Verizon’s So-Called “Deal”: AKA Ye Ol’ Broadband Bait & Switch.

In the last couple days, Verizon’s been getting a lot of press for offering supposed low-cost broadband. 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:In the last couple days, Verizon’s been getting a lot of press for offering supposed low-cost broadband. 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?

Comments

  1. Carlos Rios says

    I’m confused. SBC is offering 1.5M/368k DSL for $14.95/mo. Now THAT seems like a good deal- any sneaky fine print there?

  2. Anyone offering 368k is not offering DSL. That’s a pathetic amount of bandwidth for uploading.

  3. Here’s some more info — mainly, note that the SBC speeds are “up to” — which means the 384k is the maximum amount of bandwidth you should expect. Ouch!

    From: http://www.freepress.net/docs/broadband_report.pdf.

    “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” service [34], 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

  4. Carlos Rios says

    Bottom line I’d pay less than $20 a month for perfectly fine 1.5/384 SBC DSL and not so great 768/128 Verizon DSL. Well, yup, I think they’re BOTH good offers.

    No one will be fool enough NOT to snag a new promo deal in a year and a day

    Folks, this isn’t bait and switch- it’s damn good product marketing- and I think it’s their serious shot over the bow to Muni WiFi.

  5. So, if you designed and built a 1000 user wireless residential broadband network that could support 500 of those users being online simultaneously, how much would you charge your customers monthly to recover your equipment investment within a couple years, provide 24/7 customer support, and make a reasonable profit after paying salaries?

    I’m no fan of the telcos, but after busting my ass running a residential wi-fi network for almost two years now, http://www.fireislandwireless.com, a mobile wifi network, http://www.wi-ran.com for two years, being in the wi-fi hotspot business for 4 years, and doing the sisyphean tasks that come with it all, I don’t think that $30/month is outrageously unreasonable to pay for 1.5M DSL

    Most of my customers are not geeks, and a large amount of them haven’t a clue technically and pickup the phone to support at the drop of a hat. They also expect 99.999% uptime for their monthly fee. They view the net as a utility, like water and electricity, and get extremely bent out of shape when its not there.

    I don’t want to start a war, but I’m really wondering if a lot of folks doing the complaining out here really have any idea of the total operational and capital costs of running a network of any kind of scale and reliability.

    It would be great if somebody could put out some designs and numbers of operating independent nets that prove the case that duopoly pricing is totally insane. Maybe I can learn some design and operations lessons from them.

    Cablevision is increasing speeds (to 8-10 MB down) and holding the line on fees so far to head off any serious copper competition, so I’m sure you could get more for your money if there were more competition, but I’m not so sure that prices would be drastically lowered, otherwise, wouldn’t there be more private money being poured into building a third pipe into the home?

    If our governments at all levels weren’t owned by the lobbyists, it might be different, and I think that’s the monopoly we have to break up. I visit politicians in my area from time to time, and virtually without exception about a week after my meetings with them, I get an invitation to the next fund raiser in the mail. Coincidence? I think not. If there were structural separation in the telcos, with one company maintaining the last mile, and another marketing services over it, there might be a shot at true competition and incentives for delivering better performance over the existing copper plant. Alas, we are in dark times in this regard.

    -Craig

  6. Hi Carlos,

    Some quick feedback on your comments.

    First, remember that the $14.95 deal has all sorts of hidden costs, is only for first-time customers, and requires you to buy local phone services from Verizon. Second, in a year-and-a-day — you wouldn’t be eligible for the $14.95 deal in the first place (assuming it was even offered) since you’d be a returning customer, not a new one. And while I don’t, in any way believe you a fool, I will simply add that you too were mislead by this, in your words, “damn good product marketing.”

    –Sascha

  7. Joseph James says

    First off, I am not a big fan of Verizon or DSL (b/c you have to get the phone line), But I would like to point out errors in the “Math”.

    1) The Verizon deal is a 1 year contract. At the end of the contract you can re-signup or you can cancel your service. Therefore the first year is independent of the remaining years.

