Verizon recently launched a new DSL promotion offering six months of free service for customers who bundle phone service. The phone and DSL package is being offered for $45/month. Verizon joins AT&T, who also recently launched a DSL promotion, offering a “no contract” term for DSL pricing, which locks their pricing in for two years. Both promos are believed to be, at least in part, a response to the dismal 2Q08 results for DSL net adds. The Wall Street Journal takes it a step further, and suggests a broadband price war may be in the making. But the article is quick to point out that it is a one sided war for now. Cable companies have yet to respond, and feel less need to do so. Even though broadband adoption is slowing, cable companies are taking the lion’s share of new customers. There’s less pressure on them to join this “price war.”
The third quarter will be an interesting one to watch. Logic says that these bad economic times, which seem to be cresting in this current quarter, should drive more potential broadband customers to less expensive DSL options. But that didn’t happen in 2Q08. In fact, some cable companies, Comcast included, noted their best broadband take rates occurred with their premium, and more expensive, cable modem tiers. Will that change in 3Q08? Perhaps. It seems like the bad economic news is really piling on these days, which may push people to more “value” priced DSL options. If it doesn’t, and cable repeats its 2Q08 “slam dunk” performance against DSL in the current quarter, telco service providers may be in real trouble.