- Optimum is trying to entice new broadband customers to its Optimum Fiber service with a $25 per month offer
- Lower prices might stem subscriber losses for cable companies
- But there's concern among analysts about price wars
The service provider Optimum today launched a new fiber broadband deal for only $25 a month in an effort to entice new customers. And it’s guaranteeing this low price for five years.
The “25 for 5” offer is available to new subscribers who sign up for 300 Mbps Optimum Fiber Internet.
“With 25 for 5, we’re redefining what customers should expect from an internet provider,” said Mike Parker, president of Optimum Consumer Services, in a statement.
According to a couple of online platforms that track broadband pricing, the average cost for fiber broadband in the U.S. ranges anywhere from $50-$100 per month. Basic 300 Mbps fiber plans start at around $55–$65 per month, according to CTV for me.
But is this great price just another sign that cable operators are engaged in a race to the bottom for average revenue per user (ARPU)?
Analysts have differing views on the phenomenon.
In a February note about Cable One, the analysts at MoffettNathanson correlated lowered ARPU with rising subscriber growth, and they consider that a good thing. “Bulls will see lower ARPU as the medicine that is necessary for the subscriber losses to end,” wrote Moffett.
But there’s plenty of concern in the broadband market about price wars.
New Street Research analyst David Barden recently noted that in markets where cable is seeing a lot of new competition from fiber players, they will try everything to ensure a survivable market share. “The easiest way to do this is to lower price,” wrote Barden. And he indicated that it won’t be enough to lower prices by just a few dollars, especially if customers perceive that fiber is a better product than cable.
Barden warned that if cable operators lower their prices that could incentivize fiber operators to also lower their prices, resulting in a race to the bottom, which won’t be good for any of them.
In a January note, Wolfe Research analyst Peter Supino wrote that cable is increasingly prioritizing retention over price.
“Cable's downside risk through 2027 comes from ARPU. While the market remains focused on volumes, we believe the more significant risk to cable through 2027 is the erosion of ARPU growth as incumbents sacrifice price to defend their footprint.”