Report: Cable Under DSL Pressure

SILVER SPRING, Md. -- For years, cable companies boasted the fastest residential broadband speeds, allowing them to resist lowering their prices to match the monthly subscription charges of telephone companies' digital subscriber lines, or DSL. But that pricing stability may be changing, according to a new analysis by market research house Pike & Fischer.

For an expanding number of homes, AT&T and Qwest can better match cable offerings with downstream speeds up to 7 megabits per second (Mbps). And with the launch of its fiber-based FiOS service, Verizon now can exceed cable modem speeds at competitive prices in a growing number of markets. This represents a significant shift in competitive dynamics, P&F concludes in its annual review of high-speed Internet marketing and pricing.

For customers signing a contract, FiOS delivers speeds of 5 to 10 Mbps downstream and 2 Mbps upstream for $40, and 15 to 20 Mbps downstream and 2 to 5 Mbps upstream for $50. Verizon has also begun offering FiOS "triple-play" service bundles priced below $100. This is forcing cable operators in FiOS markets to sharply increase data rates without increasing prices.

Cable companies are also offering discounts for multi-service bundles, as well as short-term promotional prices as low as $20 per month. In response to the latter, Qwest and Verizon have introduced "price for life" offers intended to highlight the short-term nature of cable promotions. These tactics are likely to increase, according to Mitch Shapiro, author of the report and contributing analyst to Pike & Fischer's Broadband Advisory Services.

"As broadband growth comes to rely increasingly on penetrating price-conscious market segments -- and especially if the nation enters a serious and prolonged housing slowdown and/or a recession -- the market could begin to see more significant downward pressure on prices," Shapiro says.

Pike & Fischer