Broadband price war brews
Verizon Communications and AT&T have thrown the first blows in an impending broadband pricing war.
Last week, Verizon Communications said it will offer six months of free DSL service to new customers who sign up for a one-year contract and also use the company's traditional landline voice service. The promotion is available until the end of October.
Verizon's DSL service typically costs between $19.99 per month for 768Kbps downloads and $42.99 a month for 7.1Mbps downloads. Add traditional telephone service, and subscribers can get high-speed DSL and phone service for as little as $45 a month versus $65 a month.
AT&T has also upped the ante with a new promotion that guarantees customers its current pricing, which ranges from $20 to $55, for two years, the Wall Street Journal reported Tuesday.
The promotions come as broadband operators saw a sharp decline in new subscriber growth in the second quarter of 2008. Twenty of the largest cable operators and phone companies in the U.S. only signed up about 887,000 new subscribers during the quarter, the lowest level of growth seen in the past seven years, according to Leichtman Research Group.
Phone companies appeared to be the hardest hit by the slowdown, only adding about 23 percent of the customers they added during the same quarter a year ago. Specifically, Verizon lost 133,000 DSL subscriptions in the second quarter as its existing customers upgraded to its Fios network and new broadband users went to cable competitors.
Meanwhile, cable companies, such as Comcast and Time Warner Cable, have fared much better. In total, cable companies added about 75 percent of all new customers in the second quarter.
Comcast, the largest cable operator in the U.S., added 278,000 high-speed Internet subscribers during the second quarter. Comcast executives have said that about two-thirds of its new broadband customers had switched from DSL. And about one-fifth of these customers are signing up for the triple play bundle.
As a result, cable operators haven't felt compelled to lower prices or offer more for less. But as the broadband market gets tighter, a cable response is likely.
Today about 60 percent of U.S. households already have high-speed Internet connections. And of all people who regularly use the Internet, about 90 percent of them already subscribe to broadband service as opposed to dial-up. This means that there is a smaller pool of people using dial-up who may switch to broadband services, a fact that is also likely impacting growth in the broadband market.
Comcast is already starting to see its edge weakening. During the second quarter, the cable operator added about 18 percent fewer customers during the quarter than it did a year ago.
It will be interesting to see what kind of affect the phone companies' new pricing terms will have on the market in the third quarter. Stay tuned.
This broadband war could lead to some good deals for consumers. But bargain shopping consumers will have to read the fine print on these deals. Pesky service contracts with early termination fees that are common in the wireless industry could show up more regularly in the broadband market. Verizon's six-month free DSL promotion requires a one-year commitment. And the company is charging a $79 fee for people who cancel the service early.
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
I for one have come to expect nothing but neglect and ignorance when dealing with either telecom or cable companies. Oh yeah, they like to change names every one or two years so one doesn't even know who owns what.
Contract
The same thing that is keeping me from getting satellite TV is keeping me from getting DSL, I do not want to sign a contract. I didn't have to with my cable company, why should any other broadband service be any different?
I don't feel sorry for the big phone companies loosing out to the cable companies. ATT was supposed to have moved high speed and fiber optics into most of east Texas back in 2000, here 8 years later and not anywhere to be found although they are the only phone company. We are locked in and what do they care about providing upgrades to the areas that they have the monopoly.
They have no issue spending the money that they make now without reinvesting into this area. Cable companies do not reach out to the more rural areas on the outskirts of towns. They may sign up new customers just by winning the contracts of the new city that they moved into.
With the monopoly's that we are dealing with when if your lucky enough to have them its not who is the best priced its who is allowed to do business in your city or town. So your stuck with them good or bad.
And we know our government leaders are above board on these contracts.
Now rural American's pay the highest prices for dish's, either TV or Internet. I would love to pay "Verizon's DSL service typically costs between $19.99 per month for 768Kbps downloads and $42.99 a month for 7.1Mbps downloads. Add traditional telephone service, and subscribers can get high-speed DSL and phone service for as little as $45 a month versus $65 a month."
But no I have to pay $80.00 per month for Wildblue or Hughesnet. Both truly are a rip off. The best download speeds for WB is 1.0 mbps for that amount with a limit on monthly usage....let alone consistent outages due to weather at the uplink or here or maintenance . Why doesn't someone actually report the truth in how most suburban and rural Americans are paying the most for very little.
All because the big cable companies and phone companies are not investing into upgrading the infrastructures where we live.
http://www.census.gov/compendia/statab/cats/information_communications/internet_information_industries_and_internet_usage.html
You may be surprised by some of the numbers.
When we finally got another provider to come to our area, I called Charter back to cancel my service because I was going to make the switch to AT&T, they ?amazingly? offered me a $19.99 a month price and for 10 Mbps ? so I stayed because AT&T?s service is nowhere near that fast. It?s amazing what a little competition will do.
Cable modem is much much faster and 24/7 online. I had DSL for the price but I end up switching back to cable, dsl is just poor and slow heck even my treo from sprint is faster than dsl.
Verizon bring FIOS to nyc then we can talk. But by the time fios is available in my area I think I will be getting WiMax lol
Oh, right. Everything bad is Microsoft's fault, right? Sheesh. Sheerest idiocy.
- by stephengnb September 3, 2008 5:59 PM PDT
- Where's Qwest in all of this? Qwest actually has really good deals on 7 mbps.
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