DSL companies and Cable companies are together on pricing. Either already has the pipes running into your home. They could simply make more money on volume by dropping their prices and thus signing more people up. But do you see much of that?
You do realize that internet service providers do have per-user costs (and, more importantly, per-megabit costs), right? That's why you don't see prices coming down. They would NOT make more money by lowering their prices. Their primary and in fact only motivation is to maximize the amount of money they make given the amount of money they spend.
While DSL and cable internet costs are similar, imagine the scenario: Comcast loses TV subscribers and needs to make up its costs by raising rates on internet connections $50/month (unless the person is already a TV subscriber, ie, they "bundle" the TV service for free).
What will Surewest do ("Surewest" being a stand-in for whatever local DSL provider you have in your area)?
They would have a few options:
1. Raise their rates by $50 and offer
their TV service for free as a bundle as well, at which point nothing changes except maybe the companies collude to stifle the competition and perhaps face regulatory consequences.
2. Raise their rates modestly (say, $5), and have a huge influx of customers from Comcast.
3. Keep their rates the same, and take all of Comcasts' customers.
I'd say that (1) and (3) are clearly non-sustainable (the influx of customers would be too large and too sudden for them to absorb without affecting QoS severely across the board). Somewhere in the (2) scenario is most likely. In other words, internet service will get more expensive (especially as more of their customers are using the service more often), and "bundling" TV service will become less lucrative (simple market economics there).
Given that, question the premise: would Comcast opt to raise its ISP prices and scare off its customers? The answer depends largely on how quickly those customers would leave. But, in a "steady state", they'd end up sacrificing per-customer profits in the name of keeping the bottom line as high as possible. I'd bet that instead of hinking ISP rates by $50 to "make up for" lost TV revenues, they'd at most hike ISP rates by $25, and more likely less than more.
From the consumer's POV, they would see their Internet costs go up by a small amount, but likely their TV costs go way down (fundamentally: because the network infrastructure is significantly more efficient for on-demand delivery of content than the hacks overlaid on an efficient-for-broadcast-delivery network, and secondarily because the additional service sources force profits down).
The big winners here are Apple (obviously) and the second-tier ISPs (including all DSL providers) who are currently severely disadvantaged because they can't cheaply offer bundled TV along with their service.
Besides, in many areas, there is only ONE choice for broadband internet- the cable or DSL company that also makes a LOT of money by delivering television.
For this to really work as dreamed about in these various posts, Apple will need a way to connect with its subscribers WITHOUT relying on existing broadband pipes.
I agree that in areas with only one internet service provider things really suck. On the other hand, if that one service provider today is the cable company, forcing the above scenarios makes it more likely for a competing service to step in and take a portion of the market.
