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Verizon hikes DSL prices

Increases price of its lowest-tier DSL service 20 percent from $14.95 per month to $17.99 per month.

Verizon Communications has jacked up the price of its lowest tier of DSL service by 20 percent, the company confirmed on Tuesday.

Starting Monday, the company said, it began charging $17.99 to new customers signing up for its 768kbps DSL service. Verizon had been charging $14.95 per month for the same speed service since August. The news of the price hike was first reported on the industry Web site Broadband Reports.

The price change applies only to new customers, said Bobbi Henson, a spokeswoman for the company. People who signed up for the $14.95 offer are guaranteed that rate for a year until their contract expires.

AT&T and Verizon rattled the broadband market last year, when they each introduced broadband service for less than $15 per month. In August, Verizon created a new tier of service for $14.95 per month that included download speeds of 768kbps and an upload speed of 128kbps.

Since Verizon floated the $14.95 offer, the company has quickly grabbed new broadband subscribers. Verizon reported that the fourth quarter of 2005 had been its best ever for broadband, with 613,000 new subscribers signing on, a 14 percent quarter-over-quarter increase.

But increased demand for DSL has had its problems. In some regions of the country, Verizon has been unable to meet the demand due to a shortage in equipment needed to add capacity to the network. Henson said the decision to increase the price of the 768kbps service had nothing to do with increased demand.

"This is a business decision that prices the service more in line with its value and that continues to provide customers with the choice of a broadband connection that's priced comparably to or better than most dial-up services," she said. "We expect this plan to continue to be highly attractive, especially to dial-up users and people on a budget who want the benefits of a high-speed connection."

While analysts agree that the Verizon service was undervalued at $14.95, they are unsure how consumers will react to a price hike after Verizon has spent so much time and effort marketing the service for $14.95.

"It's always easier to reduce prices than it is to increase them," said Joe Laszlo, an analyst with Jupiter Research. "Raising prices is tricky. Verizon needs to be careful that it doesn't train consumers to think of broadband as a commodity and encourage them to constantly look for better deals."

But some analysts say the price hike will likely have little impact on Verizon's DSL business, since even the $17.99 price tag is cheaper than services offered by cable operators, which typically range in price from $40 to $60 per month.

"I don't think this will hurt Verizon too much because for most people there isn?t a lower priced alternative," said Jeff Kagan, a telecommunications industry analyst. "Verizon offers a wide variety of pricing and speeds, which is very different from the cable companies, which offer faster speeds at higher prices."