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Study: Price gives DSL an edge in broadband

Price is key for U.S. surfers considering moving from dial-up to broadband service, according to a new survey, which could help phone companies win out over cable rivals.

As more U.S. households unplug their dial-up Internet service for a speedier broadband connection, their choice of provider remains a question of price, according a new study.

Seventy-one percent of people surveyed for the Yankee Group report, released on Tuesday, said they would switch to a faster broadband service, if it were priced comparably to their dial-up service--usually between $10 and $25 a month. In contrast, only 17 percent said they would upgrade to a $45 broadband service.

Cable modem service typically costs about $45 a month, while digital subscriber line (DSL) service ranges between $30 and $40 a month.

This insight could have implications in the ongoing market battle between cable and phone companies, the largest broadband providers in the country. About 64 percent of U.S. broadband households use a cable modem, and the remaining 36 percent use DSL from their Baby Bell phone company, according to Leichtman Research Group. But the Bells last year introduced significant price discounts that have helped them gain new DSL subscribers at an unprecedented rate.

"Based on these responses, it appears DSL providers are hitting the vital price point," Yankee Group analyst Patrick Mahoney said in a statement.

For more than a year, the Bells have ramped up their DSL efforts, hoping to halt cable's dominance in the broadband market. They face extra pressure from the service bundles offered by cable companies, which package phone and video with their Internet connections. The phone companies, ever fearful of losing more voice customers, have instead tried introducing their own bundles to thwart their cable rivals.

Earlier this month, phone giant SBC Communications launched a package that includes TV service from EchoStar's Dish Network, DSL access, local and long-distance phone service, and a Cingular Wireless plan for $125 a month. Executives heralded the launch as a competitive step against cable plans that bundle voice and data.

The Yankee Group study also found that service discounts through bundles also appealed to many first-time broadband customers. Thirty-one percent of broadband homes surveyed had upgraded to broadband as part of a bundled package, according to the study.