Verizon Launches Low-Priced DSL, Partners With Yahoo

Verizon launches a low-priced, high-speed Internet service aimed at dial-up users reluctant to switch to higher-cost broadband.

August 23, 2005

4 Min Read
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Verizon Communications Inc. on Monday launched a low-priced, high-speed Internet service aimed at dial-up users reluctant to switch to higher-cost broadband, and also unveiled a partnership with Yahoo Inc., which will provide Internet services for Verizon customers.

The Verizon deal is similar to one Sunnyvale, Calif.-based, Yahoo has with SBC Communications Inc. Both companies, however, said in a teleconference with reporters that the Yahoo offerings would be exclusive to areas where Verizon does not compete directly with SBC, and vice versa. Verizon also has a similar deal with Microsoft Corp.'s MSN, but Yahoo would be the "default" service provider.

Verizon is charging $14.95 a month for digital subscriber line, or DSL, service with a maximum download speed of 768 kilobytes per second. The company will continue to offer higher-priced services of 1.5 megabytes per second and 3 MBPS.

Bob Ingalls, president of the Retail Markets Group for New York-based Verizon, said the company wasn't dropping its price for DSL, but was offering a new product for specific market segment. He also said the service was not being offered below cost, in order to attract customers, and was not a promotion. To get the low price, people would have to sign annual contracts.

"It's a long-term strategy, not a loss leader," Ingalls said.With broadband use growing and more than half of online households still using dial-up, Verizon decided it was time to offer a high-speed service that's less than the cost of many dial-up connections, in order to grab customers before they move to a cable operator. In addition, the company has the opportunity to pitch the higher-level services when customers renew their contracts.

"Our goal is to give people a taste of (broadband)," Ingalls said.

That "taste" would include Yahoo photo-sharing, music and video entertainment services that are difficult, if not impossible, to access over the usual 56 KBPS dial-up connection. As time goes on, service providers, such as Yahoo and rivals Google Inc., MSN and America Online Inc., are expected to offer services requiring even more bandwidth, pushing people toward paying more for higher-speed connections, Ingalls said.

In the near term, however, people who sign-up for DSL tend to stick with a service provider longer and are more likely to buy other voice and data services, Ingalls said. So, it's important to grab dial-up customers now.

Rival SBC has taken a similar strategy. The San Antonio company this year started offering annual DSL subscriptions for $14.95 a month to customers of its local and long-distance phone service, provided they also subscribe to some custom-calling features like caller-ID.In partnering with Verizon, Yahoo is working with two of the largest telecommunication companies, which are likely to become fiercer competitors as they expand their high-speed networks across the nation. During Tuesday's conference call, officials from both companies were careful not to call Yahoo a "preferred" partner, but rather a "default partnership," which means Verizon DSL subscribers would automatically be steered to the Yahoo-Verizon branded portal, but would have the option to begin their web surfing elsewhere.

Dan Rosensweig, chief operating officer for Yahoo, said the company would provide a core set of services, such as web mail, instant messaging, photo sharing and music; but would also work separately with both companies to develop unique services, which he declined to discuss in detail.

"We think you get the best of the stuff that works for everybody, as well as some unique features and integrations with email and communication products and other things," Rosensweig said, adding that Verizon-specific services would be coming over the next couple of months.

SBC has offered Yahoo services to broadband subscribers since 2001, and said late last year that it planned to expand those services to cellular phone subscribers. In January, Verizon announced a multiyear agreement to provide Yahoo premium services, such as anti-virus protection, spam filtering, email and Internet radio, through the Verizon portal.

While the latest deal greatly expands that relationship, Verizon intends to continue offering broadband customers MSN services as the default in areas where they compete directly with SBC, Ingalls said.Verizon offers DSL service in 29 states and the District of Columbia. The company is also building out an optical-fiber network that would deliver bandwidth equal to cable.

The company, however, sees it offering both DSL and fiber service for quite awhile, since one service or the other may not be available in particular regions and both have different pricing. For now, both products will carry the same Internet services.

"As applications are developed, there will be a difference in products for the higher speeds," Ingalls said.

Verizon is deploying its Fios fiber network in 14 states, California, Delaware, Florida, Indiana, Maryland, Massachusetts, New Jersey, New Hampshire, New York, Oregon, Pennsylvania, Rhode Island, Texas and Virginia. The service offers download speeds of 5 MBPS, 15 MBPS and 30 MBPS. When purchased alone, prices start at $39.95 a month.

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