Phone Companies Hike DSL Charges
By BRUCE MEYERSON, AP Business Writer
NEW YORK (AP) - Verizon and BellSouth are boosting the fees they charge
for high-speed Internet access, joining AT&T in a sudden barrage of
broadband price hikes made possible by the financial woes crushing their
dot-com rivals.
Verizon, the nation's largest telephone company, has quietly boosted the
monthly fee for most new subscribers to high-speed DSL from $39.95 per
month to $49.95, while BellSouth is expected to boost DSL prices as early
as Thursday, according to a person familiar with that phone company's
plans.
On Tuesday, AT&T announced that it is raising the monthly fee for
high-speed Web access via cable TV
from $40 to $46 starting in June
A DSL price increase may also be in the works at Qwest Communications, the
local phone monopoly for
most of the Northwest and Rocky Mountain region, based on comments
Wednesday by that company's top
executive.
But not all major cable and telephone subscribers will be paying higher
broadband rates, which generally run
between $40 and $50 per month. AOL Time Warner, the No. 2 provider of
high-speed access via cable TV,
said Thursday it has no plans to raise its $39.95 fee.
Verizon's current DSL subscribers will continue to pay $39.95 a month.
The price hikes, designed to offset the huge costs of upgrading cable and
phone networks for these
``broadband'' Web connections, seem likely to smother any lingering hopes
that competition would soon
push down prices like they have with other services such as wireless and
long-distance calling.
That theory began to unravel in February with a $10 increase to $49.95
increase by SBC Communications,
the nation's biggest provider of DSL, or digital subscriber line, with
about 950,000 customers. AT&T
Broadband is the top U.S. provider of high-speed Internet access with
about 1.3 million subscribers for its
cable-based service, followed by AOL with 1.2 million.
Until recently, prices were held down by heavy competition from numerous
dot-com rivals. But with Wall
Street turning off the spigot of easy funding for unproven ventures, many
of these companies have been
wiped out or pushed to the brink of ruin.
With the playing field suddenly cleared of these pesky rivals, the major
telephone and cable monopolies find
themselves free to set prices as they see fit in a bid to recoup their
investments.
Despite the obvious disappointment for consumers, some industry observers
would argue that the financial
carnage at DSL carriers like now defunct NorthPoint Communications shows
that their aggressive pricing
was an unrealistic strategy for building a profitable business.
Then again, it's not certain that prices can be pushed much higher before
consumers balk.
``Consumers have been trained to expect broadband service at about a $50
or less price point per month. For
the industry and these consumers, there may be no going back,'' said
Roland Van der Meer, a partner at
ComVentures, a venture capital firm that invests exclusively in the
communications industry.
But, ``with new Web applications appearing daily which demand more and
more bandwidth, I highly doubt
that consumers are willing to give up that speed and go back'' to dial-up
Web service, he said.
Van der Meer noted a recent report by the research firm RHK predicting
that high-speed subscribers would
reach 18.6 million by 2004, three times the number at the end of last
year.
``Consumer demand for high-speed access is strong. But, to hit these
projections based on consumer price
sensitivity, we are going to need new services that are profitable at the
$40 and $50 per month pricing
levels.''
BellSouth, which had 303,000 DSL customers at last count, charges $40 a
month for DSL to customers
who also buy a special package of telephone services like call-waiting and
caller ID. Others pay $49.95 per
month. Details of the planned increase in those rates weren't immediately
available.
Qwest, which had 310,000 subscribers at the end of March, currently
charges between $39.95 and $42 per
month for its DSL service.
``We're priced very competitively, and I would argue whether too
competitively,'' said Joseph Nacchio, chief
executive of Qwest, at a shareholder meeting on Wednesday.
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