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Hold onto your wallets! Verizon launches 500 Mbps FiOS tier for $310 a month

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Updated throughout at 1PM to reflect new information from Verizon.

As gigabit networks get all the love, Verizon(s vz) has upped the ante on its own fiber to the home network, announcing a 500 Mbps (that’s half a gigabit) download tier with 100 Mbps upstream capacity. That’s blazing fast and will be available in far more markets than Google’s(s goog) gigabit network or the one-off municipal networks around the country.

However, Verizon is keeping things lucrative, planning on charging $309.99 per month for internet and TV or $329.99 per month for internet,TV and phone with a two-year agreement. Verizon will offer stand-alone service to residential customers for $299.99 per month and $294.99 with a 2-year contract. The 500 Mbps is only offered on a stand-alone basis for small businesses, and costs $369.99 per month with a two-year agreement. You don’t have to sign a contract but then Verizon will charge you a bit more.

Google Fiber signsThere are a few interesting things to note in this release worth noting for broadband lovers like myself. The first is that Verizon is charging a lot for this service when compared to Google’s $70 per month for gigabit service and $120 for gigabit service plus TV in Kansas City, and also more than the newer gigabit networks proposed in Vermont ($35 for a gigabit network) or Seattle ($80). However, when compared with the 300 Mbps offerings from cable providers (Comcast charges $300 a month) the current pricing looks reasonable– underscoring how broadband pricing is all about the competition in local markets.

The other interesting bits in this release is how Verizon is clearly driving customers to sign contracts, a phenomenon that has taken hold in the last few years further reducing a customer’s ability to switch providers and acting as a possible anti-competitive move. It’s a tactic Verizon has used well in the wireless market.

Verizon is pitching this tier as being about the internet of things, but let’s get real: unless you’re hooking up a bunch of Dropcams, the internet of things isn’t the broadband suck that video is. But Verizon is right when it comes to the realization that people are using more of the capacity on their connections — so while people may never use the entire 500 Mbps for one or two apps that require high speeds, many families are all wanting to use three or four apps or broadband-enabled services, which eats into the capacity. Thus, while many folks might focus on speed here, it’s better to start focusing on the high speed tiers as capacity upgrades. It’s like adding more lanes as you increase the speed limit.

I’ll applaud demand for faster services — Verizon notes that a third of its customers are already on its 50 Mbps or above tier — since people want more broadband capacity. However, this announcement also comes with a whole host of issues that paint a grim picture about our broadband market in the U.S.

7 Responses to “Hold onto your wallets! Verizon launches 500 Mbps FiOS tier for $310 a month”

  1. nekton

    My 1 Gbps FTTH connection regularly clocks 700 Mbps DL speeds. The cost—$40 a month.
    Where? Tokyo of course.
    If you are paying $300 a month for 500 Mbps, you are being screwed.

    • Ian Herndon

      @nekton: normally I might agree, but if you take a look at my comment above you’ll see my perspective on that aspect.

      $40/mo for 1Gbps is awesome though! I am very envious. =)

  2. Ian Littman

    Say what you want about the residential price for this, but the small business edition of this connection is quite reasonably priced considering the competition. Comcast offers 100/10 business cable for that price. If you want more reliability than cable can provide, you’re looking at single-digit megabits for this price from someone like tw telecom. Sure, they probably have more aggressive SLAs than Verizon would on this FiOS connection. But FiOS would likely be just as reliable, with tons more speed.

    Google Fiber isn’t likely to overbuild FiOS areas any time soon, so for those areas this may be as good as it gets for the next few years.So, all things told, this isn’t the worst deal out there. It’s just that, for most folks, the cost per megabit remaining the same between this tier and the 300/65 one below it means that you might as well just get the 300 Mbps one. Or the 150 Mbps one below that.

    It is discouraging though that only one-third of FiOS customers are on a plan above the “standard” one. You can deliver 15/5 and even 50/25 over cable, and that makes Verizon’s investments in FTTH look bad when that covers 90% of your market.

  3. Ian Herndon

    I really like how you showed Verizon’s 500Mbit pricing not only in contrast to Google’s $70 Gbit, but also in comparison to Comcast’s 300Mbit.

    Just because Google chooses $70 for 1Gbit doesn’t mean consumers should suddenly view that as new cost standard.

    As we all know, *many* things dictate the cost of service, and competition isn’t the biggest factor; it is a prominent one, but when it’s all said and done broadband providers are lucky to break a 10% profit. If they were in the 50%+ range as a whole I would be much more frustrated about pricing differences.

    At the end of the day many people will spend more on a family night out to the movies than the entire full month’s cost of their standard high speed connection.

    The best analogy I can think of is a vehicle purchase. If you buy a car with a 35k MSRP for 20k, someone else selling it for 5k doesn’t make your 20k deal any less appropriate. Sure, the random deal is out there and you could have had a better one, but it doesn’t negate the great price you still received. It’s all about perspective.