In the wake of SBC Communications Inc.'s price cut for high-speed Internet service earlier this month, its phone and cable competitors are now rolling out promotions that include their own significantly lower rates.
Comcast Corp. is offering broadband service for $14.95 a month for three months in the Bay Area, a key SBC market, down from its normal rate of $42.95. In SBC territory in San Diego, Cox Communications Inc., has started offering high-speed service for $24.95 a month for three months -- the previous price was $39.95. And Verizon Communications Inc. has dropped its broadband prices to $19.95 a month -- $10 off what it had been -- for three months for new customers in its service area, which includes much of the Northeast.
While many of the latest deals are being targeted at specific markets, together they are available to a wide swath of Internet users.
SBC kicked off the discounting earlier this month by offering its service for $14.95 a month -- less than many slower dial-up Internet access plans -- for a year to new customers who subscribe online. This was unique because unlike the current promotions, it was a long-term cut rather than a temporary offer.
In a sign of the intensifying competition, SBC is now offering another promotion. The company on Friday will start offering to cable broadband subscribers three months of free Internet if they switch over from a rival cable provider. Cable customers who switch to SBC's Dish Network satellite service also will get three months of video plus HBO and Showtime free.
Some consumers have begun to exploit the competitive pricing situation. On Web sites like www.slickdeals.net and broadband-user message boards people with screen names such as Darth Fader have been posting detailed suggestions on how consumers who don't qualify for the new SBC rate or who subscribe to competing providers can haggle for their discounts of their own.
"Ask for the customer retention department, and ask for the new rate," Darth Fader advises on www.dslreports.com. " ... (I) got re-rated, no problem. It was pretty quick."
Companies generally won't reveal their policies on retention, but some confirm that they will negotiate in some cases to keep customers.
The U.S. Supreme Court's ruling this week that cable companies don't have to share their high-speed Internet connections with rivals prompted fears that cable broadband prices will rise in some markets that have few independent providers. But in competitive markets, the ripple effect of SBC's broadband price cut has set the stage for lower prices as phone and companies look to reel in customers and offer them other services.
Some analysts say the fact that more consumers are starting to haggle for better rates highlights what could become a dangerous trend for broadband providers if they keep cutting prices in a market that is far from saturated. More than half of the 77 million U.S. households with Internet access still use dial-up connections. Cable and phone companies that try to aggressively push bundled packages of broadband with TV and phone service could end up creating a breed of bargain-hopping discount seekers who switch providers or downgrade to cheaper services.
"You don't want to create cannibalization where people who are paying a higher price want to switch down," says Bruce Leichtman, president of Leichtman Research Group, Inc.
For now, companies will need to deal with the likes of Anthony Pettavino, a Chicago area Comcast customer who heard about SBC's $14.95 a month deal on an Internet forum where consumers were discussing how to use the offer to haggle for discounts.
He called Comcast's customer-service department, explained he was thinking of switching to SBC and got a deal: he says the rep offered him $19.99 a month for six months of broadband. He had been paying $42.99 a month.
"This was more than sufficient to quell my urge to switch providers, which I'm not sure I would have done anyway," says Mr. Pettavino. Comcast declined to comment on Mr. Pettavino's case, but spokeswoman D'Arcy Rudnay said, "We place an enormous amount of value on solving our customers' problems."
The promotions come as competition is heating up between phone and cable companies as they enter each other's core businesses. Cable companies are rolling out Internet-based telephone services, undercutting the Bells' traditional phone business even as phone companies are preparing their own TV service.
When it comes to broadband, cable has a competitive advantage not only because its modems are generally faster but because it entered the market earlier than phone companies and thus has more subscribers.
Currently, there are more than 21.1 million cable-broadband subscribers, compared with roughly 15 million people who get high-speed Internet service through their phone company, or what is known as DSL service.
So far, there is no indication that Comcast or Cox plan to roll out their offers to broader swathes of the country.
As for SBC, its latest offer is aimed at stealing cable broadband customers, who as a rule pay more (because of the faster surfing speeds). DSL is basically a souped-up phone line, whereas cable broadband is transmitted over the cable TV network, which can carry more content at higher speeds.
The company also has decided to expand its monthly $14.95 rate to qualifying customers who order it over the telephone as part of a bundle; previously the deal was available only online.
Other phone and cable companies say they haven't seen any effect on their own subscriber numbers from SBC's move.
The Art Of Haggling
A couple of sites where people trade detailed tips about how to get better rates for high-speed Internet service:
www.slickdeals.net, which lists discounts on tech products
www.broadbandreports.com, which rates Internet services