The price gap between cable broadband service and phone carriers' digital subscriber lines widened to an all-time high in August, according to a survey by SG Cowen.
Cable-modem service was, on average, 75.8 percent more expensive than DSL during the month, up from a 53.3 percent gap in July. While phone carriers cut prices — the average DSL price decreased by 9.2 percent — cable companies raised them.
Leading the price decline was Verizon Communications which rolled out a slower service that cost just $14.95 a month, with a free month of service with a one-year commitment.
By contrast, cable broadband service got 4.1 percent more expensive, on average. Comcast Corp. raised prices an average of 7.9 percent, while Time Warner Cable raised by 5.8 percent, according to the survey.
Aggressive price cuts have helped phone carriers make headway in the broadband market and challenge cable companies, analyst Lowell Singer said in a note.
During the first and second quarters of 2005, cable companies captured 47.8 percent and 46.3 percent of net new broadband subscribers, respectively, down from 50.3 percent in 2004 and 60.8 percent in 2003. SG Cowen estimates that cable companies will capture about 47.3 percent of net new broadband subscribers in 2005.
Cable companies "must continually reassess whether to accept share losses or to fight back by reducing high speed data pricing and accepting lower margins," Singer wrote.
Singer or one of the other authors of the report own shares of Cablevision; SG Cowen or one of its affiliates has managed or co-managed a public offering of Cablevision and Comcast securities in the last three years.
