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Is a telecom price war in the offing?

November 3, 2008 |  8:36 am

Just as federal regulators again hammer cable companies over the fast-rising prices in pay television, Verizon Communications said it would reduce its bundled prices for Internet, phone and TV services.

The nation's second largest phone company -- which controls home phone lines throughout Southern California's affluent beach communities -- said it was cutting prices to keep customers from fleeing to such cable firms as Time Warner Cable, the largest cable services provider in the greater Los Angeles region.

Verizon is offering a choice of triple-play bundles ranging from $79.99 to $119.99 a month, down from a low of $95 previously, spokesman Bill Kula said. Verizon also is introducing pared-down bundles of voice and Internet or TV at lower prices.            

Bloomberg News suggested that the cuts may make Verizon more attractive than Time Warner and Cox Communications, which covers some of the same SoCal beach communities that Verizon does. Time Warner's triple-play package starts at $89.85 a month for the first year of a three-year contract.

"More than anything, it just reflects the intense competitive nature of the industry right now and the need to get more aggressive on price to win share,'' Robert W. Baird analyst Will Power told Bloomberg News. "Price still matters in telecom.''

It's been easier for cable companies to offer phone service than it has for phone companies to offer pay TV, and that has helped cable take a big chunk out of phone carriers' customers. Verizon lost nearly 1.2 million home-phone customers in the third quarter, while Comcast, the nation's largest cable firm, gained 483,000 phone customers.

Verizon's effort may prove hollow to many. As Bloomberg pointed out, the deals only affect those still on the carrier's copper phone lines and using DirecTV Group's digital TV service.

Verizon's much-superior fiber-optic network, called FiOS, has given it an edge where those lines are installed, but the company is still a long way from being able to offer FiOS pay TV programming in all of the more than two dozen states where it operates.

Meantime, cable companies, pooling their resources through a research arm called CableLabs, have been developing a higher-speed technology that would let them use their existing network to compete with FiOS.

For those who want and can get the top-notch services, which offer high-definition TV, the Verizon price cuts won't mean a thing.

-- James S. Granelli