Comcast steals telecom DSL customers
The intensity of competition between cable operators and phone companies went up a notch as Comcast reported a big boost in the number of new subscribers who switched to its cable-broadband service from DSL.

Comcast, the largest U.S. cable television operator, said Thursday when it reported first-quarter 2006 earnings that it increased high-speed broadband subscribers by 437,000. Of these subscribers, about 34 percent came from competitors selling DSL (digital subscriber line) service, compared with about 23 percent of customers a year ago, Steve Burke, chief operating officer of Comcast, said during a conference call with analysts and investors.

"We now get as many customers coming from DSL as we get from AOL narrowband," he said.

Burke suggested that customers are switching to Comcast because they are more interested in high-speed service than in price.

Over the last year, phone companies have slashed prices in an effort to win customers. AT&T dropped the price on its introductory DSL offer to $12.99, and Verizon Communications is offering its 768Kbps service for $17.99. The strategy has worked as phone companies are closing the gap between the total number of DSL subscribers and cable modem subscribers in the country.

Meanwhile, Comcast and other cable companies have held the line on pricing, and instead have increased speeds of their service.

"As the RBOCs (regional Bell operating companies) cut prices we keep focused on speed superiority and reliability," Burke said. "As consumers engage in richer Internet experiences, such as music, games and video, they should place even more value on speed."

The bundle factor
Jim Penhune, an analyst at Strategies Analytics, doesn't think consumers are switching from DSL to cable because of speeds. He believes they are switching because Comcast is able to offer them a triple-play package of services that includes video, voice and high-speed data for about $100 a month. He said that when he surveys broadband users they still report they are more interested in pricing and value than they are in faster speeds.

"I would argue that customers are switching from DSL because Comcast can offer them a low-cost phone service as part of the bundle," he said. "I give the cable companies credit for holding their ground on pricing. But I'm just not sure how compelling the speed argument is for large numbers of consumers."

Comcast also noted that the bundled package was a big factor in attracting new customers. The company added 211,000 new phone customers during the quarter, more than it had signed up for all of 2005. And in regions where Comcast sells phone service, the company added more new high-speed Internet access customers than in other parts of the country where the option to buy a package wasn't available, Burke said.