    2) DSL and Cable Broadband prices continue to decline, thus there will likely be lower cost cable or DSL to choose at the end of the contract.

    3) As a consumer you have choices and if you choose not to exercise your choice that is your own fault.

    4) Sascha – According to the Verizon press conferance call you can resign the contract at the end of the year. Also if you tell either a cable or teleco that you are leaving the will give you the better deal. They would rather have a lower margin than lose your business to their competitior.

    The only valid part of the “math” is that Verizon does not offer naked DSL in most places, thus you need to buy the phone line.

    I would ask those who read the above article to come to their own conclusions and not to jump on a blogger’s or commentor’s bandwagon just because the headline is catchy.

  8. Mork from Ork says

    I just switched to the $14.95 plan after being with Verizon for over a year on a different dsl plan. No problems whatsoever with not being a new customer. This is no bait and switch, just better pricing. Some people absolutely need 3-4 or more mbits for downloading movies 24/7 etc. Not me. I think 768/128 is fine for casual browsing and occasional downloads. As competition plays out they will raise the speed anyhow, like they recently did with the 1.5mbit lines that went to 3 without imposing extra charges. And the “up-to” part refers to limitations due to your home’s distance to their switching stations, not some scheme to throttle down your bandwidth.

  9. John Stapler says

    The only Verizon DSL products that go to $37.95 for month to month are the 1.5MB and 3.0MB speeds. The rep you talked to misinformed you. The $14.95 product stays at $14.95 after 1 year (at least for now). Of course in a year we could be talking about another new offer. I work for Verizon. Thanks.

  10. Anyone offering 368k is not offering DSL. That’s a pathetic amount of bandwidth for uploading. РEsme Vos

    Uh, I’m pretty sure that Verizon is only 128kb upload so if 384kb is pathetic, what is 128kb? Also, with SBC, after the first year, you can renew your contract for the same price or start a new one if the price is lower. Even though it says new customers only, they will let exisiting customers get the deal if they call in. I’ve done it more than once.

  11. Carlos Rios says

    Thanks Joseph and Mork for buttressing my “not a bait and switch” case-but I agree with Esme and Sascha that these are not altruistic, “let’s just offer a super deal out of the goodness of our hearts” moves on the part of Verizon and SBC.

    They want to offer good, no gimmicks “entry level” broadband NOW to try to kill Muni Wireless in the womb.

    I have to think the good public servants in Philadelphia, Minneapolis, New York and San Francisco will right about now be starting to worry about the likelihood of underwriting multi-ten million dollar Muni WiFi white elephants, doomed to offer a more expensive broadband product than the telcos.

    It’s more than “damn good product marketing”, it’s “Cutthroat Business 101”, and the Muni Wireless folk will need to respond aggressively

  12. JR VanOoteghem says

    I’ll have to disagree with Esme. I pay $29.95/mo. for 1.5 and an additional 6$ for basic phone service since I use VoIP and addtional fees for a total of $39 and some change. I think its a heck of a deal! I’m not understanding her math……It could be well less than quoted.

  13. This $14.95 deal is ment to attract dial-up users. Now unless people can get “naked” dial-up, they already have pots service. So why would you factor in the cost of your phone line when conidering DSL. By the way you forgot to include moving expenses in your dollars/Mbps for Japan telecom‚Äôs DSL.

  14. Actually, the analysis, while correct for the details, is missing the most important component of the story that hasn’t been told…. Verizon has been illegally cross-subsidizing the their entire DSL roll out through local phone rates.

    For example, the wholesale price set for ISPs to resell the Bell DSL product is —- over $26 a month, and that’s the “Best Price”. If the retail price is $14.95, it also doesn’t include the various other components that Verizon has been able to use — this includes everything from free advertising on phone bills, including the phone bill inserts to free TV, mailing lists, etc.

    This has put virtually every ISP off the ‘public switched networks.

