For the first time, U.S. local telephone companies have sold more high-speed Internet connections than cable providers have, a milestone that could intensify competition and lower prices.
After taking a leisurely approach to high-speed Internet access for years, phone companies now see broadband as essential to their survival, committing billions of dollars to extend their networks, market their services and offer extras such as free wireless home-networking gear.
The four Baby Bells -- SBC Communications Inc., Verizon Communications Inc., BellSouth Corp. and Qwest Communications International Inc. -- added 1.05 million digital subscriber lines during the first quarter of 2004. Some cable companies have yet to report results, but analysts with Goldman, Sachs & Co. and Deutsche Bank estimate that new DSL lines just barely outsold new high-speed cable connections in the quarter.
There's some desperation behind the phone companies' drive for broadband. Revenue from traditional phone service has been declining for years as prices fall and customers switch to wireless phones and other providers. The Baby Bells have tried to compete by bundling services but face numerous competitors. And with the rise of phone service over the Internet, customers who shut off their phone lines for cable broadband may never have a reason to turn them on again.