Broadband Market Is About to Heat Up

As phone companies scuffle with cable providers to push high-speed Internet service, former dial-up customers like Bill Rowe are getting online faster and for less. The corporate buyer from Manchester, N.H., has his pick of three providers of so-called broadband access -- at a price that is half what it was five years ago.

"If you are going to be online at all, it really doesn't make any sense to do dial-up at these prices," said Rowe, comparing his monthly $29.95 bill for digital subscriber lines, or DSL, service with the $23.90 America Online charges for dial-up Internet access.

After years of trailing the cable industry in offering broadband, regional telephone companies led by Verizon Communications Inc. and SBC Communications Inc. are gearing up for a summer showdown with cable giants like Time Warner Inc., Comcast Corp. and Cox Communications Inc. The regional phone companies are aggressively pitching their DSL services by boosting speeds, adding services and dropping prices.

"All this new stuff is going to be coming over the summer, and consumers are going to be the beneficiaries," said Judy Bersus, senior vice president of marketing for Verizon, which plans to double the fastest Internet access speeds available to its residential customers.

"When you think about broadband migration, it's going to be a long battle. But I want to be winning more [of the market] than cable every single day."

The regional phone companies seem to be off to a strong start.

In the first quarter, they added slightly more than 1 million broadband lines, outpacing cable companies for the first time. In California, DSL lines outnumber cable. Nationwide, though, DSL and the phone companies offering it are a distant second, accounting for just more than one-third of the 30 million broadband lines.

High-speed Internet access remains a relatively small piece of revenue for phone and cable companies. But it's growing while traditional cable and local phone services are flattening out -- and even shrinking.

Broadband "is not providing great revenues for companies now, but it is a good way to hold on to customers and upgrade them to other applications that could become huge new revenue sources," said Patrick Mahoney, an analyst at Yankee Group.