The big let-down

It's common practice in today's telecom market to lure in new customers with price cuts. The major telecom players did this a couple of years back, dropping the price of DSL service to very low rates to lure some customers into the market and convince others to leave much higher-priced cable modem offerings.

The strategy paid off — at least at first — as DSL penetration grew faster than cable and threatened to wipe out the early cable advantage. Cable players say they have now reversed that trend and are steadily gaining again. At The Cable Show in Las Vegas this month, Steve Burke, chief operating officer for Comcast, said more than half of his company's new broadband customers are DSL refugees while Tom Rutledge, chief operating officer for Cablevision Systems, called DSL, “Digital Slow Line.”

Recent numbers from broadbandtrends.com show cable has gained a half percentage in recent months to hit 52.5% while DSL has lost a half percentage to hit 44.5%. Although hardly conclusive, the shift reflects a slowing of DSL gains.

Some of that is the move to a cable bundle, and some could well be, as Burke claimed, that consumers lured by low prices will dump a service at the first chance to buy a better one.

If that's true for DSL, however, it could also be true for cable telephony, as the University of Michigan consumer research, reported in this issue on page 16, seems to indicate. Only a couple of years into providing voice service, cable companies are seeing customer satisfaction numbers drop.

The thinking is that pricing for cable telephony, which included promotional discounts, may have lured customers who didn't wind up getting what they wanted and balked when the promotion ended.

Some of this thinking is still pure speculation, but it's reasonable speculation, and should be cause for thought. Although service providers have provided — and continue to provide — lip service for offering consumers more than just lower prices, where they don't put words into action, customers are walking.

PENETRATING THE SMARTPHONE MARKET

While the anticipated launch of new the iPhone generates all the attention, the U.S. has already built a substantial market for smartphone devices, according to M:Metrics. More than 6 million subscribers use an operating system (OS)-driven handset, so Apple faces some stiff competition when it throws its Mac OS 10 software into the market.