• The Wall Street Journal , Tuesday, September 2, 2008 12:01 PM

Faced with stiffer competition for broadband subscribers, the likes of Verizon and AT&T are forced to pursue new deals to expand their customer base. Verizon, for example, is now offering customers six months of free DSL service for those who sign up for the company's phone and Internet package -- a savings of $20 per month. AT&T, meanwhile, has taken a different route, guaranteeing current prices, which range from $20 to $55 per month, for two years. For now, the most generous offers are coming from DSL providers, but The Wall Street Journal thinks the cable companies will soon become more aggressive with their customer retention promos, too.

So why the price cuts? For the last 10 years or so, broadband Internet service providers have been adding customers at a healthy pace, so there was no need for discounts. Now that the market is maturing (60% of U.S. households have a high-speed Web connection), the price wars are heating up, with savvy consumers shopping around for the best deals.

Phone companies have been first to respond because cable companies picked up 75% of new customers during the second quarter. This was the first time the tide turned dramatically in the cable providers' favor. Analysts claim that the rise in video consumption, has led consumers to pursue faster Web speeds, which is a benefit of cable broadband service. In the past few months, the cable companies have also been aggressively marketing their speed advantage over DSL.

Read the whole story at The Wall Street Journal »