March 1, 2013
Consumers Not Ready For Life In The Fast Lane, Says Internet Giant
Michael Harper for redOrbit.com — Your Universe Online
Americans have never been known to turn down anything claiming to be fast. This is, after all, the land of fast food, fast cars and Amazon next-day shipping.
Though this is a commonly understood trait of the American people, one Time Warner Cable executive doesn´t believe their customers really want the super-fast connection speeds of Gigabit fiber. During a Morgan Stanley Technology Conference, Irene Esteves, Time Warner´s CFO claimed that the cable company is certainly able to deliver these speeds, but customers simply wouldn´t want to experience the unbridled power of Gigabit Internet.
In a quote destined for headlines, Esteves told conference goers: "We're in the business of delivering what consumers want, and to stay a little ahead of what we think they will want.”
According to The Verge, Esteves then followed by saying: "We just don't see the need of delivering that to consumers."
Time Warner currently delivers one Gigabit and 10 Gigabit-per-second speeds to business customers, so clearly the company has the connections to make this kind of speed possible. Yet, as far as residential speeds are concerned, Esteves claims customers aren´t opting for their top-tier speeds.
However, these statements are in direct opposition to Google´s attitude towards high-speed fiber. The search giant is looking to roll out these speedy services in earnest, beginning in select Kansas City neighborhoods.
Last fall, Google announced that 180 of 202 compatible neighborhoods were eligible to receive Google Fiber service, delivering one-Gigabyte-per-second (or 1024 Mbps) of connectivity for $70 per month.
By comparison, Time Warner´s top-tier packages which Esteves claims aren´t that popular deliver 50 Mbps in New York City for $75 per month, a full $5 more than Google Fiber's 1024 Mbps deal, according to PCWorld.
Esteves claims this is a simple matter of supply and demand, but some experts say Time Warner´s reluctance is more about protecting the high margins which accompany delivering high-speed data.
According to a recent MIT Technology Review piece, cable companies such as Time Warner are earning up to 97 percent profit margins on their broadband services, a business which one Wall Street analyst called “almost comically profitable.”
Just as Apple goes to extreme lengths to protect their margins, so too will cable companies who have become accustomed to earning this kind of cash.
Esteves didn´t completely turn her nose up to the idea of Gigabit fiber service, mentioning that her company may be taking a very Apple-like approach of “wait and see.”
"If Google finds the magic pill and finds applications that require that and develops a need for it, well terrific,” she said. “We would build our product base in order to deliver that."