Verizon Strikes Up the Broadband Subscribers

Industry watchers say a cheap DSL offer boosted user rolls in the last quarter.
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Verizon (VZ) - Get Report came come out swinging in the broadband wars last quarter.

Industry watchers say Verizon's recent $15-a-month DSL offer helped convince more than 600,000 people to hang up their dial-up connections in favor of faster Net access in the fourth quarter.

If the early numbers are true, Verizon will have far surpassed Wall Street expectations of more than 300,000 new users. The company posted broadband subscriber growth of 389,000 users the previous quarter. And depending on how well

AT&T

(T) - Get Report

did in the fourth quarter, Verizon may have edged out the former SBC for the top spot in broadband growth, even outpacing cable giants like

Comcast

(CMCSA) - Get Report

and

Time Warner

(TWX)

.

The sudden spark on the broadband side is a welcome sign for Verizon watchers who have been worried that the phone giant was

squandering billions of dollars on a dicey consumer service gamble.

To date, DSL -- the shorthand term for the digital subscriber line Internet service big telcos are using -- has largely been in the background at Verizon, with most attention focused on the company's multibillion-dollar fiber optic expansion effort. The so-called Fios plan calls for superfast data lines to be strung to homes to deliver triple play services like TV, Net access and calling.

Based on analysts' cost projections, Verizon has spent $3.2 billion on Fios over the past two years. Analysts estimate that Verizon had about 100,000 Fios subscribers at of the end of September.

"They have long been the laggards in broadband," says a Wall Street analyst with a neutral rating on the stock. "If they are trying to justify what they are spending on broadband, then it is important that they deliver at or better numbers than their peers."

Along those lines, Verizon said Thursday that it has followed the lead of its Bell brethren

BellSouth

(BLS)

and AT&T by partnering with

Yahoo!

(YHOO)

to provide broadband users a few free perks like radio and bigger email capacity.

Analysts say the deal gives Verizon customers more reason to stick around rather than switching to a rival service. And for Yahoo!, it's an opportunity to sell advanced services like video to potentially millions of new broadband customers.

Though the costly fiber effort hasn't won Verizon many fans on the Street, even critics say broadband subscriber growth is key, especially when your core phone business is vanishing rapidly.

"One thing we've found," says the analyst, "broadband growth slows down access line losses."

Verizon is scheduled to report earnings on Jan. 26. The company's shares rose 28 cents to $31.47 in midafternoon trading Thursday.