Last Update: March 16 @ 10:36 AM
Telecommunications
Verizon, Cox spar on broadband prices
BOTH THE WALL STREET JOURNAL and CNET, the tech news site owned by CBS Interactive, have argued that there is a brewing broadband price war.


PROVIDENCE – In a bid to counter slowing subscriber growth, Verizon Communications is offering new customers six months of free Internet access when they sign up for the company’s DSL service.

The national promotion will continue through the end of October in 24 states, including Massachusetts and Rhode Island. It does not include Verizon’s high-profile fiber optic Internet and television service, FiOS.

“What we’re trying to show people is what a tremendous value high-speed Internet is compared to the cable companies,” Verizon spokesman Phil Santoro told Providence Business News. “This is a really good alternative to the broadband service that cable companies offer.”

Verizon’s monthly subscription charges for DSL are $20 for a download speed of 768 kilobytes per second, $30 for 3 megabytes per second, and $43 for 7 megabytes per second.

DSL is broadband service delivered over telephone wires. This month is the 10th anniversary of Verizon’s initial launch of the service. (The company also continues to offer dial-up Internet service over its phone lines for $11.99 to $24.99 a month depending on how many hours of Internet access a subscriber wants, but Santoro said dial-up’s popularity is waning.)

Verizon’s move comes as broadband subscriber growth slows for both phone and cable companies.

The nation’s 20 largest broadband companies signed up 887,000 new subscribers during the second quarter, according to the Leichtman Research Group. That was about half as many as during the same quarter in 2007, and the smallest number of new subscribers analysts at Leichtman have seen in the seven years it has been tracking the industry.

Bruce Leichtman, the group’s president and principal analyst, said the phone companies have been particularly hard hit because of “Verizon and AT&T’s emphasis on selling higher speed FiOS and U-verse bundled services, often at the expense of the traditional DSL service.”

So, is Verizon launching an all-out broadband price war? It depends on who you ask.

Both The Wall Street Journal and CNET, the tech news site owned by CBS Interactive, argued yes in recent articles.

“Verizon Communications and AT&T have thrown the first blows in an impending broadband pricing war,” declared CNET’s Marguerite Reardon, noting a new deal from AT&T that allows subscribers to lock in their current prices, of $20 to $55, for two years. (AT&T does not offer DSL service in Rhode Island.)

But not everyone agrees. Karl Bode, who writes for the influential Broadband Reports site, poured cold water on the idea in a post headlined: “There Is No Broadband ‘Price War.’ ”

Bode argued that Verizon and AT&T’s latest promotions are minor ones, and pointed out the absence of similar moves by the major cable companies, including Cox.

“Just a tip: you’ll know there’s an actual broadband ‘price war’ when the cable industry participates,” Bode wrote.

Cox has no plans to offer a Verizon-style deal on broadband at this time, according to spokeswoman Amy Quinn. For new subscribers who sign up online, Cox has a discounted rate of $60-per-month for the first year after they sign up for the company’s Premiere service, which has a download speed of 10 megabytes per second. The deal also includes digital telephone service.

“As you can tell, the speeds for this service are considerably faster than the DSL offering by Verizon,” Quinn said in an e-mail. Santoro argued most users will experience slower speeds because cable companies deliver Internet service over a shared network.

Either way, consumers probably would not mind a broadband price war. As Bode pointed out, the average American pays more for broadband service than citizens of most other developed countries.

The average monthly subscription price in the U.S. was more than $50 in October 2007, according to the Organization for Economic Cooperation and Development (OECD), which lists 20 wealthy nations with lower broadband subscription prices than the U.S. and only nine with higher ones.

Verizon Communications Inc. (NYSE: VZ), a Dow 30 company, delivers broadband and other communications services through its Verizon Wireless and Verizon Wireline divisions. For more information about Verizon and its Rhode Island operations, visit www.verizon.com/ri.

Cox Communications, a wholly owned subsidiary of Cox Enterprises, is a broadband communications and entertainment company with more than 6 million customers nationwide including about 450,000 basic cable subscribers in New England. Additional information is available at www.cox.com.

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