May 13, 2003 10:35 AM PDT

Verizon, Microsoft launch DSL service

Verizon Communications and Microsoft on Tuesday unveiled their long-awaited joint DSL service for $34.95 a month, with a $5 discount for customers of certain Verizon voice service plans.

The two companies first announced a broadband partnership last June.

"Verizon Online DSL with MSN 8 will help speed the adoption of broadband by providing consumers with communication and information services that enrich the online experience while addressing important issues such as junk e-mail and online safety," Steve Ballmer, CEO of Microsoft, said in a statement.

The offer comes as premium Internet service providers such as Microsoft's MSN, AOL Time Warner's America Online and EarthLink seek to reinvent themselves for the high-speed Net to battle subscriber erosion due to discount dial-up providers and broadband providers. In making the leap, older ISPs are taking on the role of front-end marketers and premium content providers, riding on lines owned by the cable and phone companies.

MSN, with 8.7 million subscribers, is the second largest ISP in the United States after AOL.

According to the companies, Verizon with MSN 8 offers content customized for broadband connections, called DSL Live, featuring videos as well as Listen.com's Rhapsody music-streaming service. Other features include virus protection, antispam filters and parental controls.

In addition to Verizon, Microsoft has partnered with Qwest Communications International for digital subscriber line service and Charter Communications for cable broadband. However, the Qwest and Charter deals are structured differently than the Verizon agreement; Microsoft resells Qwest's and Charter's broadband access lines directly to consumers under the MSN moniker.

Rich Bray, MSN's vice president of North America, said MSN will pursue partnerships similar to its agreement with Verizon, in which access providers can retain control of selling directly to consumers. He said the company is having "fruitful discussions" with cable companies, but would not say whether any deals were imminent.

To date, only AOL has signed a partnership deal with a cable company, industry giant Comcast. Meanwhile, the list of major Baby Bells has shortened to Bell South as the only provider without a deal with a major Internet company.

Verizon for MSN 8 comes months after Yahoo and SBC Communications launched a co-branded DSL service.

SBC, which is offering a promotional rate of $34.95 a month, has added more than 1 million net new subscribers since the second quarter of 2002, according to the company. Net subscribers are up 63 percent, to 2.5 million, compared with 1.8 million for Verizon's DSL service and 1.1 million for BellSouth's.

Still, DSL providers have struggled to match the pace of cable providers, leading to price cuts in a bid to fuel demand. Verizon's $29.95 a month bundled service is $10 to $20 a month cheaper than cable plans from Charter, Comcast and Road Runner.

Roughly 16 million U.S. households get some form of high-speed Web access. Most, about 10 million, get it from cable companies, which have until recently been considered to offer better service for about the same price as DSL providers such as Verizon.

Both cable and phone companies are increasingly turning to service bundling as way to stave off inroads from competitors, a tactic that has drawn scrutiny from consumer groups. Under such deals, cable companies may offer discounts for customers who sign up for cable TV, broadband and voice services, for example.

Lower DSL pricing could hurt dial-up services such as AOL's flagship premium service, which the company offers for $23.90 a month. AOL has seen subscriber numbers fall off slightly in recent quarters from a high of 34 million, as customers migrate to discount dial-up services such as United Online or to high-speed providers that include AOL Time Warner's Road Runner high-speed cable service.

AOL also offers its own high-speed service that costs $54.95 a month. In addition, it is hoping to lure customers from other high-speed providers by way of its $14.95 a month "bring your own access" product, which includes features such as exclusive content.

 

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