November 16, 2006 11:53 AM PST
NetZero launches broadband service
The company, which sells dial-up service under the NetZero and Juno brands, will offer a new service, called NetZero DSL, using networking infrastructure leased from Verizon Communications. The service will be sold within Verizon's DSL service area.
United Online's broadband play is yet another sign that the Internet dial-up business is dying on the vine. For the past several quarters, service providers such as EarthLink and AOL have reported steep declines in subscribers as people ditch dial-up for faster broadband services. United Online reported that revenue from its Internet access business for the third quarter declined 15 percent, compared to the same quarter in 2005.
Meanwhile, EarthLink saw its dial-up subscriptions decline by 81,000 dial-up subscribers during the third quarter. But it gained 47,000 new subscribers for its broadband business, boosting broadband revenue 37 percent to $149.4 million.
Competing directly with the phone companies and cable operators for broadband customers won't be easy, however, because these service providers own the infrastructure that United Online and others, such as EarthLink, lease to deliver similar services. The situation could get even more difficult as the Federal Communications Commission fazes out regulations that have kept in check wholesale prices for network access.
Because Verizon will be able to charge whatever it wants for wholesale access to its infrastructure, it will be difficult for United Online to offer a cheaper service than Verizon. In fact, pricing for the new NetZero services is actually more expensive than that currently charged by Verizon. For example, NetZero is offering a 768 kilobits-per-second download service for an introductory price of $14.95 for the first six months. After that, the price jumps to $19.95 per month. Verizon also offers this service for $14.95, but the price does not increase.
NetZero is also offering a 1.5 megabit-per-second service for $19.95 per month for the first six months. The service will cost $29.95 per month after the introductory period ends. Verizon offers a 3Mbps service for $29.95.
Both NetZero products require a six-month commitment from customers.