Strategic pricing and the broadband battleground.
"DSL's low price beats cable's high speed,"
declares Jed Kolko, an analyst with Forrester Research in a
recent report. Kolko further notes that the three top providers
of DSL services in the U.S., SBC, Verizon, and BellSouth, have
averaged 35% in subscriber growth for 2003 as opposed to 31% for
the same period for the big five in cable, Comcast, Time Warner,
Cox, Charter, and Cablevision.
Even so, evidence is accumulating that the ILECs
may be abandoning the aggressive pricing that they used to
position DSL so effectively against cable in the past.
PRICE DEBATE
"SBC has recently raised their price almost 40%,"
notes Dave Burstein, editor and publisher of DSL Prime, an
online newsletter focusing on the DSL industry. Patrick Mahoney,
analyst, consumer technologies for the Yankee Group, sees upward
movement as well though somewhat less pronounced. "It depends on
what you're comparing, he explains. "If the customer elects to
bundle services, it can be as low as $29.95. If he doesn't, it's
$39.95."
Speeding toward DBS
The ILECs themselves take strenuous exception to
the notion that they're raising prices. "Look at the overall
trend for the last 18 months," insists Joe Izbrand, a
spokesperson for SBC. "In late 2002 the market rate was
approximately $40 per month. Now we're at $26.95 for our
standard speed."
Adds Bobbi Henson, a spokesperson for Verizon,
"The cable companies are still up around $50. They haven't
dropped their prices appreciably. That's why they're losing
ground."
So who's right? Again it's a matter of
interpretation.
"The ILECs are passing on the universal service
fees to the subscriber," observes Mahoney. "That's adding about
$3 to the (monthly) cost of the service."
Zelos Wiley, media relations manager for
BellSouth, objects sharply to that view. "That's a separate line
item. It's not part of the cost of the basic service," he says.
Maybe so, but total cost to the subscriber is
surely up, isn't it?
"It's a mistake to focus on the universal service
fee," argues Henson. "The cable operators have ancillary charges
of their own that they don't include in the basic service price
either. A lot of them charge extra if the customer has a home
network. They charge for every terminal attached to the
network."
Izbrand makes another point in this regard, one
insisted upon by all of the ILECs. "Universal service fees have
more than doubled since the year 2000. We can't afford to absorb
that cost any longer."
