Verizon DSL Reductions Prompt ISP Outrage
New residential digital subscriber line pricing rates released by Verizon Online Friday has Internet service providers demanding government action.
Verizon Online, a subsidiary of Verizon Communications Inc., is offering residential customers up to 768Kbps downstream and 128Kbps downstream for $39.95 with a one-year contract.
That's predatory pricing, as far as smaller ISPs are concerned, and subject to antitrust laws.
A first-draft letter of complaint, addressed to William Kennard, Federal Communications Commission chairman,
is making its way through the ISP ranks, calling for government
intervention against Verizon's
Normally the domain of the state Public Utilities Commissions, which
handles complaints between ISPs and telcos, a July, 2000, court case
between AT&T Corp. and the City of
Portland put all high-speed issues in the lap of the federal government --
namely the FCC.
An excerpt from the letter, authored by Rod Dixon, chief counsel of Freebuyers Net LLC, states the
ISPs' objections:
"Verizon currently offers to Internet users "Verizon Online DSL" as its
high-speed Internet access for home users. This service is priced at
$39.95/month, and we are convinced that this pricing structure evidences
predatory pricing by Verizon. Under the law of antitrust, predatory
pricing arises when a business rival prices its products in an unfair
manner with an object to eliminate or retard competition and thereby gain
and exercise control over prices in the relevant market. We are convinced
that Verizon's pricing of its Internet access services fits within this
framework."
When a customer orders DSL service from an ISP, the provider in turn goes
to the telephone company to provision a line. The normal provisioning fee
is $32.50, in the case of Verizon Communications. Any additional costs to
the consumer pay for the ISPs overhead including payroll, customer support,
building maintenance and advertising.
Verizon Online decided to lower its prices from $49.95 to $39.95 a month,
giving it only $7.45 per subscriber per month. Not much, officials
concede, to operate an ISP, but a necessary one.
According to Bill Kula, Verizon Online spokesperson, the decision to lower
its prices was not a predatory move but a necessary business decision to
compete with the other broadband choice: cable.
"Verizon Online isn't being shown any preferential treatment from Verizon
Communications," Kula said. "Verizon Online, just like any other ISP, have
the choice to determine the price to charge their customers. We believe
$39.95 is extremely competitive and in the best interests of customers who
want high-speed Internet access."
Also, Kula points out, the main reason the prices were lowered was to
compete with cable Internet providers like AT&T
Kula went on to mention the fact that preferential treatment wouldn't
happen, because it's a federal offense. US West [now Qwest Communications
Dixon said that whether the companies are in collusion or not is
irrelevant, it's just a matter of time before the low prices force other
ISPs out of the DSL market entirely, leaving Verizon Online with its deep
pockets the only provider.
"Of course, it depends on an ISPs particular cost structure, but no one is
making money competing "anti-competitive agenda."
and Time Warner, Inc.,
which provides high-speed access in the $40 range.
] tried
that in the past, Kula said, telling customers it could only buy DSL
service through its site, and they got in trouble for it.