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[IP] Broadband: Pick Cheap or Speedy




Delivered-To: dfarber+@xxxxxxxxxxxxxxxxxx
Date: Sat, 04 Oct 2003 17:11:23 -0700
From: Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>



Broadband: Pick Cheap or Speedy By Staci D. Kramer

Story location: <http://www.wired.com/news/business/0,1367,60699,00.html >

02:00 AM Oct. 04, 2003 PT

Millions of broadband subscribers are getting a boost in speed -- without a concurrent rate increase -- as cable operators contend with intensified DSL competition from local phone companies by increasing service instead of decreasing price.

At the same time, DSL providers like SBC Communications are banking on customers who care more about saving money than time.

As Merrill Lynch analyst Jessica Reif Cohen told clients in a research note: "DSL vs. cable is less like Pepsi vs. Coke than Honda vs. Mercedes."

A pair of recent events involving three of the largest broadband ISPs underscores the different approaches to marketing. Early this week, SBC Communications dropped the online subscription rate for SBC Yahoo DSL to $27 a month. A few days later, Comcast and Adelphia Communications , two of the largest cable operators, announced separately that they are boosting standard downstream speed for broadband customers to 3 Mbps from 1.5 Mbps. Both will continue to charge cable subscribers $43 a month for the service.

Top speed for Comcast Pro ($95 per month) goes to 4 Mbps from 3 Mbps; Comcast Home Networking ($53 per month) subscribers move to 4 Mbps from 2.5 Mbps.

SBC's cheapest DSL plan, meanwhile, promises at least 384 Kbps, more than 80 percent slower than the speed Comcast is now offering for its standard service.

Comcast isn't the first cable ISP to hit those speeds for standard subscribers, although with 4.3 million cable modem subscribers it is the largest. Cox Communications has offered 3 Mbps from the beginning.

By focusing on speed, cable is playing to its technical strengths. Comcast is spending about $40 million nationally to equip its systems to handle the higher speeds in some regions.

Comcast estimates that the majority of its customers will have the pumped-up service by the end of the year. Subscribers in 14 Comcast regions, including Detroit, Atlanta and Dallas, can get it now by unplugging their cable modem for 60 seconds and plugging it back in.

For DSL providers, technical constraints make it more difficult to be able to promise consistent delivery speeds to all customers. SBC's plan, for instance, promises 384 Kbps to 1.5 Mbps, depending on the distance to the central office, household wiring and other factors.

Limitations of the copper-wire telephone infrastructure keep SBC and other local DSL providers from reaching all of their traditional phone customers in most regions. (The St. Louis suburb of Florissant is one of only two SBC municipal service areas in which every resident can get DSL.)

SBC is increasing availability and speed by installing neighborhood broadband gateways, remote terminals that allow DSL to reach more households with a broader signal. The goal is to increase availability from 60 percent of phone customers to 80 percent by the end of 2004.

In the meantime, SBC would rather focus on delivering enough bang for few bucks, aiming much of its marketing at potential customers who think their cable bills are too high. The company has more than 3 million DSL subscribers, picking up more than 500,000 in just the past two quarters.

SBC tested an even lower rate of $25 a month in some markets earlier this year but $27 is the lowest rate the company has made available nationally. To lock in the rate, customers have to sign a 12-month contract.

SBC spokesman Joe Izbrand argues that most consumers don't need more than a few hundred Kbps.

"Does it matter to a user that doesn't really have any applications that need 3 megabytes? We don't see a reason for consumers to spend more money for that speed," he said.

At Cox, Steve Gorman, executive director of marketing for high-speed Internet, said his company didn't feel an impact from the low-price SBC trials in Cox markets. He attributes that in part to inertia, particularly in markets where Cox was entrenched long before SBC or other local phone companies ramped up their DSL efforts.

"The No. 1 reason people buy is speed and that hasn't changed," said Gorman. As for whether or not consumers need speed, he adds, "When you talk about the dynamics of price, speed and applications you can't discount the fact that consumers learn how to consume bandwidth."

But the cable operators aren't all reading from the same playbook. Charter Communications ' newest offerings include a $30 option for 384 Kbps downstream and $40 for 2 Mbps downstream. Current customers are getting a complimentary boost to 2 Mbps through March 2004 as part of a "thank you" campaign that also serves as a preview of the faster service.

Archives at: <http://Wireless.Com/Dewayne-Net>
Weblog at: <http://weblog.warpspeed.com>

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