AT&T, Verizon, and other telcos look to get the broadband price right

Sean Buckley, FierceTelecomIn our new report, Comparing broadband pricing: where do AT&T, Verizon, Cincinnati Bell and others stand?, FierceTelecom looks at how U.S. broadband providers are pricing their consumer standalone broadband services.

Building broadband value is important not only for Tier 1 telcos that serve larger markets, but also smaller Tier 2 and 3 telcos that see broadband service as part of a bigger strategy to step outside their traditional voice-centric telephone company shells.

The price of broadband really depends on a number of factors, including access method (DSL or fiber to the home), speeds, bundles, and contract terms.

On the access end, we saw a noticeable gap between what a telco charges for DSL versus fiber to the home (FTTH) services.

Lumos Networks (Nasdaq: LMOS), a service provider that serves mainly smaller rural markets in Virginia, offers a 6 Mbps DSL service for $34.95, while the first tier of its Broadband XL FTTH service is $54.95 a month.  

The other factor is the bundle. While not all subscribers like or want bundles, many telcos will give users a discount on broadband service if they purchase their broadband service as part of a dual- or triple-play bundle.

AT&T (NYSE: T) offers a triple-play bundle with U-verse TV, its Max Plus 18 Mbps broadband tier, and a 250 minute wireline voice plan with 20 calling features for $109.99, while a standalone 18 Mbps offering costs $56 a month.

There is value in the broadband bundle, however, for both consumers and service providers alike.

A consumer can gain immediate savings on their monthly bill and have one source to call if they have a problem with their service, while a service provider increases ARPU.  AT&T reported in Q4 2012 that subscriber ARPU was $170 and Verizon (NYSE: VZ) saw FiOS average revenue per user of $150. Not far behind AT&T and Verizon was CenturyLink (NYSE: CTL), which reported that more than "90 percent of its Prism IPTV subscribers also purchased broadband service" during the fourth quarter. 

Finally, there are the contract terms. To lure new subscribers and even those existing subscribers that want higher service, all of the service providers we profiled offer a promotional period typically of 6 or 12 months. At the end of that period, the price rises.

Cincinnati Bell (NYSE: CBB) offers its 20 Mbps Fioptics FTTH tier for $34 a month for a year. After the one-year trial is over, the price rises to $49.99 a month. Meanwhile, Windstream does raise its promotional broadband prices, but those prices will remain unchanged for the entire time that the user maintains its relationship with the service provider.

In our new report, we examine what all of the top U.S. service providers are offering for either standalone DSL or FTTH services. While this is our first report on broadband pricing, service providers will continue to evolve their broadband pricing schemes and bundled offerings to stay on competitive footing with cable. -Sean

Check out our special report, Comparing broadband pricing: where do AT&T, Verizon, Cincinnati Bell and others stand?