DSL, cable broadband prices diverge

Amid a confusing flurry of promotional deals that are often regionally targeted, cable companies and telephone companies are definitely diverging on price and speed when it comes to high-speed Internet access.

A quick review of announced pricing by the four largest telephone companies and four largest cable companies shows that DSL services from the telcos are significantly cheaper than cable modem services but that cable offerings are based on more bandwidth.

Both groups are offering discounts based on purchase of other services, although here again, the telephone company offerings tend to be cheaper. The one anomaly is Cox Communications, which not only offers a very telco-like symmetric 256 kb/s service at only $24.95 per month but also features a 4 Mb/s by 512 kb/s Cox Preferred service as part of a bundle for $39.95 per month.

Michael Bowling, vice president of broadband services at BellSouth, said his company is not aiming to compete solely on price but does offer a low-cost DSL Lite service as part of a bundle at $24.95 because “we want to give customers flexibility to pick the service that meets their needs.”

The next challenge, he adds, is to be able to develop customized features that go beyond price and speed in attracting and keeping customers.

Thus far, the telephone companies are relying heavily on service bundles that package voice, high-speed data and satellite entertainment services at highly competitive prices to stave off their cable competitors.

That's a strategy that isn't long-term, said David Willis, vice president and research lead for META Group's Infrastructure Strategies advisory service.

“There's a large group of consumers who will really like that offer [the telcos' current bundle] because it's cheaper,” said Willis. “However, looking out two years, partnerships with the satellite companies are going to fall apart, particularly with SBC and Verizon. Those two are actively skimming off the top the highest dollar customers and putting them directly on fiber. They also want to get into the content game. That is going to set off a three-way melee between telcos offering television services, satellite companies offering television services and cable companies offering television services.”

Willis believes the cable companies are in a better position to offer a more exciting service bundle, even if it is more expensive, because companies such as Comcast are adding extra video services now, in addition to getting into voice.

DSL VERSUS CABLE PRICING