SBC Communications Inc., the No. 2 U.S. telephone provider, sliced some high-speed Internet service prices by 25 percent, pressuring other Internet suppliers to match the cuts and stepping up a battle with cable-television companies.
SBC lowered the price of its standard digital-subscriber- line service to $14.95 a month from $19.95, Ed Cholerton, vice president of consumer marketing at the San Antonio-based company, said Tuesday.
Competitors such as EarthLink, the No. 4 provider, charge at least $19.95 a month. For existing phone customers, Qwest charges $40 a month for 1.5 megabyte-per-second service.
The cuts prompted a plunge in shares of EarthLink and United Online Inc. and sparked criticism from Verizon Communications Inc. chief executive Ivan Seidenberg.
SBC chief executive Edward Whitacre is mainly targeting cable-TV companies such as Comcast Corp., which compete by offering packages of phone, Internet and television service. Comcast, the largest provider of high-speed access, charges about twice as much as SBC for its cable-modem service.
“You can expect us to continue to be aggressive with DSL,” SBC chief financial officer Richard Lindner said in New York on Wednesday. The product is “key to our ability to compete with cable companies in our markets.”
The price cut may help SBC add more than 450,000 new customers during the second quarter, UBS AG analyst John Hodulik said in a note to clients Wednesday. SBC added a record 504,000 DSL users in the first quarter, bringing its total to 5.6 million, the most of any telephone company.
SBC’s pricing is intended “to take as much oxygen out of the dial-up market as possible and to put pressure on cable- modem prices,” said Viktor Shvets, an analyst at Deutsche Bank Securities in New York who rates the shares “buy.”
