October 21, 2003 10:52 AM PDT

SBC sees surge in DSL subscribers

SBC Communications on Tuesday reported a 13 percent gain in its broadband customer base, further evidence that recent price cuts are helping the Baby Bell gain market share.

The San Antonio-based company said it added 365,000 digital subscriber line (DSL) customers for a total of 3.1 million consumers in the quarter that ended Sept. 30. That's up from 304,000 added subscribers and 2.8 million total customers in the previous quarter.

The subscriber gains come amid a price cut for SBC's co-branded DSL service with Yahoo. In September, the SBC Yahoo DSL service launched a promotion to offer DSL for $26.95 a month for one year. That came on the heels of other price cuts throughout the year, from $34.95 in February to $29.95 in June.

SBC is not alone in cutting DSL prices. Both Verizon Communications, the largest Baby Bell, and BellSouth launched discount DSL promotions for as low as $29.95. Verizon will report its earnings Oct. 28, and BellSouth will post earnings Wednesday.

The drive to add new DSL customers highlights a troubling reality for the Bells. Cable companies are competing more aggressively with the phone giants, mainly by offering service packages that bundle video programming, broadband Internet and voice calling. The Bells do not have a comparable offer for video and have witnessed an erosion in their local phone business.

In response, the Bells have banded with satellite TV providers such as Hughes Electronics' DirecTV and EchoStar's Dish Network to package their voice and data offerings with video.

Cable companies dominate the Bells in broadband and have about twice as many subscribers. At the end of this year, cable companies are expected to have 13.3 million subscribers, compared with DSL's 5 million, according to market researcher In-Stat/MDR.

Nevertheless, the price cuts appear to be helping the Bells. Cable companies, which charge on average $45 to $55 a month for broadband, recently boosted their base download speeds in an effort to add more bang for the buck. It remains to be seen whether broadband customers will choose speed over price.

SBC's DSL numbers were released as part of its third-quarter earnings report. Despite solid gains in DSL, SBC reported disappointing earnings, as profit and revenue declined from last year. The declines were based on continued erosion of its local phone service.

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