DSL Price War Helps Close Broadband Gap

NEW YORK (AP) _ Last year was the first in which telephone companies added more broadband Internet subscribers than their cable TV rivals did, according to a research report. <br/><br/>The largest DSL

Monday, March 6th 2006, 12:03 pm

By: News On 6

NEW YORK (AP) _ Last year was the first in which telephone companies added more broadband Internet subscribers than their cable TV rivals did, according to a research report.

The largest DSL providers, which have been engaged in a price war that has slashed promotional prices as low as $13 a month, added 5.2 million subscribers in 2005, according to Leichtman Research Group's analysis of company statements.

The major cable companies gained 4.4 million high-speed Internet subscribers last year, for a total of 24.3 million. That means cable retained a narrowing lead in total subscribers over the phone-line based DSL technology, or digital subscriber line, which had 18.5 million customers.

The numbers reflect the 20 largest broadband companies in the United States, with 42.8 million total subscribers and about 94 percent of the market. Bruce Leichtman, principal analyst at Leichtman Research, estimates that around 35 million people are still using dial-up access.

The number of new cable broadband customers has been fairly stable each year since 2002, while DSL growth has been accelerating. Meanwhile, the overall phone vs. cable fight is becoming even more contested as phone companies begin rolling out subscription TV services in some locations.

Prices for low-end and introductory DSL services were cut in half last year, as SBC Communications, now AT&T Inc., introduced a one-year plan for $15 a month which was matched by Verizon Communications Inc.

The phone companies hit the ``grand slam'' with those price plans in the second half of the year, Leichtman said.

``The question is, do you want to keep doing that?'' Leichtman asked. Competing on price can be a dangerous game, he noted.

The price war has continued this year. Last month, AT&T introduced a yearlong DSL contract for $13 a month. When the contract runs out, the price jumps to $30 a month.

Cable companies typically charge $35 a month and up for broadband, while generally offering higher download speeds than DSL providers.

The largest cable broadband providers in 2005 were Comcast Corp., with 8.5 million and Time Warner Cable with 4.8 million.

Among the telephone companies, the leader was AT&T with 6.9 million broadband subscribers. Verizon had 5.1 million, which includes an undisclosed but relatively small number of fiber-optic connections in addition to DSL.