In the last couple days, Verizon's been getting a lot of press for offering supposed low-cost broadband [1]. But further investigation of this "deal" shows it to be little more than a bait & switch tactic to suck people into a higher cost broadband contract. Here's how it works & compares with other broadband service offers:

Verizon offers you a $14.95/month contract for one year. Now, this is a good offer by comparison with SBC (whose service runs closer to $40/month). However, if after one year, you don't lock in another 1-yr contract (or if that second year rate turns out to be not as low), the rate is $37.95 per month (folks had to call to find this out, it's not mentioned anywhere on Verizon's website). Amortized over 2 years, the cost of Verizon's "deal" averages out to be $31.28 a month plus the cost of phone service. After 3 years, the cost averages out to be $34.84 plus the cost of phone service.

Facts about Verizon's offer:

• Offer available to new Verizon DSL customers only.
• 768kbps/128kbps service (slow, and half the normal DSL speed, 25% the normal cable speed)
• 1-yr commitment required, with an early termination fee of $79.
• Other taxes USF fees are about $4.00 per month.
• $19.95 shipping/activation charge.
• Verizon local residential phone service required.
• The $14.95 offer expires on September 17th 2005.

Still think it's a good offer???

On a per mega bit basis, the Verizon offer alone is $19.47/Mbps. The SBC offer is $38.49/Mbps. Right now Japan telecom's DSL service is a 40Mbps connection for $29. That's $0.73/Mbps.

Are we supposed to be happy about paying far more for worse service?

Read more... [2]

[UPDATE1]

From: http://www.freepress.net/docs/broadband_report.pdf [3].

"The recent "price-wars" in the broadband market, which have received much media attention, are little more than bait-and-switch gimmicks to lure customers back and forth between the duopoly DSL and cable carriers. SBC began this pricing competition with the announcement of a $14.95 per month rate for their "DSL-express" service34, available in certain areas to new customers who sign up online. But to get this price, customers must bundle DSL with phone services and sign a one-year contract with a $200 early termination penalty. After the one-year introductory period, the rate reverts to the standard monthly fee, currently $49.95 (plus the cost of phone service and taxes/fees). When amortized over three years, the true cost of the SBC offer is $47.17 per month, not including the cost of the phone line.35

Rick Lindner, the CFO of SBS, recently assuaged SBC shareholders who expressed concern over the low-price offer, indicating that the offer was merely a way to capture market share from the cable companies and entice customers to buy other SBC products. Explaining the long-term objective of this offer, Lindler said that bundling a low-cost DSL line with phone service "suddenly takes you from ... being a $15 product to being a $65 or a $70 customer." He added: "We're out to pillage and plunder the industry, that's our objective."36

34 SBC's "DSL-express" offers download speeds between 384 kbps and 1.5 Mbps. Upload speeds range between 128 kbps and 384 kbps. The service does not provide a static IP address.

35 This figure is based on the $14.95 per month (plus $2.97/mo. universal service fee) for 12 months; $44.95 for the remaining 24 months; and the $200 installation fee amortized over 36 months. This price does not include the $99 DSL modem cost, as SBC is currently offering a full rebate for this equipment. Fees were obtained for California from sbc.com.

36 http://www.thestreet.com/pf/tech/scottmoritz/10226542.html