Price war looms for high-speed net access
Copyright 2003 Gannett Company, Inc.
November 14, 2003, Friday through Sunday, FIRST EDITION
The cost of high-speed home Internet access has dipped below $20 a month in some areas as cable and phone companies battle for customers.
In one of the most aggressive promotions, Comcast recently began offering high-speed cable service for $19.95 a month for 12 months to select customers in California, Illinois and Maryland. After that, the cost would more than double to standard Internet cable rates. Comcast says the promotion is aimed at winning over high-speed DSL customers.
Still, the promotion by the No. 1 broadband provider could pressure rivals — who have also sliced broadband rates several times this year — to drop them further. Last month, the best DSL, or digital subscriber line, deals nationwide ran about $26.95 a month.
"Comcast's intent may not have been to instigate a price war, but it may as companies scramble to retain and add subscribers," says Bruce Leichtman of Leichtman Research Group.
Lower prices are helping the spread of broadband which has been held up, in part, by cost. In the past quarter, a record 2 million U.S. home users signed up for broadband service, says Leichtman. Still, an estimated two-thirds of home Internet users have the usually cheaper but slower dial-up service. Leichtman and others warn that broadband growth could slow as early-adopter ranks thin.
At $19.95, broadband would be about the same as dial-up service from an Internet service provider.
Broadband's push into the mainstream, which really took hold this year, has sparked a wave of new content that requires high-speed delivery from the likes of ABC and Major League Baseball. More content is likely to inspire more people to buy broadband, tech analysts say. And more broadband subscribers will inspire more content.
Comcast's promotion is targeted at select DSL users, some of whom switched to rival services. Comcast, with 4.9 million subscribers, has made similar offers in other markets. But they usually lasted three to six months. Comcast then raised monthly prices to usual rates.
"This particular campaign is a limited offer, and we anticipate it to be a one-time event," Dave Watson, a Comcast marketing executive, said in a statement.
Since spring, SBC — with 3.1 million subscribers — twice reduced its monthly DSL cost: to $29.95 from $34.95 on June 1 and to $26.95 on Oct. 1.
In May, Verizon lowered its stand-alone home DSL service to $34.95 from $49.95. Like others, Verizon is offering tiered services — just as ISPs offer different rates for dial-up and e-mail service.
While lower prices mean better deals for consumers, operators risk cutting into profits.