• by Gavin O'Malley  @mp_gavin, June 2, 2005

In an effort to forestall the proliferation of rival Internet providers, SBC Communications Wednesday said it would cut the rate of its already cut-rate broadband service by 25 percent. As the second-largest U.S. telecommunications company, SBC's decision to provide monthly broadband service for $14.95--down from $19.95--will accelerate nationwide high-speed adoption, according to industry observers.

SBC's limited-time-only offer, which requires a one-year contract, might capture market share from dial-up providers, who average between $15 and $20. The SBC service now ranks among the cheapest for broadband in the United States. AOL still charges more than $20 per month for dial-up, while cable companies like Comcast--which markets its services as faster than SBC's--charge about $40 per month.

The aggressive course was a no-brainer for Scott Helbing, senior vice president of SBC consumer marketing, who said in a statement: "[M]ost important, we grow our business because we can offer customers the values that motivate them to switch from cable Internet or upgrade from dial Internet access."

SBC sees a two- to three-year window to add as many digital subscriber lines as possible, before cable companies like Comcast and Time Warner complete their launch of telephone services and pursue SBC customers with voice, video, and data packages, said an SBC spokesman.

The company already had one of the more aggressively priced DSL services, offering a $19.95 monthly rate for customers who signed up over the Internet and agreed to a one-year contract. Verizon, by contrast, still charges about $30 per month.

While its first-quarter growth was a record, SBC's 5.6 million DSL lines are equal to about 11 percent of its total phone lines. Comcast Networks, meanwhile, comfortably leads all providers, accounting for 22 percent of broadband households in 2004, according to Jupiter Research.

Time Warner is responsible for 12 percent, and Verizon has 10 percent. Other companies with notable market shares include Cox (8 percent), Bell South (6 percent), Charter (6 percent), Adelphia (4 percent), and Cablevision (4 percent).

If the cost of broadband continues to slide, up to 69 million households--78 percent of U.S. online homes--will have high-speed access by 2010, a recent Jupiter Research reported estimated. The report, "Broadband Forecast, 2005 to 2010," found that 8.2 million new households subscribed to broadband last year, bringing to 31.9 million the total number of U.S. households with broadband--a 35 percent increase from 2003.

Joe Laszlo, Jupiter Research analyst and lead author of the report, estimated that while cable companies still hold about 59 percent of the U.S. broadband market--thanks to an early start in launching high-speed Internet services--telecoms like SBC are aggressively closing in.

"I see SBC's move today as a good sign for consumers, because the other telecoms follow their lead--the cable guys will really start feeling the pressure and possibly adjust," Laszlo said.

SBC offers DSL service to about 80 percent of the homes in its territory, and will attempt to reach 90 percent within the next 12 to 18 months, a company spokesman confirmed.

The initiative also is encouraging consumers to further rely on the Internet to interact with the company, as the cheaper SBC Yahoo! DSL Express must be ordered online.

The online offers also include a $99 instant credit toward a $149 SBC Yahoo! DSL Wireless Home Networking kit, a $179 "laptop home networking bundle," or a $99 DSL modem.

For customers who want faster Internet service, the SBC Yahoo! DSL Pro service is also available for $24.99 per month for 12 months if ordered online.

In all, 43 percent of online households in the United States connected via broadband in 2004, according to Jupiter's report.

"Early broadband growth was restrained partly by the belief that it was a luxury," stated the report. "This is changing in consumers' minds, as lower pricing, compelling benefits, and greater familiarity from friends and neighbors with broadband all shift perceptions."