United Online tries to prove it can outlast cheap broadband.When SBC (1) (SBC Communications Inc., San Antonio, TX, www.sbc.com) A large, national telecommunications company that grew from a multitude of local and regional companies, including Southwestern Bell, Pacific Bell and Nevada Bell, into a single, unified brand by 2002. Communications Inc. slashed slash v. slashed, slash·ing, slash·es v.tr. 1. To cut or form by cutting with forceful sweeping strokes: slash a path through the underbrush. 2. its price for DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary Internet service to $14.95 per month, investors knew United Online Inc. and other dial-up providers were in trouble. The cuts greatly reduced the price edge that United Online's NetZero service, at $9.95 a month, has always had over speedier DSL. In one day, shares of Woodland Hills-based United Online fell by nearly $2 each, about 15 percent. Analysts downgraded the company, along with Atlanta-based EarthLink Inc. In knocking United down to a "hold" rating, Jefferies & Co. analyst Youssef Squali said that SBC's price was now "within shouting distance shout·ing distance n. A short distance: lived within shouting distance of each other. " of NetZero. Now United Online is out to prove it still has a future. NetZero began offering up to a one-third discount through online ads. Then it launched NetZero HiSpeed 3G, a third generation dial-up service with a stronger Web accelerator Software that speeds up the retrieval of Web pages. Anticipating that you might click a link on the current page, it downloads the linked pages in the background. Most of these utilities require nothing more than your browser, while others require a counterpart component in the server. , better storage and information-fetching options. The new service, with all the bells and whistles A slang English term for exceptional features in some product. In the computer field, it typically refers to functions in software that may be greatly appreciated by some users, even though they may not be necessary most of the time. , is being offered at $14.95 per month. "You can surf so fast that you won't believe it's not broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). ," boasted Chief Executive Mark Goldston in a press release. Still, analysts are skeptical. If users can pay $14.95 for broadband itself, why bother? "It's definitely a clever offering," said Jim Friedland, an SG Cowen analyst. "But it's making the best of an antiquated technology. United has a real problem because the market is clearly transitioning." United Online officials declined comment. Market grab SBC has acknowledged that its price-slashing tactic is a bid to grab as much market share as possible. The offer is only available to new DSL customers and requires a one-year commitment, after which the price reverts to the usual $29.95 rate. Furthermore, the offer does not include hardware costs for switching over. (Earthlink offers DSL for $19.95 a month for the first six months, $39.95 thereafter.) SBC's offer is expected to accelerate a trend toward DSL that's already occurring. Roughly 7 million customers are abandoning dial-up yearly, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. SG Cowen research, while residential broadband subscribers rose by 2.3 million new customers in 2004, after rising by 2.2 million in 2003. The trend is being fueled by the growth of music downloading A music download refers to the transferring of a music file from an Internet-facing computer or website to a user's local computer. This term encompasses both legal downloads and downloads of copyright material without permission or payment if required. and digital photos, which need the bigger data capacity of broadband. United has weathered past storms. Cash flows have been strong and last year the company had revenues of nearly $450 million. In the first quarter ended March 31, United Online posted net income of $11.5 million, compared with $80.2 million for the like period a year earlier. (The year-ago period included a large income tax benefit.) Revenues rose to $130.5 million from $119.6 million. "They do a very good job of managing the business, but they're in a business that's going away," Friedland said. "If everyone in dial-up is going to broadband, at some point their business is going to zero." Analysts estimate that NetZero's 3.1 million dial-up subscribers account for about 80 percent of company revenues. Forty percent of subscribers use the $14.95 accelerated service, which analysts believe is vulnerable to DSL. The company is diversifying, most notably with plans to introduce a voice-over-Internet-protocol, or Voip. phone service later this year. But United Online faces competition from AT&T Corp., Comcast Communications Corp.. Charter Communications Charter Communications NASDAQ: CHTR is an American company providing cable television, high-speed Internet, and telephone services to more than 5.7 million customers in 29 states. It is the third-largest publicly traded cable operator in the U.S. Inc.. Vonage Inc. and Yahoo Inc. EarthLink also plans to offer the service, which allows users to make phone calls over data lines rather than phone lines, bypassing the telephone company toll. United's biggest problem in the Voip arena is that it's confined con·fine v. con·fined, con·fin·ing, con·fines v.tr. 1. To keep within bounds; restrict: Please confine your remarks to the issues at hand. See Synonyms at limit. by dial-up. Friedland said that because it is not a broadband provider, it doesn't have the ability to offer a solution to all voice and data needs. A company that can offer the whole package--cable, high-speed modem and telephone service for one monthly rate--will have an advantage with customers, who are less likely to leave if they have a bundled service. Ultimately, it may be United Online's only hope. "If they can successfully build a non-access business, that's really the solution," Friedland said. |
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