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Verizon Lowers DSL Rates

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By Rex Moore (TMF Orangeblood)
May 6, 2003

If you've resigned yourself to paying $45 or more for broadband service each month, you may be in for a pleasant surprise. Verizon Communications (NYSE: VZ) is cutting the price of its DSL service, and other providers may follow suit... leading to a first-ever national high-speed price war.

Verizon previously charged $45 to $50 per month, but is quoting a $34.95 rate to new customers on its website. What's more, that price could drop down to $30 per month when ordered as part of a bundle of the company's other services. That's a screaming bargain, especially when compared to AOL's outrageous $24 monthly price for slow dialup access.

Verizon and other phone companies such as SBC (NYSE: SBC) and Qwest (NYSE: Q) provide DSL service over phone lines. Cable operators such as Comcast (Nasdaq: CMCSK) and Cox (NYSE: COX), on the other hand, provide high-speed service via cable. The phone companies are worried about the cable guys' potential to move into their voice territory with bundled packages of their own. Verizon's price cut, therefore, may be the first volley in the battle for market share -- especially in the face of some recent price hikes by Comcast and others.

It's not clear yet how long the other providers will hold out before lowering their rates. If they don't see many defections, they may try to hold the line. It seems some investors are anticipating price cuts, though, as shares of cable stocks have fallen about 8% since the Verizon news broke.

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