DSL wars come down to a battle of the bundles

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their buck by choosing the Bells, which are trying to encroach on cable's long dominance in the broadband access market.

"Any time you can get more choice in market, it's at least in concept good for consumers," said Rob Sanderson, an equity analyst at American Technology Research. "Any time you can pick and chose your options, there has to be some utility for consumers in having the flexibility to choose."

Money in the bank
That's not to say the Bells are winning the war. Despite higher overall costs, cable companies continue to gain hundreds of thousands of new broadband subscribers every quarter. Most of these gains come from existing video customers adding broadband to their monthly bills.

Comcast, the nation's largest cable provider, added a record 549,100 new broadband customers during the quarter ending Sept. 30. That's up from 472,700 the year before and 327,000 from the previous quarter for a total of more than 6.5 million subscribers. Time Warner Cable added 168,000 last quarter to 3.7 million, while Cox Communications added 184,446, or 32 percent, to reach 2.4 million.

Not to be overshadowed, the Bells have gained DSL subscribers at a steady rate. Most of these gains can be attributed to attractive pricing plans.

SBC, the largest DSL provider, added 402,000 subscribers last quarter for a total of 4.7 million subscribers. Verizon added 309,000 to 3.3 million, BellSouth added 134,000 to 1.9 million, and Qwest Communications gained 102,000 lines to 956,000.

These results may indicate that lower prices and more affordable bundles are helping both sides prevent customer defections, or churn. The Bells are offering incentives for new broadband subscribers from choosing cable, while cable companies are able to keep their customers despite pricing competition.

Why are cable customers choosing a more expensive service rather than switch to better savings? The answer is simple--convenience.

"The selection of who (consumers) choose to provide multiple services seems to be based more on convenience than on price," said Mike Paxton, an analyst at In-Stat/MDR. "Convenience nudges it out a little."

The road to similarity
Cable and the Bells are on a path to become mirror images of each other. SBC, BellSouth and Qwest are planning to invest billions to upgrade their existing copper wires to one day offer Internet-based video streams into the home.

Last month, SBC awarded a $1.7 billion contract to Alcatel for the telecom equipment maker to upgrade its network infrastructure to fiber optic lines to handle more data traffic to serve video. SBC is in trials with Microsoft to use the software giant's digital encoding technology for video as well. Once the service is up and running, SBC will add video to its price packages.

Verizon is planning to offer a video service on its fiber optic lines as early as next year. The company's "Fios" service will pipe 5mbps to 15mbps of data bandwidth into homes and package a video service similar to cable.

The Bells' ambitions are getting cable companies antsy. Cable executives have publicly discussed their need to offer wireless phone service to their customers to remain competitive. Time Warner CEO Richard Parsons last week told investors that the company would explore partnerships and consider acquisitions to get into the business.

Cable giants are on common ground over expanding into cellular. There is already discussion among Comcast, Time Warner Cable, Cox Communications, Charter Communications and Advance/Newhouse Communications to consider how to approach the business, according to one industry source close to the discussions.

In the long run, the war of the bundles may turn out to resemble the 2004 presidential election: strengthen the base and pick away the undecided consumers.

"If (consumers) perceive they got a deal from Verizon, then they won't look any place else," said Verizon spokesman Jim Smith.

Clarifications

A couple of clarifications. Vonage is mentioned in the article as $24.95 for voice, but fails to mention that that too must be tied to another offer; e.g., broadband from another carrier adding another approximate $45 to the mix, bringing the total to the same as SBC offer of $70. In addition Verizon is offering in NY a $29.95 standalone offer for DSL where customer gets choice of DSL speed from 1.5-3.0; over 30% savings over cable bundle in NY - no promo, this is standard list.

Alternative

Go for Cox all in one package: you can get basic cable, phone n internet service for cheaper pricee.

[roberts2424]

Bell South

What's also interesting is that Bell South and select other
companies won't let you subscribe to their DSL services unless
you have a phone line with them. In other words, you can't get
DSL without a Bell SOuth phone line. Their DSL service is truly
remarkable but who needs all that other stuff? Our household is
discussing jumping ship and going with Cable Broadband just to
cut expenses, something we'd like to avoid since we like our
current DSL service.

Qwest does not want to sell DSL

I just went thru a very frustrating evaluation of the High Speed access options for our home. We live in an upper middle class area of Phoenix AZ and wanted something better than dialup. Right now we have Qwest for home phone, ATT long distance & dialup internet, and Direct TV. We wanted to stick with one of these companies. Direct TV internet priced itself out of the evaluation. ATT doesn't offer DSL in our area so I went to Qwest. Over a two week period in October - after alot of phone calls and pushing for answers I found that Qwest does not want the business. It seems they wired the area years ago with fiber optic cable and have decided that if you want more than phone you WILL use the fiber optic cable - on their terms. You HAVE to rent a modem from them (it's a special fiber optic modem)you have to take MSN, and they do NOT support home networks - and if you have the guts to install it on your own they will not give you any tech support. And to top it off the technician would not give me any indication of the download/upload speed! They would hook up the first computer in the home for $9.99 (promotional rate) but the second and additional computers are $99 each! They gratiously will allow you up to 4 computers in a household to use the connection for the same monthly rate but they are each separately connected to the internet and can not be networked together. They really want you to buy your cable tv from them too. I told them that I now understand why so few people in the local school directory have a Qwest or MSN email address and Cox has the majority. I am planning to call Cox and set up phone and internet from them and eliminate both Qwest and ATT. We are not willing to give up Direct TV so Cox is not going to get that business.

[LANjackal]

Cable + VoIP

Phone company being obstinate? Simple solution: get cable internet access and VoIP. If you're not a cable TV subscriber, your bill will be only $5 or so more than if you were. However, you won't be tied to an expensive landline service, and your internet access will be considerably faster than with DSL. Go cable!!!