Verizon offers DSL at $14.95 a month

Relatively low cost aims to keep customers from using cable's Net service

August 24, 2005|By KNIGHT RIDDER/TRIBUNE

PHILADELPHIA - In an effort to keep customers from defecting to cable, Verizon Communications Inc. offered a slower version of its high-speed Internet service yesterday for $14.95 a month.

The new tier of DSL service might represent an early benefit for consumers as phone companies try to move into territory traditionally dominated by cable, and as cable firms begin to sell phone services.

Its success or failure might also answer an important question in the Internet marketplace these days: Which is more important, price or speed?

"We're still at the beginning stages of these guys figuring out how to sell their services - whether it should be in terms of services they offer, or price, or speed," said Joe Laszlo, a telecommunications industry analyst at Jupiter Research.

Verizon's product, available immediately to customers who commit to the service for a year, is priced less than many people pay for much slower dial-up Internet services, and about half of what Verizon charges for its regular high-speed service, which is usually at least twice as fast.

The new service delivers download speeds of up to 768 kilobits per second, more than 10 times faster than dial-up's maximum of 56 Kbps. Verizon's standard DSL currently offers up to 3 megabits per second, while Comcast Corp.'s cable-modem service delivers up to 6 megabits per second.

High-speed, or broadband, Internet connections offered by cable companies cost more than $40 month.

About 35 percent of the 78 million Internet households in the United States get their access from cable, 21 percent from DSL or other high-speed phone lines, and 47 percent from dial-up, according to Jupiter.

Dial-up users are quickly migrating to broadband Internet services, which enable them to listen to high-quality streaming music, watch video clips and use other features that require the speedy transmission of large amounts of information.

Various market studies have found that the factor keeping many people on slower dial-up connections is price.

For every dial-up subscriber Verizon attracts to the new service, "that's one potential customer taken off the table for cable," said Bob Ingalls, president of Verizon's Retail Markets Group. He said it was less likely that such a customer would defect to the telephone services that cable companies offer.

A study by the market research firm Forrester Research found that broadband customers are very loyal to their service providers. Only 10 percent said they would be willing to switch from cable to DSL, or vice versa.

"If Verizon loses a broadband customer to cable, they've probably lost that customer for phone service, too," said the author of the Forrester study, Maribel D. Lopez, a vice president and principal analyst at the firm.

For Philadelphia's Comcast Corp., the nation's largest provider of broadband Internet service, the answer to the speed-vs.-price question is speed.

"Our customers say to us that they want fast, reliable broadband service," said Greg Butz, senior vice president of marketing and business development for Comcast Online. "In spite of our competitors' pricing actions, we absolutely believe we're the best value ... for broadband."

Comcast has also sold its service as one with a rich set of features, including a premium music download service from Real Networks and Internet security services from McAfee Associates. Verizon has tried to match those features by partnering with Yahoo Inc. and Microsoft's MSN Network to provide free access to their premium services.

To stress the Yahoo relationship, Verizon also announced that its premium Yahoo package became available to its subscribers yesterday.

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