Verizon, AT&T Broadband, BellSouth join move to increase high-speed Internet charges

Thursday, May 3rd 2001, 12:00 am
By: News On 6

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.