Broadband Service Opens a Price War
Jun. 2–Turning up the heat in the battle for broadband users, three area Internet providers Wednesday announced new pricing strategies.
Leading the charge was telephone giant SBC Communications, which began selling high-speed DSL service to new customers for $14.95 a month.
The new price appears to be the lowest offered anywhere by a major broadband company and dramatically undercuts the $42 to $50 monthly charge levied by most cable providers, even the $23.90 a month America Online charges for its much slower dial-up service.
The low SBC price is available to users who sign up online at promo.yahoo.com/sbc/. The price is good for one year, after which it will revert to the company’s standard DSL price of $50 a month. SBC’s frequent promotions, however, generally pull that price down to the $25 or $30 range.
The announcement was quickly followed by Comcast Corp.’s decision to offer cable modem service beginning next Monday to new users for $14.95 a month. That deal is only good for three months, after which it reverts to the standard monthly price of $42.95 for cable TV subscribers. The rate is $59.99 for cable Internet-only subscribers.
SureWest Broadband took the opposite approach, apparently betting that speed rather than price matters to many customers.
The Roseville-based company said it would begin selling ultra-fast, 20-megabit Internet service in parts of Sacramento County over its fiber optic network for $89.95 a month, $40 more than its standard 10-megabit service. That kind of speed is 20 to 40 times faster than DSL and could appeal to customers such as telecommuters who routinely transfer large files, or those who play online games.
SBC’s move comes as the company prepares to offer its own television service over telephone lines beginning next year. By luring Internet customers away from cable companies, SBC would position itself to get the TV business of those customers, too, said telecommunications analyst Jeff Kagan.
“Customers won’t want to do business with a phone and a cable company,” Kagan said. “They will choose one or the other.”
SBC also could be looking to slow the erosion of its core telephone business caused by cable and cellular companies, as well as voice over Internet companies such as Vonage.
SureWest Broadband, for instance, offers telephone, cable and high-speed Internet service in parts of Sacramento County in competition with SBC and Comcast Corp.
Kagan said SBC’s rate cutting increases the price spread between DSL and cable so much that cable companies may be forced to respond. But he’s not sure when that would occur.
Comcast’s three-month offer notwithstanding, he noted that the cable Internet prices have held steady even in the face of SBC promotional DSL deals for as low as $19.95 a month. Cable companies have counted on the fact that their higher speeds — generally triple those of DSL — help keep customers loyal.
“Cable companies will continue with their higher prices until the phone companies start killing them,” Kagan said.
He also said he expects droves of dial-up customers, who make up about 40 percent of Internet households, to abandon their services for DSL, which is now about the same price or cheaper, but up to 25 times faster.
“It’s such a great price and a great speed, I don’t see why anyone would continue to be a dial-up user, Kagan said.
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