BellSouth DSL Offering Puts Emphasis on 'Lite'

BellSouth (BLS Quote - Cramer on BLS - Stock Picks) is joining other telcos in cutting prices for high-speed Internet service. Sort of.

The regional Bell operating company on Tuesday introduced a DSL-based Internet-connection package priced lower than the service it already offers to residential customers.

The move would appear to put BellSouth in the same camp as fellow RBOCs Verizon (VZ Quote - Cramer on VZ - Stock Picks) and SBC Communications (SBC Quote - Cramer on SBC - Stock Picks), each of which lowered pricing on high-speed, or broadband, Internet service earlier this year as part of an effort to steal market share from cable operators, which control roughly two-thirds of the high-speed residential Internet business.

But SBC's new cut-rate offering, points out one industry-watcher, doesn't match the price cuts that Verizon and SBC are offering, nor is it a remarkably better deal than what BellSouth and its cable rivals already have on the table. Thus, the Atlanta-based BellSouth's new service -- which is targeted at users of ordinary dial-up Internet service -- seems unlikely to have a significant effect on telcos' competition with cable for broadband business.

BellSouth's shares fell 37 cents Tuesday to trade at $26.99.

The new service, FastAccess DSL Lite, allows for download speeds of up to 256 kilobits per second and upload speeds of 128 kbps. That download speed puts it about five times faster than the highest-speed dial-up service but about one-sixth of the 1.5 megabits-per-second download speed of BellSouth's current BellSouth FastAccess DSL product.

As for pricing, the cut-rate service costs $40 per month, or $35 if bundled with certain other BellSouth telephone services. The full-scale DSL service is priced at $50 a month, or $45 bundled.

Given the competitive environment, BellSouth's new service isn't much of a deal, suggests market research firm Broadband Intelligence. On a bundled basis, BellSouth's new offering is slightly less expensive than the $40 to $42 per month cable modem service offered by BellSouth's chief rivals, according to Broadband Intelligence. But DSL Lite transmission speeds are significantly lower than cable's competitive offerings.

In comparison, BellSouth's full-fledged DSL option is priced $15 per month higher than the similar service that Verizon is offering in its own territories.