Broadband Economics 101

I’m switching from DSL to cable next week. My local cable company (Cox) says I can pay them $15 a month to rent the modem, or buy one from them for $90. Or I can head over to Amazon.com and get the
Linksys BEFCMU10 EtherFast Cable Modem
for $77 with free shipping. (A buck less than Newegg.com, even!) Or a
Motorola Surfboard SB5100
for $65. Or a
D-Link DCM-200
for $66 with a $20 rebate.

So my question is: Why would anyone pay $15 a month to RENT one of these things, when the payback period is between three and six months and it takes about 5 seconds to connect one? I just don’t get it.

4 thoughts on “Broadband Economics 101

  1. I rented a cable modem from my cable company for nearly 3 years because:

    When I signed up, cable modems weren’t readily available over the counter and my cable company refused to provide tech support for any account that wasn’t using their own. There was also no breakout of charges for the modem.
    Even if I hadn’t moved and switched to DSL, I probably would have kept their modem, since they just recently broke out the cost of a modem rental, and IIRC, it is about $5 a month. That’s relatively cheap insurance against a fried modem thanks to lightning from the thunderstorms we get on average 10 months of the year here in Florida.

    Why do some people return rental cars empty and pay the exorbitant gas prices at the agencies? It’s just more convenient.

    Being in the phone business, from time to time, I still hear people say, “I wish the phone company would just give me a phone and put it on my bill.” Some people just like their technology spoon fed to them. Think of how many years your parents paid the phone company every month for that basic black desk phone (which would probably still be working today in thousands of homes, were it not for de-regulation).

    It sounds to me as though Cox has made a conscious decision in your area to encourage subscribers to provide their own by pricing rentals at $15 a month. Apparently Adelphia in my area would rather keep all the equipment under their control, up until the Ethernet connection.

  2. That makes more sense, and I might have made the same decisions as you if the numbers were that close together. I think it’s also a demonstration of the amount of competition in this market, with Qwest and Cox duking it out for market share in three markets: phone, cable, and Internet access. I remember paying Qwest setup charges of $150+ a few years ago when we moved in. Cox is setting all three services up in the new house with no setup charges at all, and rates that are lower across the board. We’ll see how well it goes.

  3. Good luck!

    When we moved, it coincided with the third %7 rate increase Adelphia had made in just over a year. I couldn’t get DSL at the old place (in a heavily populated suburban area). Adelphia had overpopulated our neighborhood loop. As an early adopter I was getting speeds nearing 2Mb/s, but by the time I disconnected, I was lucky to get 400Kb/s from the same sources. The DSL also gets me 256K up, while the cable service had me capped at 128K.

    In my case the overall cost between using cable modem and digital cable or DSL and DirecTV was within two or three bucks of being the same. The DSL installation charge ($40) was waived and I got $100 rebate on the DSL modem (Westell 2100),which made it free.

    But I have yet to have an outage on my DSL, in spite of the fact that I’m now in a rural environment, and the old cable connection couldn’t hold a candle to the dish.

  4. I just had Comcast highspeed internet service installed on the $19.95 per month for the first 6 months promo they were running.
    I had the option of buying my own cable modem or renting a motorola 4220 from them for $3 per month. they also provided a NIC instead of using the USB connection option. I was not really sure what brand of cable modem to get so I took the $3 rental. If it goes bad they replace free of charge so thats a benefit.

    what I really want to do is connect a second computer so we can share the cable internet service. Im trying to decide what I need to buy to do this and what brand is best.
    wireless would be nice but I feel it would slow down the internet connection. Im leaning toward buying a NIC for the second computer and running the wire to it. I would only have to drill thru one wall so it would not be a big deal.
    any advice on what type or brand of cable router I should go with would ne a great help in deciding what to do. the second computer still has dial up service good thru aug so i have a few weeks to decide.
    Im running XP home edition on my computer hooked to the cable modem and the second computer I want to network with has win98. don’t know if this will cause any issues.

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