DETROIT – On Tuesday, Verizon Communications offered broadband Internet access for just $14.95 a month, following a similar move by SBC Communications in June.
While Verizon’s service offers much slower upload and download speeds than other broadband services, it is still at least 10 times faster than dial-up. What’s more, it costs the same if not less than what most dial-up customers pay for 56kbps access. And because it is broadband, the connection is always on–something even supercharged dial-up services can’t offer, CNET.Com reported.
The phone companies hope that by giving customers a taste of broadband, they will eventually wring more profits out of them by selling them higher-speed services or other more advanced services such as IP TV.
“We’re hoping people will upgrade their service to higher speeds,” said Bob Ingalls, president of Verizon’s retail markets group. “The applications they use will be better enabled by speed, and we just want to give people a taste of it.”
With roughly half the Net-surfing population in the United States still connecting via dial-up, a large untapped market still remains, analysts say. At the end of 2004, about 42.7 million households were using dial-up technology to connect to the Internet, according to Jupiter Research. By the end of 2005, that number is expected to shrink to 34.7 million.
Meanwhile, cable businesses and phone companies have been adding new broadband subscribers. There are currently about 13 million residential DSL (digital subscriber line) customers and roughly 22 million cable modem, according to Jupiter.
While cable still dominates the market, phone companies are closing the gap. In 2004, DSL had about 41 percent of the market, up from 39 percent the year before. Analysts attribute most of the recent jump in DSL subscriptions to the phone companies’ more aggressive pricing strategies. This trend is expected to continue with cable and DSL splitting the market evenly in the next three to four years.
So far, cable companies have resisted national pricing cuts to compete with phone companies’ new offers. Instead, they say they have focused on providing the best value.
“Dial-up customers are switching to broadband in large numbers,” said Jeanne Russo, a spokeswoman for Comcast. “And we hope they will view our service as easier to use with faster and more reliable connections. We think customers will look at all those things when deciding on a provider.”
A large component of this value proposition has to do with service bundling. Cablevision has used this quite effectively, said Jim Penhune, an analyst with Strategies Analytics. Cablevision offers high-speed Internet access, cable television service and telephony for a total package of $90 per month for the first year of service. After that the price jumps to $115 for all three.
