Pennies are raining down from heaven onto phone customers this summer as the giant Baby Bells clash with the giant cable monopolies.
Mergers have left many fewer, but now much larger, Bells, and they have an absolute lock on America's traditional landlines. The trouble is that business is in decline, and they're having to buy their way into fixed-line's growth markets--broadband and VoIP. Cable companies not only dominate broadband, but also have the most IP phone subscribers. Three of the top five and five of the top 10 VoIP providers are cable companies, reports Alex Goldman, managing editor of ISP-Planet.
The Bells were already selling entry-level DSL plans at dial-up prices at the start of summer and sacrificing long-distance and toll profits to unlimited calling plans forced on them by cable and pure-play VoIP competitors. They're signing up millions of new customers a year but converting precious few from cable, which, so far, has successfully defended itself just by raising download speeds. In entry-level markets where cable prices have softened a little, cable's voice/video/ broadband triple play snags as many DSL as dial-up subscribers.
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With cable still holding the high ground, the Babies are staying on the attack. For example, after canceling its $40 activation fee, Verizon Communications has lopped 29 percent off its VoiceWing service, offering unlimited VoIP calls for the same amount Vonage charges--$25 a month. AT&T/SBCis serenading growing businesses with a $50-a-month unlimited calling plan--and the savings increase when combined with broadband.
Readying triple plays of their own, the Bells have bumped top-tier DSL speeds to 6Mbps without a price hike. AT&T/ SBC charges only $28 a month in certain battleground markets. BellSouthcharges $47 a month, but tosses in a free videocam for remote site monitoring (Wi-Fi networking and security services being perfect complements to broadband). Finally, Verizonhas doubled download speeds over its Fios fiber-to-the-home network to 10Mbps on the low end and 30Mpbs on the high end, while shaving prices. That's 30Mbps for $59.95 a month in some markets! For now, at least.
When titans wrestle, change falls out of their pockets.
Originally published in the August 2006 issue of Entrepreneur Magazine