Verizon quietly cuts DSL prices
Reuters
May 2, 2003, 10:20 AM PT
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Verizon Communications, the largest U.S. telephone company, has quietly slashed the rate of its high-speed Internet access service by more than 20 percent, an assault on rivals such as cable television companies and America Online, analysts said Friday.
Since March 28, customers calling Verizon's service centers have been quoted a price of $34.95 a month for high-speed DSL (digital subscriber line) access, a $10 reduction from previous rates, analysts said.
The company plans to widely market the new pricing in the coming weeks, analysts said.
New York-based Verizon declined to comment.
That pits Verizon's high-speed DSL service directly against the cost of traditional dial-up services offered by AOL Time Warner's America Online, which costs $23.90 a month, plus about $10 for a telephone line. AOL's high-speed broadband service, meanwhile, costs about $55 a month.
Verizon's new price is also $10 cheaper than Time Warner Cable's Road Runner high-speed service, which costs roughly $45 a month.
Verizon and other Baby Bell telephone companies have been hawking new services to thwart competition from cable TV operators, which also offer packages of telephone, video and data services.
Although DSL represents a small part of Verizon's overall business, it is a key component of its "bundles" or packages of services and its strategy to fight against cable companies, analysts said.
"Verizon needs to reduce the longer-term cable threat to its core voice business by raising its share of the broadband market. If it does not, then the Trojan Horse of cable high-speed Internet could morph into a much more widespread threat," Merrill Lynch telecommunications analyst Adam Quinton said.
"We believe the pricing action taken by Verizon is designed to blunt that longer term," Quinton said.
Verizon's new pricing strategy also puts new pressure on AOL, which already has been struggling with a slump in advertising and a contraction in its dial-up business as well as federal probes into its accounting practices.
"Verizon's agenda seems to be not only to increase its share versus cable for high-speed customers, but also appears to be a move to accelerate the migration of dial-up customers to high speed," Merrill Lynch Internet analyst Jessica Reif Cohen said in a research report.
Given the aggressive pricing environment, it will become more difficult for AOL's dial-up service to compete against high-speed offers from both cable and phone operators, Cohen said.
AOL has unveiled a new high-speed service targeted at those who already have faster Web connections, or broadband, and is moving away from offering high-speed Internet access. AOL now will face added pressure to develop added, premium services to draw customers to that broadband service, analysts said.
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