BellSouth Cuts Price for High-Speed Internet Service

Sep. 28–The cost of high-speed Internet service just got lower in metro Atlanta, with BellSouth cutting the price of its flagship DSL product by $7 a month.

But don’t count on an imminent price war with BellSouth’s chief rivals for broadband service — the cable companies. Instead of slashing prices, cable providers are touting higher speeds, analysts say.

BellSouth said Monday that its DSL Ultra service, with download speeds of up to 1.5 megabits per second, will be priced as low as $32.95 a month for those who also buy a bundle of phone services. The pricing change is effective immediately, and those who buy only the DSL service from BellSouth will still pay $42.95 monthly.

The price cuts apply to both new and existing customers throughout BellSouth’s nine-state territory in the Southeast and will be automatically reflected on October bills, the Atlanta-based carrier said. To get dial-up customers to switch to broadband, BellSouth is offering an introductory price of $17.95 a month for six months.

BellSouth left unchanged the prices for its DSL Lite service, with download speeds of up to 256 kilobits per second, and its DSL Xtreme service, with download speeds of up to 3 megabits per second. Those are priced as low as $24.95 and $44.95, respectively, with a bundle. The stand-alone price is $10 higher.

Although analysts don’t expect a price war now, they do expect broadband prices to drift lower eventually.

“While BellSouth’s retail (broadband) rates remain the highest among the Bells, we believe that the introductory offer of $17.95 per month has set a new floor for DSL pricing,” said UBS analyst John Hodulik in a note to clients Monday.

SBC Communications’ comparable flagship offering is priced at $26.95 a month, while Verizon Communications’ is priced at $29.95 a month.

BellSouth’s chief broadband rival in metro Atlanta is Comcast, which last October doubled its download speed to up to 3 megabits per second without boosting its price. It charges $42.95 for those who also subscribe to its cable TV service, and $57.95 for those who do not. An even faster service — 4 megabits per second — is priced as low as $52.95 a month.

Atlanta-based Cox Communications, which competes with BellSouth in markets such as New Orleans, charges as low as $39.95 for download speeds of up to 4 megabits per second and $54.95 for download speeds of up to 5 megabits per second.

“We offer customers more value, and it’s working for us,” said spokesman Bobby Amirshahi. “Seven out of 10 broadband customers in our markets use Cox.” Cox Communications is controlled by Cox Enterprises, which owns The Atlanta Journal-Constitution.

Atlanta-based EarthLink offers new customers a $19.95 rate for high-speed Internet for the first two months, and $39.95 per month thereafter.

“I think the cable companies would much rather play a speed game,” said Jonathan Hurd, an analyst at Adventis, a Boston-based research and consulting firm.

“Cable companies don’t have as much pricing flexibility as the phone companies on average right now,” according to Hurd. “From a cash flow perspective, they are more sensitive to changes in average revenue per user. So they would rather tout speed than price in terms of their marketing.”

Philadelphia-based Comcast, with 650,000 cable TV customers in metro Atlanta, also is touting content.

“It’s important to note that we believe that overall value is measured by speed in relation to what speed enables,” said Reg Griffin, a Comcast spokesman in Atlanta. He pointed to partnerships with ABC News, CNBC, Fox Sports, and video mail and jukebox music services it now offers to broadband customers.

“Both cable and the phone companies are going to have to find ways to add value other than speed,” said Hurd. But price will remain a factor, he said. “Price is one element of the overall value proposition to the customer, and it’s got to be managed like that.”

Nationally, one in four Americans now has a high-speed Internet connection at home. On average, customers pay $34 to $44 a month for broadband, said analyst Joep Knijn of Adventis.

Three major cities — San Diego, New York and Boston — have more broadband than dial-up users, according to comScore Networks. The figure is about 39 percent in metro Atlanta.

Nationally, about 61 percent of high-speed subscriptions are cable; in Atlanta, it’s about 51 percent.

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