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The Honolulu Advertiser
Posted on: Wednesday, May 14, 2003

Verizon to lower prices for DSL service

By Sean Hao
Advertiser Staff Writer

Verizon Communications Inc. yesterday released details of significant price cuts for broadband Internet service nationwide in a bid to lure customers from cable companies that now dominate the market.

Starting May 21 new and existing Verizon digital subscriber line, or DSL, users in Hawai'i can get high-speed Internet access for a minimum of $29.95 a month when bundled with local and long-distance service and $34.95 when purchased as a stand-alone service.

Verizon's DSL service currently costs $34.95 in a package and between $49.95 and $59.95 as a stand-alone service depending on the speed of the service. Those prices exclude taxes.

The cuts follow a similar move by San Antonio, Texas-based SBC Communications Inc. in Mainland areas and are among the first signs of an anticipated price war for pricey broadband Internet services.

Such "always on" services allow for faster downloading of online content such as music and videos. However, most U.S. homes still log onto the Internet through cheaper, slower dial-up connections.

That could change as prices for broadband service drop.

"We're really excited to be able to offer DSL at this price and we hope that a lot more people give it a try," said Verizon Hawaii spokeswoman Ann Nishida.

By lowering costs, telephone companies are hoping to make up the difference by attracting more users, said Norm Bogen, a communications analyst with Instat/MDR in Scottsdale, Ariz. He said such price cuts were inevitable as cable increasingly becomes the broadband service of choice for consumers.

"It's either make up the difference to yourself, or lose customers to cable," Bogen said. Price cuts "will increase adoption rates; the question is by how much?"

Whether Verizon's move will drive cable companies to cut prices is unknown.

"I don't think it's going to happen anytime soon, but I think if they start to lose customers then they'll have to react," Bogen said.

Most home broadband Internet users connect to the Web via cable, which in Honolulu is provided by Oceanic Time Warner Cable's Road Runner Internet service at a cost of $44.95 a month. Oceanic President Nate Smith was unavailable to comment on Verizon's announced rate cuts yesterday.

Unlike cable Internet service, DSL is delivered over traditional copper phone wires. Though it can be comparable with cable in terms of speed, DSL service is limited to homes within a certain distance from a telephone switching station. In addition to that limitation, the rollout of DSL was hampered early on by significant service quality issues, though those problems have largely been overcome, Bogen said.

In addition to cutting prices Verizon announced that its DSL service will be bundled with Microsoft Corp.'s MSN 8.0 software, which provides online chat and messaging as well as parental controls and virus protection.

While lower costs will lead more people to subscribe to broadband Internet service, they aren't a panacea for the communications industry, which still is suffering from overcapacity and slower-than-anticipated adoption rates for high-speed Internet services, Bogen said.

But it could boost adoption rates for broadband, which Instat/MDR expects to rise by about 5 percent a year in the United States. About 15 percent of U.S. homes log onto the Internet via high-speed connections, according to the technology research firm.

Shares of Verizon fell 11 cents yesterday to $37.39 on the New York Stock Exchange.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.