Cable Operators

At What Price Victory?

7/15/2005 8:00 PM Eastern

Bryan Smith, vice president of broadband services at Insight Communications Co., is attacking the high-speed access price wars with a simple sales strategy.

“We’ve been working to make sure that our customer service representatives understand the strings attached to [digital subscriber line] offers,” Smith says, pointing to the restrictions on telephone companies’ bargain introductory offers. The telco deals — recently as low as $14.95 or $19.95 for the first few months — typically require yearlong commitments, and other “strings,” such as online account maintenance and requirements to buy additional services, Smith says.

Price Comparisons
A Sampling of Cable and DSL High-Speed Price Points
Note: Green type indicates a typical monthly price and connection speed (downstream/upstream). Red indicates recent promotional offers.
Source: From company information.
Comcast $42.95 4 Mbps/384 kbps for voice and Internet customers ($52.95 for 6 Mbps/768 kbps) $14.95 in San Francisco area; $24.95 for 3 months; $19.95 with music, video promotions
Time Warner Cable $39.95 (for video customers) 5 Mbps/384 kbps $24.95 for first six months
Cox $39.95 4Mbps/512 kbps $24.95 for three-month introduction
Charter $39.99 3 Mbps/256 kbps $26.99 for six months via retail store offer
Cablevision $44.95 (for video customers) 10 Mpbs/1 Mbps $29.95 promo price; $23.90 for six months with WiFi router
Insight $44.95 4 Mbps/384 kbps $30 with bundle
Verizon $29.95 annual contract 3 Mbps/768 kbps (also $44.95 for 15 Mbps) $19.95 for first 3 months on annual contract
SBC Yahoo! DSL $24.95 1.5 Mbps/384 kbps (includes two content services, such as music) $14.95 for 12 month commitment (new customers only)
BellSouth Fast Access Ultra $32.95 to $42.95 depending on voice services 1.5 Mbps/256 kbps $9.95 for first three months for new customers with commitment

As cable and telephone companies accelerate their campaigns to convert dial-up customers to high-speed connections and to entice existing broadband users to their networks, price is playing a predictable, but curious, role in the competitive battles. The latest price-war tactics are serving up choices that are as complicated as the mobile-phone sales cacophony.

In the broadband-price skirmishes, deals are laced with home-networking gear, content supplements, webcams (to promote broadband photo capabilities) and other ancillary features.

Moreover, the fundamental deals are increasingly hard to compare. For example, despite some restrictions, SBC Communications Inc. recently offered cable customers three months of free service and $14.95 per month for the rest of one year if they could “produce a cable bill to show that you’re switching to us from cable.”

Insight offers a discount of $30 per month on its high-speed package. The deal is about $15 cheaper than its $44.95 “core service,” and requires customers to buy multiple Insight video and phone products. The MSO also offers a $79.95 monthly broadband service (with a higher speed limit of 6 Mbps), although only about 1,000 customers have signed up so far.

Suzanne McFadden, vice president of marketing for Comcast High Speed Internet, says cable is “going after customers who are looking to create a broadband lifestyle.”

“We have a stronger platform and consistent speeds,” McFadden says.

The proliferation of DSL deals appears to be bringing the telcos into parity with cable broadband offers. Leichtman Research Group’s latest broadband usage analysis shows that homes that do not already subscribe to high-speed service are now leaning toward DSL. The study also found that the typical monthly DSL bill is about $36 compared to cable broadband’s typical pricetag of about $40.

As cable and telco suppliers (and lurking satellite broadband suppliers, such as the recently launched Wild Blue) step up their competitive offers, consumers will continue to face price, as well as service choices. For example, BellSouth lists its “FastAccess” DSL services at three levels: “Lite” (256 kbps downstream for $24.95 per month), “Ultra” (1.5 Mbps for $32.95) and “Xtreme” (3.0 Mbps for $44.95). Each version has correspondingly faster upstream speeds plus a $10-per-month supplement for customers who buy “naked DSL” (that is, without BellSouth voice service).

MSOs are also tiering broadband offers. For example, Cox Communications Inc. delivers a “Value” package (256 kbps for $24.95 monthly), “Preferred” tier (4 Mbps for $39.95) and “Premier” (5 Mbps for $54.95). Cox, which overlaps many BellSouth territories, has much faster speeds, including upstream levels for its higher-priced levels.

Not every price incentive has caught on. Comcast insists that its recent, short-lived $14.95 promotion in the San Francisco Bay area was not triggered by a similar price plunge from SBC Yahoo! DSL, which has been very aggressive in that net-savvy region. Observers acknowledge that creating the campaign and the marketing collateral material could not be launched fast enough to reply to SBC’s campaign.

But Comcast has other lures in its arsenal. It offered a free digital camera when it introduced videomail and its PhotoShow Deluxe photo sharing services. Comcast also featured an MP3 player to draw attention to its “premium radio” service, the “RhapsodyPlus” package from RealNetworks.

As the promotions and incentives continue to multiply, it’s clear that broadband offers based on pricing and packaging are just getting into gear.

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