Road Runner takes cue from DSL
Time Warner Cable is quietly trying to lure back former customers by matching monthly fees for its high-speed Internet service with prices from cheaper competitors.
The nation's second-largest cable company last month launched a program in Kansas City, Mo., to offer its Road Runner cable Internet service for the same price as DSL (digital subscriber line) competitor SBC Communications. Residents in the region can get Road Runner service for $26.95 a month for one year, a far cry from its standard price of $44.95 a month.
The price match is a promotion to win back former Road Runner customers who defected to SBC's cheaper broadband rates, Time Warner Cable spokesman Mark Harrad said. The promotion is specific to that region and does not reflect an overall cut in its prices, he said.
"As a general practice, Time Warner Cable divisions are not in a price war with DSL," Harrad said.
Industry Web site Broadbandreports.com first reported the promotion last week.
The Kansas City deal highlights the heightened competition between cable and DSL to lure the growing number of U.S. households upgrading to broadband. In the past year, broadband adoption has skyrocketed, largely from an overall migration away from slower dial-up services. Cable providers command about two-thirds of the market, but DSL providers--namely the Baby Bells--have made an aggressive push by cutting prices and offering cheap introductory offers.
SBC has been especially aggressive by offering DSL access for $26.95 for the first year of service. Price promotions such as this helped the company raise its DSL subscriber base 13 percent last quarter, to 3.1 million customers at the end of September.
Other Bells such as Verizon Communications, BellSouth and Qwest Communications International, have started offering similar promotions in an effort to catch up with cable. DSL price cuts have helped the Bells add customers at a faster rate than cable during the second and third quarters of 2003. Data from 2004 will not be made public until the companies finish reporting fourth-quarter results next month.
Time Warner Cable showed strong growth last quarter, reporting 3 million new Road Runner customers, an increase of 23 percent. However, that growth paled in comparison with the 69 percent it gained in the same period between 2001 and 2002.
During a call with Wall Street analysts last October, Time Warner executives hinted that Time Warner Cable might fiddle with pricing as a way to combat DSL. Don Logan, chairman of Time Warner's media and information division, said promotions could help stem the subscriber slowdown and act as "another arrow in our quiver."
Cable companies have touted other advantages over DSL, including faster download speeds and more bundled services such as video programming. Cable companies like Comcast are experimenting with discounts but have resisted overall cuts in their base price.
But analysts say it's too early to tell whether regional experiments will lead to widespread price cuts.
"A lot of those (promotions) are very regional," said Jim Penhune, an analyst at Strategy Analytics. "I still think cable operators are very reluctant to launch a global price-cutting program."