Broadband giants launch price, ad war

The recent rash of television advertisements, direct mail flyers and low-cost promotions for high-speed Internet access can mean only one thing: The broadband battle is heating up.

4 min read
The recent rash of television advertisements, direct mail flyers and low-cost promotions for high-speed Internet access can mean only one thing: The broadband battle is heating up.

The mounting marketing warfare reflects the recent growth within the lucrative high-speed, or "broadband," industry. Digital subscriber line (DSL) providers made up largely of phone companies are gaining momentum, and cable-based Excite@Home, the largest high-speed Net provider, has topped 1 million customers.

Like the long-distance calling wars during the past decade, the fight for broadband customers has escalated with dozens of special offers, one-time deals and big budget ads. This budding broadband industry has finally reached the public consciousness and the realization that high-speed connections will eventually become the preferred means of accessing the Internet.

"The value of the customer is so great that (service providers are) going to do a lot of advertising and a lot of price competition," said Paul Talmey, president of Talmey-Drake Research & Strategy, a Colorado-based marketing and public opinion research firm.

As part of SBC Communications' national push to launch DSL services, a telephone system-based high-speed Net access technology, the company is offering its customers discounted service at $39.95 and will waive equipment and installation costs through April 30.

At the same time, SBC unit and local phone giant Pacific Bell is airing a series of television and radio advertisements aimed at attracting new users. One particular TV spot, which portrays fictional neighbors chastising one another as "Web hogs," seeks to compare the dedicated speeds of DSL with cable-modem-system speeds. Cable-modem-system speeds can fluctuate depending on the number of users surfing the Web simultaneously.

SBC is not alone in its efforts to gain customers quickly before the nascent high-speed, or "broadband," Internet market takes off.

BellSouth, another regional phone company, is running a DSL promotion through April 16 that includes free activation, a free modem if customers install the service themselves, and $50 redeemable at Internet bookseller Barnesandnoble.com.

Excite@Home, which primarily offers service using alternative cable-modem technology, since mid-February has run a nationwide promotion with cable partner AT&T to entice potential new customers. The discounted cable-modem service costs just $19.95 per month, about half off, for the first three months with free installation and includes a $50 gift certificate with online grocer Webvan.

Although the offer, touted as a "No risk deal", expires today, AT&T@Home already has introduced a handful of other offers, including a successful push to wrest customers from online leader America Online by subsidizing the cost of the AOL service.

Local phone company US West also offers a DSL promotion that expires today. The company's "Internet sale" calls for free installation, a $69 value, for customers who signed up by March 31. US West's price for a DSL connection and Internet access is $37.90 per month.

Although cable-modem services have cost roughly $40 per month since their introduction, DSL services, at the time primarily targeted at businesses, remained comparatively costly. As recently as July of last year, for example, GTE's consumer DSL service cost $60 per month while many business DSL services cost upward of $150 per month, depending on the download speed. DSL prices have continued to fall consistently, however, over the past 12 months.

Separately, Covad Communications and Rhythms NetConnections, two smaller competitive DSL providers, also recently launched TV ad campaigns.

CNET TV: Broadband battle
CNET TV: Broadband battle
Talmey said broadband service providers are in a "hyper competitive" race to gain customers before they try another high-speed service, because attracting new customers is easier than getting existing users to switch services.

Analysts say that because of the distinct competitive forces in any given market, many promotions and advertisements will be targeted locally.

"What's going to happen is a lot of these fights are going to be local marketing fights," Talmey said.

Company executives have long said the best selling point for their high-speed connections is to allow potential customers to try the service.

Excite@Home has had some success by setting up demonstrations of its service on a specified day in shopping malls around the country. Many other broadband providers have established partnerships with retailers such as CompUSA, Circuit City and The Good Guys to set up in-store demonstration kiosks.

"If we can High speed pipe dreams?get people to sample it, whether it's on a kiosk or at a friend's, once they play with it and see how fast it is and see our content, we think they'll want it," said Andrew Johnson, a spokesman for AT&T Broadband & Internet Services, Ma Bell's cable unit.

Johnson said AT&T plans its marketing and advertising budgets a year in advance, and that others' promotions don't directly affect Ma Bell's strategy.

But most analysts agree that competition in general will continue to lead to lower costs and more intense marketing and promotional efforts.

"My DSL isn't any different from your DSL. And my cable modems aren't any different from your cable modems. So, from a marketing perspective, it means you end up in price wars," Talmey said.

"This is what everyone wanted to see with the '96 Telecommunications Act," Johnson said. "They wanted to see competition along all lines of business--whether it was video, data or local phone."