SBC’s $20 DSL Red Herring

Baby Bell phone company SBC Communications has launched a promotion that breaks a barrier of sorts. It’s offering DSL for $19.95 (£11) a month. It only comes in a bundle though. You must also subscribe for one year to SBC’s unlimited calling plan at $48 (£26) a month.

The DSL service promises download speeds of between 384kbps and 1.5mbps, and an upload speed of up to 384kbps. It also includes increased e-mail account storage, safety and security features and a parental control package.

SBC Communications, who markets DSL high-speed services in partnership with Yahoo, say the $19.95 (£11) a month plan, effective from 1st November, is available to new broadband subscribers or for customers who want to change from cable to DSL.

It’s a regular tussle between the phone companies and the cable companies. Approximately 60% of US homes with broadband access, use cable modems, but broadband penetration nationwide has not yet hit 50%. By the end of 2004 roughly 30 million of the 110 million US households will have broadband access – still only 30%.

At the end of the second quarter (2004) UBS said cable firms had 16.7 million Internet customers, while phone companies had 11.3 million DSL customers – still a considerable gap.

Looking ahead, Local Bells plan to replace ageing copper wiring in affluent urban areas with fibre-optic wiring that will also handle video, hoping obviously to stop wireless and cable service providers at the pass. Indeed, only last week SBC granted Alcatel a $1.7 billion contract to install fibre-optic lines in its network infrastructure, so that it can eventually handle video, while Motorola will supply equipment to Verizon for their video service.

But cable companies like Comcast and Time Warner Cable remain the market leaders for household broadband customers. While phone companies like SBC, Verizon Communications, BellSouth and Qwest Communications are upgrading their networks to handle higher bandwidth applications such as video.

While SBC added 402,000 DSL customers in the third quarter and Verizon added 309,000 DSL customers, cable firm Comcast signed up 549,000 broadband customers in the same period. Comcast did target college students though with a $19.95 (£11), six-month promotion, which may go some way towards explaining their third quarter success.