Price war lite

Anyone who lived through the long-distance wars of the '90s gets a little nervous at the notion that broadband services are now entering a period of price wars. After all, at the end of their bloody battle for customers, which only hit bottom when AT&T and others were offering to pay prospects $100 to change long-distance providers, the entire industry was decimated and its once-lucrative service completely commoditized.

There is much that distinguishes high-speed Internet access service from long-distance voice, however. At the height of the earlier battle, there was a tremendous proliferation of companies selling service, and the primary difference among the services was price. By contrast, most consumers only have access to two major broadband service providers--the cable company and the telephone company. Cable has already been given the right to prevent other Internet service providers from accessing its cable modem networks and the expectation is that the telcos will gain the same privileges for their DSL and fiber networks.

There are two-way satellite services and a handful of broadband wireless access and broadband power line networks, but these are not available today to most consumers. Nor are most municipalities building their own fiber optic networks. Broadband Internet access will remain a telco-cable market for the immediate future.

When the telcos lower DSL prices to $14.95, they are simply trying to lure dial-up customers into the broadband world, with the expectation that customers will be loathe to return to dial-up and only slightly less horrified by the process of changing carriers and, very possibly, e-mail addresses.

That could all change if BPL or WiMAX take off, or today's trend-setting teens decide they want all their Internet content and messaging on their cell phone.

Interestingly, when BellSouth did its pricing "cut," the company actually backed off short-term low-price deals for a longer term offer that pegged DSL at $32.95 a month but released customers from having to buy advanced voice features to get that price. The company said its customers were asking for more straight-forward pricing and fewer gimmicks, and that the basic DSL price is very competitive where it counts--with the cable industry.

So don't expect Verizon to offer to mail you a check for $100 if you switch to FiOS, and don't be fooled into thinking broadband price wars lead to the dramatically falling prices of long-distance voice. It's a different world.

E-mail me at cwilson3@primediabusiness.com.