Broadband packages that bundle high-speed Internet access with subscription TV and telephone services are becoming de riguer, but consumers need to double-check the math to make sure a discount on one product translates into a deal overall.

SBC Communications last week sliced its basic DSL package to $19.95 a monthabout half the price of most comparable cable broadband offers, and even slightly less than some slower dial-up services, such as America Online.



Careful. Even though that deal leads with one of the lowest DSL prices in the land, the total comes in at more than $70 a month and could wind up costing you more than you otherwise might pay for broadband and phone service. That’s because subscribers must also purchase SBC’s complete local and long distance phone plan, which costs $48.95 for unlimited local and long distance calling, voicemail, call waiting and other perks.



«You’re not getting a big discount until you start piling all the (services) in,» said Mark Cooper, director of research for the Consumer Federation of America.



In a telecommunications-heavy world, pricing trends highlight a new fact of life, consumer watchdogs warn: To save some money, you may have to spend a great deal more.



Families can now easily shell out more than $100 a month for local and long distance phone plans, subscription TV, pay-per-view, Internet and cellular phone service. New demands in the form of Internet mediamusic downloads, interactive games, satellite radio and video-on-demand servicespromise to push costs, and bundling opportunities, to even greater heights.



The packaging of TV, telephone and broadband services in a single bill highlights growing competition between the Baby Bell phone companies and cable conglomerates. Bundling makes sense for both sides because customers who buy more services are more likely to stick with them in the long haul. And by offering other services such as local and long distance phone calling, cellular plans and cable or satellite TV, consumers can pick the services they need at varying discounts.



But with all of these pricing plans and packages, are consumers getting real savings off their monthly phone or cable bill? It often depends on how much people buy.



Spending money to save money

Indeed, savings increase with more services, but so does the monthly bill.



Take Verizon Communications. The nation’s largest phone company currently offers DSL with a download speed of up to 1.5mbps for as low as $29.95 a month for a one-year commitment and an extra voice line. People who buy a $54.95 unlimited local and long distance voice plan get up to 3mbps DSL for the same price and a discount on satellite service from DirecTV for about $37.



Verizon said it will soon introduce «naked DSL,» which lets people buy only broadband without forcing them to buy a voice line.



SBC, the nation’s second-largest phone company, has aggressively priced its 1.5mbps DSL as low as $26.95, with a basic local phone line costing $10.69 a month. The company is pushing to sell bigger packages, called «Total Connections,» that include local and long distance voice calls, a Cingular Wireless plan and DSL, for between $78 and $90 depending on the state of residence. Add satellite TV from the Dish Network, and the bill costs between $108 and $120.



«It’s important for us to move quickly so we can bring DSL to market to leapfrog cable and to do so at a reasonable cost,» said SBC spokesman Wes Warnock.



Basic, barebones cable TV costs around $15 for Comcast, and up to $40 for more channels such as CNN and Lifetime with Cox. Digital cable, which offers more channels and, in some networks, video-on-demand, runs up to $60 a month in some systems, and even higher when adding premium channels such as HBO, Cinemax and Starz.



Remarkably, few cable systems are budging on their broadband Internet rates despite price competition from DSL. Most cable systems offer up to 3mbps download speeds for $40 to $45 a month, and about $55 for broadband without video. That amounts to more than $60 a month for barebones cable and broadband and more than $100 for digital.



Some cable systems offer phone service as well, for between $30 and $50 a month. That means up to $150 a month for the bundle.



From these estimates, it appears consumers can get more bang for their buck by choosing the Bells, which are trying to encroach on cable’s long dominance in the broadband access market.



«Any time you can get more choice in market, it’s at least in concept good for consumers,» said Rob Sanderson, an equity analyst at American Technology Research. «Any time you can pick and chose your options, there has to be some utility for consumers in having the flexibility to choose.»



Money in the bank

That’s not to say the Bells are winning the war. Despite higher overall costs, cable companies continue to gain hundreds of thousands of new broadband subscribers every quarter. Most of these gains come from existing video customers adding broadband to their monthly bills.



Comcast, the nation’s largest cable provider, added a record 549,100 new broadband customers during the quarter ending Sept. 30. That’s up from 472,700 the year before and 327,000 from the previous quarter for a total of more than 6.5 million subscribers. Time Warner Cable added 168,000 last quarter to 3.7 million, while Cox Communications added 184,446, or 32 percent, to reach 2.4 million.



Not to be overshadowed, the Bells have gained DSL subscribers at a steady rate. Most of these gains can be attributed to attractive pricing plans.



SBC, the largest DSL provider, added 402,000 subscribers last quarter for a total of 4.7 million subscribers. Verizon added 309,000 to 3.3 million, BellSouth added 134,000 to 1.9 million, and Qwest Communications gained 102,000 lines to 956,000.



These results may indicate that lower prices and more affordable bundles are helping both sides prevent customer defections, or churn. The Bells are offering incentives for new broadband subscribers from choosing cable, while cable companies are able to keep their customers despite pricing competition.



Why are cable customers choosing a more expensive service rather than switch to better savings? The answer is simpleconvenience.

«The selection of who (consumers) choose to provide multiple services seems to be based more on convenience than on price,» said Mike Paxton, an analyst at In-Stat/MDR. «Convenience nudges it out a little.»

The road to similarity
Cable and the Bells are on a path to become mirror images of each other. SBC, BellSouth and Qwest are planning to invest billions to upgrade their existing copper wires to one day offer Internet-based video streams into the home.

Last month, SBC awarded a $1.7 billion contract to Alcatel for the telecom equipment maker to upgrade its network infrastructure to fiber optic lines to handle more data traffic to serve video. SBC is in trials with Microsoft to use the software giant’s digital encoding technology for video as well. Once the service is up and running, SBC will add video to its price packages.

Verizon is planning to offer a video service on its fiber optic lines as early as next year. The company’s «Fios» service will pipe 5mbps to 15mbps of data bandwidth into homes and package a video service similar to cable.

The Bells’ ambitions are getting cable companies antsy. Cable executives have publicly discussed their need to offer wireless phone service to their customers to remain competitive. Time Warner CEO Richard Parsons last week told investors that the company would explore partnerships and consider acquisitions to get into the business.

Cable giants are on common ground over expanding into cellular. There is already discussion among Comcast, Time Warner Cable, Cox Communications, Charter Communications and Advance/Newhouse Communications to consider how to approach the business, according to one industry source close to the discussions.

In the long run, the war of the bundles may turn out to resemble the 2004 presidential election: strengthen the base and pick away the undecided consumers.

«If (consumers) perceive they got a deal from Verizon, then they won’t look any place else,» said Verizon spokesman Jim Smith.

Telstra has released details on its trial to extend the limitations of current ADSL technology.

As previously reported on Whirlpool, applicants that applied to Telstra for ADSL but were unsuccessful may be invited to take part. The trial will end on January 31st, and is open by invitation only.

Participants in the trial will be able to get ADSL even if they have signal loss of up to 80 decibels (dB). Previously, Telstra had set the cut-off mark at 56dB.

Pat O’Beirne from Telstra doesn’t want to get hopes up. „These are very early days and the results of the trial will be critical to any future decision."

«The trial will involve extensive line testing and customer feedback to gather information about the performance of the ADSL and voice service under trial conditions.»

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.