SBC Throws Down a Broadband Gauntlet

SAN FRANCISCO -- A $14.95 per month promotion that SBC Communications launched Wednesday took its price for DSL (digital subscriber line) broadband significantly below that of brand-name dial-up Internet services, which offer only a small fraction of DSL's performance.

The move by the U.S. regional carrier, which calls itself the biggest DSL provider in the country with 5.6 million lines in use, turned up the heat in a competition for high-speed subscribers that pits carriers against each other and against the cable companies. All want to capture customers for potentially lucrative "triple play" bundles that include data, voice, and video. Research company IDC estimates that the number of broadband households in the United States will grow by 18.5 percent per year between 2005 and 2009.

The limited-time offer is exclusively for new users of the SBC Yahoo DSL Express service who sign up for a 12-month contract and buy SBC local phone service, according to an SBC statement. However, the company has not determined when the offer will expire, said SBC representative Wes Warnock. The DSL Express service offers between 384 kilobits per second and 1.5 megabits per second of bandwidth. Also Wednesday, SBC rolled out a similar offer for its SBC Yahoo DSL Pro service (1.5 mbps to 3 mbps) for $24.99 per month.

In contrast, dial-up services top out at 56 kbps and cost more than $20 per month at the regular price from major service providers such as America Online and Microsoft's MSN.

Reach More Customers

"SBC is now down in the dial-up price range," said Ovum analyst Jan Dawson. The move is a way to reach an untapped segment of price-sensitive potential customers after millions of average consumers followed early adopters into the high-speed services, he said. Dawson doesn't think it's a short-term gimmick. "Companies like SBC don't do things like this if they can't make money from them," he said.

Carriers are locked in an ongoing battle with cable companies, which were first to offer broadband in the United States and still have more high-speed customers than do the DSL providers, Dawson said. The cable operators have focused on generally superior bandwidth--typically 3 mbps to 10 mbps--at prices starting around $40 per month. The carriers tend to play the price card, and at the moment they are narrowing the subscriber gap, Dawson said.

In global terms, DSL pricing in the United States is competitive with that in most developed countries, though consumers in some countries, such as Japan and South Korea, get more bandwidth for about the same price, Dawson said. In most of the world, DSL is the major form of broadband because U.S. cable penetration is not as extensive, he added.

Regular Pricing

SBC's regular price for DSL starts at $19.95 for customers who buy a bundle that includes unlimited local and long-distance phone service. It costs $29.95 per month for customers who don't get a special bundle, although all customers must have at least a basic SBC phone service in order to buy SBC's DSL, said company spokesman Michael Coe. The local line costs about $10 to $12, depending on local rules, Coe said.

The carrier charges as little as $9.95 per month for dial-up in a bundle with landline and wireless phone service and satellite TV. That price is also available to the 24 percent of SBC customers who can't yet receive DSL, Coe said. SBC's no-strings-attached dial-up price is $21.95 per month. The carrier has about 1 million dial-up customers, Coe said. SBC serves customers in 13 states, including California and Texas.