Covad Cuts Prices, Launches Ads


With a $15 million ad campaign and newly discounted prices, digital subscriber line provider Covad Communications Inc. is looking to re-establish its broadband brand.

Covad emerged from Chapter 11 bankruptcy earlier this year, shedding some $1.4 billion in debt and scaling back the number of central offices it served.

Although the company's original focus was on enterprise customers, Covad has given its residential service a big advertising and marketing push, gambling that lower prices will lure in more users.

"It's obvious, I think, that e-mail and occasional Web surfing perhaps is not enough," said Covad CEO and president Charles Hoffman during a conference call. "Thus the price decrease, we think, will enable people to try broadband at the same or slightly above what they are paying for dial-up.

"As soon as they experience the speed, they will never go back," he said.

Covad is boosting connection speeds for its basic TeleSurfer Link service from 200 kilobits per second downstream to 384 kbps, and 64 kbps upstream to 128 kbps. It will sell at $21.95 for the first four months and $39.95 afterwards.

Prices for the upper-tier TeleSurfer Plus will be cut from $59.95 to $49.95 per month. That buys a customer speeds of 1.5 megabits per second downstream and 128 kbps upstream. It will also be offered at an $21.95 introductory rate.

TeleSurfer self-installation kits, which include a modem, will be offered for $99, down from $199. With rebates, that fee may also be waived entirely.

Covad's TeleSoho small-office, home-office product is also coming down in price, from $89.95 to $69.95 per month. Similarly, the TeleSoho installation kit will drop from $275 to $199, with some rebates for free installation in some areas.

To drive uptake, Covad recently launched a consumer ad campaign in Washington, D.C., and the San Francisco Bay area. A parallel promotion aimed at small-business customers began in June in Chicago and San Diego and will soon arrive in 15 more big markets.

Combined, Covad will spend $15 million on the ads through the end of this year.

Buying ads and slashing prices might seem to be risky moves for a company that just emerged from Chapter 11. But Hoffman said Covad has made major cuts in its operational expenses, so lowering service prices won't put it in a financial hole.

"While we were going through that process we dramatically cut our expenses, so we have a great cost basis," Hoffman said. "We can still make a great margin at the lower price."