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DSL News
Comcast Discounts Broadband Rates in Attack on DSL
Article #: 1
| Date: | | | Written By: | Michael Learmonth | | Article: | NEW YORK (Reuters) - In move that could touch off a wider price war, Comcast Corp., the nation's largest cable operator, has begun steeply discounting its high-speed Internet service in certain areas to steal lucrative customers from the Baby Bells.
Comcast is targeting customers who use fast Web connections over traditional phone lines, known as digital subscriber lines, in certain Verizon and SBC Communications territories in California, Illinois and Maryland. Comcast is offering high-speed Internet service for $19.95 for the first 12 months if they switch.
A Comcast spokesperson stressed the offer was limited in scope, targeted by e-mail to existing DSL customers. Comcast's regular broadband rate is $42.95.
The "DSL Switch Campaign," as it is known, is analogous to the "dish win-back" campaigns the cable industry has used to compete against satellite broadcasters DirecTV and Echostar.
"They're going to compete on broadband just like they did on the video side," said Kaufman Bros. cable analyst Mark May, who predicts cable prices for new customers will decrease 10 percent, on average, in the coming year.
"They'll try to differentiate the product, but at the same time create campaigns that target DSL competitors," he said.
An SBC spokesman said the company "hasn't seen any impact" from the Comcast promotion, which began in September. A Verizon spokeswoman said the company had no plans to react to Comcast's move.
The Baby Bells pushed into high-speed data and wireless (news - web sites) services to offset declines in their local telephone business. Last spring SBC and Verizon cut their high-speed data prices in attempt to win share from their cable competitors, but market share has remained roughly the same with about 65 percent using cable modems and the 35 percent using phone lines.
"The price cuts didn't slow the cable modem (news - web sites) growth engine at all," said Cynthia Brumfield, director of communications and media at analyst group Pike & Fischer.
Until recently, the cable operators have opted to invest in boosting speed, rather than offering price cuts. The strategy has worked, so far, as all the major cable operators reported wide gains in broadband customers over the past year.
But most of these gains have come at the expense of dial-up providers like AOL, MSN, and Earthlink, which lost an estimated 1 million customers in the third quarter.
But now it appears the cable operators are preparing to take on the telcos on price. Don Logan, Time Warner's media and communications group chairman, said in the quarterly conference call that until now Time Warner Cable has held prices up, but that might not last. Price cuts, he said, are "another arrow in our quiver."
In addition to price breaks, the industry is looking at tiered schemes where consumers could pay a lower monthly rate for a slower connection speed.
Cox Communications executive vice president Pat Esser said in a quarterly conference call that the company had introduced lower- and higher-priced broadband service in four markets, with "additional markets to follow."
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