Charter charges more money for slower Internet on streets with no competition

It's no surprise that cable companies charge lower prices for broadband when they face competition from fiber-to-the-home services. But an article yesterday by Stop the Cap provides a good example of how dramatically promotional prices for Charter's Spectrum Internet service can vary from one street to the next.

In this example, Charter charges $20 more per month for slower speeds on the street where it faces no serious competition. When customers in two areas purchase the same speeds, the customer on the street without competition could have to pay $40 more per month and would have their promotional rates expire after only one year instead of two.

Stop the Cap said it examined promotional offers to new customers in the metro Rochester, New York, market, "where Spectrum faces token competition from Frontier's slow speed DSL service" and more robust competition in limited areas from Greenlight Networks' fiber service. Greenlight fiber is available in 23 percent of Rochester, while Charter cable is available to homes throughout the city, according to BroadbandNow. Greenlight prices start at $50 per month for 500Mbps.

"Charter's offers are address-sensitive," Stop the Cap founder Phillip Dampier wrote. "The cable company knows its competition and almost exactly where those competitors offer service. That is why the company asks for your service address before it quotes you pricing."

Dampier found that Charter offers 200Mbps service for $50 a month "[i]n neighborhoods where Spectrum enjoys a broadband monopoly." Charter charges $70 for 400Mbps service in those same competition-free neighborhoods.

But "[j]ust one street away, where Greenlight offers customers the option of gigabit speed over a fiber-to-the-home network, Spectrum's promotional prices are quite different," Dampier wrote. On the competitive street, Charter charges only $30 a month for the same 400Mbps service that costs $70 nearby. As previously noted, customers on the noncompetitive street have to pay $50 for 200Mbps.

"Spectrum does not even bother offering new customers its entry-level 200Mbps plan in areas where it has significant fiber competition," Dampier noted, referring to the promotional offers that pop up when you type in an address. "For $20 less per month, you get double that speed."

For gigabit-download service, Charter charges $90 a month on the competitive street versus $110 on the noncompetitive street. These are the base prices without fees and taxes. Stop the Cap's article included these screenshots from Charter's promotional offers:

Charter prices on a street where the company faces no serious competition.

Stop the Cap

Charter prices on a street where the company faces no serious competition. Stop the Cap

Charter prices on a street where it faces competition from fiber.

Stop the Cap

Charter prices on a street where it faces competition from fiber. Stop the Cap

Charter prices on a street where the company faces no serious competition. Stop the Cap

Charter prices on a street where it faces competition from fiber. Stop the Cap

Longer price guarantee on competitive street

Charter also offers to lock in the monthly rate for two years in the competitive area, compared to just one year in the noncompetitive area. Prices can rise dramatically once promotional deals expire, so locking in a price for 24 instead of 12 months ensures that customers on competitive streets save even more money in the long run.

And that's not all. Charter "charges a hefty $199.99 compulsory installation fee for gigabit service in noncompetitive neighborhoods. Where fiber competition exists, sometimes just a street away, that installation fee plummets to just $49.99," Dampier wrote.

He added:

Note similar pricing variability exists in Spectrum service areas around the country, with the most aggressively priced offers reserved for addresses also served by a fiber-to-the-home provider or multiple competitors (e.g., cable company, phone company, Google Fiber or other [competitor]). Current customers typically have to cancel existing service and sign up as a new customer to get these prices.

Cable-company pricing varies widely, so the price difference between competitive and noncompetitive areas may be lower elsewhere. But the price differences show how valuable competition is to broadband subscribers.

Greenlight charges $50 per month for 500Mbps service, $75 for 750Mbps, $100 for 1Gbps, and $200 for 2Gbps. The company charges a $100 installation fee. It doesn't offer promotional prices, so there isn't a big automatic price hike after a set period like there is with many major ISPs.

Charter says it uses a “common” pricing strategy

When contacted by Ars, Charter said that "Spectrum Internet retail prices, speeds, and features are consistent in each market—regardless of the competitive environment." But "retail prices" are the standard rates customers pay after promotional rates expire. Stop the Cap showed that Charter's promotional rates vary between competitive and noncompetitive areas.

Charter told Ars that its promotional offers are affected by several factors, including "location."

"Any promotional offers available to new customers are time-limited and vary based on a number of factors, such as time of year, location and programming, or device opportunities, and testing different promotional offers concurrently is common in a subscription business," Charter said.

This isn't the first time we've written about major Internet providers offering lower prices in competitive areas. In 2015, we noted that AT&T was charging $40 more per month for gigabit service in cities without Google Fiber.

Charter has over 27 million residential Internet subscribers in 41 states, making it the second-largest home-Internet provider in the US after Comcast.