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Looming Broadband Price War Could Bring Entertainment Home

30 May, 2003 By: Holly J. Wagner


Cable and satellite operators are bracing for a potential broadband price war that could shift the balance of home broadband penetration.

Verizon launched price cuts early in May, offering broadband service as a stand-alone or bundled with its other phone-related services. The cuts shaved between $5 and $25 off the monthly cost of broadband, depending on whether the consumer buys it alone or with other services.

Prices dropped from $49.95 a month to as low as $29.95 per month for those who buy digital subscriber line (DSL) service from Verizon in packages with local, long-distance and/or wireless phone services. Rival SBC Communications has hinted that it will roll out $25-a-month DSL service with partner Yahoo! soon.

The lower price puts pressure on cable and satellite competitors to bring their prices down from the $40 to $50 per month they charge.

Cable companies have come under fire from consumer watchdog groups in recent months. Consumers Union leveled sharp criticism after seeing a Federal Communications Commission (FCC) report about cable industry growth.

The stronghold for cable broadband providers has been data speeds, which are often much faster than DSL data speeds.

Analyst firm comScore Networks found in February that broadband service from cable providers moves almost twice as fast as service from phone companies.

Competition will only intensify further with developments in broadband over powerline (BPL) technology. BPL lets utility companies offer broadband service over the same lines that bring electrical current to homes. The FCC opened a public comment period April 23 seeking input on ways to accelerate BPL development. Analysts predict companies will soon be able to offer BPL service for an average of $20 a month less than telephone and cable companies because the infrastructure they need to deliver their services is already in place.

The boon for entertainment media could come in increased household penetration for broadband services, since most people still have broadband access only at work.

Content providers have long bemoaned the need for ubiquitous broadband service to create economies of scale for Internet services. To date, far more people access the Internet with broadband connections at work than at home; and comScore reported growth in dial-up subscribers is increasing almost 10 times faster than broadband subscribers.

“Broadband has been slower to rise, due to limitations in geographic availability and higher cost,” said comScore Media Metrix analyst Bruce Ryon.

Another wild card, according to the Pew Internet & American Life Project, is that a large percentage of people still don't see the value of broadband vs. dial-up access.

“Fewer experienced dial-up Internet users -- the prime candidates to upgrade to high-speed connections -- now say they want broadband than a year ago” according to a Pew report. “Dial-up users who are most likely to say they would like to get broadband at home are the ones who say it is not available in their neighborhood.”

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