker Zoom.

Makers say cable's domination of modem supply slows rollout of features, such as home networking. They want the FCC to force cable companies to set a fair price for modem leases based on costs and deduct that from owners' bills. The FCC has such rules for cable set-top boxes but says its authority over modems may be limited.

Only about 10% of customers buy their own modems, because, critics say, cable companies don't publicize the option and provide little financial incentive. For example, Time Warner Cable, the No. 2 cable provider with 2.6 million customers, offers no discount on broadband service to consumers who buy their modems. AT&T Broadband, which recently merged with Comcast to form the biggest cable company, announced a $ 7 monthly rate in-crease last May for customers with their own modems. While renters continued to pay $ 45.95, owners saw their rates rise to $ 42.95 from $ 35 .95. Comcast and Mediacom also have imposed steeper rate increases for modem owners.

Cable companies say the trend mirrors plunging modem prices. In two years, the typical price they pay for modems has dropped to $50 from $ 150. Retail prices average about $ 70. "Our prices reflect what's happening in the market, " Comcast's Sarah Eder says. But if modem prices are falling, the companies should be cutting renters' rates, not raising buyers' rates, Manning says. The companies say the savings are offset by jumps in service costs. Yet Cox Communications still gives $ 10 to $ 15 discounts to modem owners.

Cable companies encourage leasing to keep a steady revenue stream and simplify troubleshooting, Gartner analyst Patti Real says. Cable providers disagree. Also slowing retail sales, critics say, is that even tiny changes to a modem's case requires it to be recertified, which can take three months.

by: emaly

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