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Verizon to hike DSL price for month-to-month

The nation's largest phone company will increase no-strings DSL subscriptions by $3 to push customers toward one-year contracts.

Verizon Communications on Friday confirmed it will raise the price of its DSL subscriptions for month-to-month users by $3 to drive customers toward cheaper one-year contracts.

Beginning March 22, the nation's largest phone company said it will increase prices for its non-binding subscribers from $34.95 a month to $37.95. Verizon said the bump is meant to persuade monthly customers to commit to its one-year plan, which costs $29.95 but penalizes subscribers for canceling prematurely.

Verizon gives the monthly customers the $29.95 rate only if they subscribe to the company's unlimited local and long-distance phone plan--$44.95 to $59.95 per month, depending on the state--or the unlimited local package, ranging from $21.95 to $32.95.

"There are pressures on margins from Wall Street that they continually face," said Patrick Mahoney, an analyst at market research firm The Yankee Group. "As broadband growth steadies, they need to show continually increased revenues."

The increase comes soon after Verizon raised DSL by up to 11 percent in some regions, citing a "tax recovery fee." The increases would only be in effect until the Internet Tax Nondiscrimination Act goes into effect this November.

Like its other Baby Bell cousins--SBC Communications, Qwest Communications International and BellSouth--Verizon has been offering low-priced broadband to catch up to cable's dominance in the business. Many of these deals are priced under $30 for more than 1mbps of speed. In contrast, cable modem service costs $45 to $50 a month for much faster speeds of 3mbps to 4mbps.

Verizon hopes the price increases will give people more incentive to stay with the service rather than defect to its cable competitors.

"We want to reward customer loyalty," said Bobbi Henson, a company spokeswoman. "It costs us more to have people on that kind of plan because they are not as loyal."

Costs may also come under consideration as the company opens its wallet to develop speedier fiber-optic connections into peoples' homes. The service, called Fios, will offer a whopping 15mbps of download speed and 2mbps upload for $49.95 a month. Eventually, Fios will sell cable TV-like service to its customers as well in an attempt to break cable's hold on the video market.

Verizon reported 3.6 million DSL lines in service at the end of 2004.