In a reversal of a previous pricing strategy, Verizon Communications said yesterday it will sell a high-speed Internet service for $14.95 a month. Earlier this...
CHICAGO — In a reversal of a previous pricing strategy, Verizon Communications said yesterday it will sell a high-speed Internet service for $14.95 a month.
Earlier this year, after SBC Communications launched its $14.95 service, Verizon’s Chief Executive Ivan Seidenberg suggested his firm would not follow suit, asserting that Verizon’s prices for digital subscriber line (DSL) service were already low enough.
While Verizon’s new low-price DSL service is 10 times faster than a dial-up connection, it is only half as fast as the 1.5 megabits/second offered by SBC.
Verizon seeks to walk a fine line of pricing and speed so that its price will be low enough to convert dial-up customers to DSL but the slower speed will prevent cannibalization of Verizon’s current DSL customers who pay more for service at 1.5 or 3 megabits/second.
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“About half the people who use the Internet are dial-up customers,” said Bob Ingalls, president of Verizon’s retail markets group. “Price is the primary barrier that keeps them from buying broadband. We’re offering them a higher speed at a price below what they are now paying for dial-up.”
Ingalls said that every dial-up customer Verizon converts to DSL means they won’t get their broadband from a cable-TV operator. And that also means they are unlikely to buy voice-phone service from cable.
He also said that once customers “get a taste for speed” with the low-price service, Verizon hopes to move them up to a faster and more expensive service.
Verizon will partner with Yahoo! to provide the new DSL service. It will continue to offer the MSN portal from Microsoft, but Yahoo! will become Verizon’s preferred portal.
SBC also partners with Yahoo!, but there’s no DSL competition between the services offered by the two. SBC, for example, is the largest phone carrier in Illinois and Verizon is second, but there is no overlap in the markets served by each.