BellSouth’s DSL is the highest of regional Bells, but SBC is a bargain

By Bill Wolfe
bwolfe@courier-journal.com
The Courier-Journal

Oldham County resident Mary Jennings uses BellSouth’s FastAccess DSL Ultra, an always-on Internet connection that can download Web pages, pictures and hefty files quickly. But speed and convenience come at a price: $50 a month.

Across the river, in Sellersburg, Ind., David Duggins also surfs the Web, sends e-mail and downloads with blazing speed with his digital subscriber line from SBC Communications, the regional Bell company that serves Indiana and 12 other states.

His cost? Just $27 a month — only about $5 more than he had paid for his dial-up AOL service. When DSL became available in Sellersburg about eight months ago, «we switched over immediately,» Duggins said.

While SBC offers one of the best DSL bargains in the country, BellSouth charges more for its full-speed service than any of the other three regional Bells — SBC, Qwest and Verizon.

«I’ve never been happy with the cost» under BellSouth, said Jennings, who moved to the Louisville area three years ago from Campbell County, where Cincinnati Bell sells DSL for $30 a month. (Despite the name, Cincinnati Bell is not a regional Bell.)

BellSouth has kept its prices «at an industry-leading level,» said Patrick Mahoney, an analyst with the Yankee Group. And with little pressure from competitors, «they have felt there is no need for them to reduce their pricing at this time.»

Other phone companies «are really trying to win the DSL customer at all cost,» Mahoney said, while BellSouth concentrates on average revenue per user. «I think it’s just been fundamentally a different kind of choice by BellSouth.»

SBC, which co-brands its DSL service with Yahoo!, leads the Bell pack in cost cutting. «We’re obviously doing something right,» spokeswoman Jessica Nunez said. SBC growth accounted for half of all the DSL growth in the United States in the past year, she said.

The company’s $27 DSL price is good for customers who sign up online or at retailers Radio Shack and Best Buy. It’s also available whenever customers sign up for a bundled package.

Verizon also lowered its rates sharply a little over one year ago, cutting the base rate to $35 a month from $60. The result was an explosion in DSL sales: «It’s great,» spokeswoman Bobbi Henson said. «We had a record quarter» recently with the addition of 345,000 DSL customers.

Qwest Communications, the biggest phone company in 14 states, sells DSL with MSN Internet service for $45 a month.

Michael Bowling, vice president of broadband services at BellSouth, said its prices reflect competition and customer demand, but declined to compare rates with other companies. DSL is one form of broadband, which also includes high-speed Internet by cable and wireless service.

«We are constantly evaluating what the competition has. … It’s a very fluid, dynamic market,» Bowling said.

That broadband competition comes chiefly from cable systems, which typically charge more for their service than phone companies charge for DSL. In Louisville, however, Insight Communication’s cable broadband is less — $45 a month, not including a modem.

The regional Bells do not compete with one another on high-speed Internet. Covad Communications is the only nationwide DSL alternative to the Bells. Covad also provides DSL to Internet service provider Earthlink for resale and recently contracted with Louisville-based Lightyear.

BellSouth also sells DSL wholesale to other Internet service providers, such as Louisville’s IgLou Internet Services, which sells standard-speed DSL for $40 a month, not including a modem.

It has been difficult for competitors to gain a foothold in areas dominated by the Bell companies, said Bill Weber, vice president of government and external affairs for Covad.

Covad used a technique called line sharing — leasing the DSL-carrying frequency of the phone line while leaving the Bells with the voice frequency — to build up its network of 514,400 DSL subscribers.

Weber said he thinks the varied DSL prices reflect different business approaches.

«BellSouth has always been the highest-priced DSL provider» among the regional Bells, he said. The company appears to aim for as much profit as it can generate without driving customers away to cable Internet or low-cost dial-up service.

«I think that SBC took a different model,» seeking to build up DSL subscriptions as a way of increasing the «stickiness» of the SBC brand. With customers wedded to SBC through their e-mail addresses and attractive Internet service pricing, they’re less likely to switch to competitors, Weber said.

When high-speed Internet was new, it appealed to a relatively small group, Nunez said. «At first you get all the tech-savvy people.»

But as more consumers began downloading music and sending pictures by e-mail, it made sense to reach out to a larger market that had been limited to dial-up Internet services.

«You’ve got to make it affordable in order for them to switch,» she said. Now SBC has about 1 million dial-up subscribers and 4.3 million broadband customers. BellSouth has about 1 million dial-up subscribers and about 1.7 million DSL accounts.

One BellSouth strategy has been to offer lower-priced DSL service, but only for slower «DSL Lite.»

For a base price of $35 a month, customers get a download speed of 256 kilobits per second, compared with the 1.5 megabit per second downloads possible with DSL Ultra. It would take the lower-priced service 33 seconds to download a 1 megabyte file, while the DSL Ultra could pull in the same file in 6 seconds. The same file would take 2.5 minutes on a 56k modem.

Additional discounts are available for people who bundle their phone and DSL service with other options, including unlimited long-distance service and features such as call waiting and caller ID. DSL Ultra is available for $40 a month for customers who also subscribe to BellSouth’s unlimited long-distance and Complete Choice plans.

Some other regional Bells push bundling discounts, too. With Verizon, for example, bundling DSL with phone service and a long-distance plan lowers the price from $35 to $30 a month, Henson said. Qwest also drops its price by $5 for customers who sign up for any phone plan above basic service, spokeswoman Silvia McLachlan said.

Kentucky Alltel, which provides service in parts of Western, Central and Eastern Kentucky, including Lexington, has DSL prices similar to those of BellSouth — $50 a month for full-speed broadband and $35 monthly for reduced-speed.

Cincinnati Bell sells DSL for $30 a month, when packaged with local phone service and a long-distance plan. The phone company keeps its rates down to match competition from Time Warner Cable’s Road Runner broadband, said Cincinnati Bell spokeswoman Jenifer Kues.

Internet users looking for affordable broadband in Kentucky can check with competitors selling cable and fixed wireless service — although they are not available in all areas.

Covad sells DSL in parts of Kentucky for $40 a month. Go to www.covad.com to learn if it is available in your area.

Those seeking even lower prices may find time is on their side. According to Weber, DSL prices may rise in the short term, but they are likely to fall three to five years from now as new technologies come to market.