    Asscording to Dave Burstein of DSL prime, the true costs are around $10.-$12 for line shared DSL. By eliminating the competition througg this predatory pricing scheme, no ISP could compete.

    Bruce

  15. Bruce brings up a very good point about cross-subsidizing. This is exactly why the EU has forced the incumbent operators in the member states to open up their networks to competitors. The regulators here know the kind of game-playing that’s gone on for years and they’re not putting up with it anymore.

    Latest on the regulators’ target list: cable companies. Don’t be surprised to see the EU force them to open up their networks. Here in the Netherlands, the Minister of Economic Affairs has singled out our “beloved” UPC (the much hated cable company) as a monopolist and is about to take action.

    In essence, the incumbent operators in the EU have to wholesale access to independent ISPs at very low rates and they cannot discriminate. The result: much lower prices for broadband and higher bandwidth. Better yet, the incumbent telcos are invading each others’ territories causing prices for voice and broadband service to drop. The number of people who have broadband service has gone up dramatically in the last two years.

    In places like Sweden (8 million people in an area the size of California), they pay 20 EUR per month for 20 Mbps broadband service. Doubtful Verizon can beat that. Verizon is so thrilled about their 384 Kbps offering — calling it BROADband. Asians and Europeans laugh at this. It is really a joke, isn’t it, except maybe Americans don’t get it. Yet.

    At least in this instance, the EU has a more competitive regime than the US which is more interested in protecting large telcos than in creating a competitive market for telecoms services. Wait until mobile phones have Wi-Fi capability. You will see very interesting applications come out of Asia and Europe. Hopefully by then, I can get cell phone coverage inside my temporary San Francisco apartment. Sigh.

  16. Joseph James says

    Esme,
    I have to respectfully question your use of “384k” as the speed Verizon is offering. Verizon’s website states the $14.95 offering is for 786k. There are many people who read your site and I believe that you can swing a great deal of influence via your blogs so I implore you to please check your facts.

    I understand your passion for municipal wireless and I believe that using wireless to bridge the digital divide is a noble cause. But, you must represent facts fairly and accurately or you risk losing credibility.

    Best Regards,
    Joseph James.

    Verizon 786 link:
    http://www22.verizon.com/ForHomeDSL/channels/dsl/packages/default.asp

  17. Joseph,

    I focus on upload speeds, not download. So I am mistaken. Instead of 384 Kbps, the upload speed of the Verizon offering is actually worse — 128 Kbps. That’s really NOT broadband at all. Even more laughable.

  18. We’ve seen predatory pricing taking place across the (US) country when telecom incumbents face competition from municipalities. In fact, simply investigating the possibility of muni-broadband networks is often enough to get incumbents to lower their pricing by 20%-40% right off the bat. Obviously, these price cuts are targeted to maintain market share and detract from the attractiveness of municipal options — but let’s be clear, they wouldn’t happen on their own without municipal intervention.

    Now, as the municipal broadband movement has continued to gain steam, we’re seeing Verizon offer a similar price-cut on a national scale. And yes, I agree that it’s smart marketing; but it’s also a false economy — people are excited to be getting services that are far more expensive (and much worse) than those offered in many other industrialized countries. And we’re happy because the services and pricing was even worse before. My point is that as long as we’re willing to settle for table scraps, we’ll never achieve the pricing and service packages that are normal in many other countries — we’ll never see true (and affordable) broadband. I have a hard time “swallowing” the idea that I should be happy paying for the telecom equivalent of stale bread and water while folks at the restaurant down the street can enjoy a 10 course meal while, at the same time, paying less than I am.

  19. Johnny Nords says

    Will someone in the municipal wireless broadband community Please define what you mean by “affordable broadband” ? Specifically what does the offer need to look like in your mind…speed and price? I am getting the idea that what you really want is for Verizon to pay you to use their service! Until then you will just keep complaining.

    I think $14.95 is pretty affordable especially considering the dominant dial-up service was $21.95 until pretty recently and no one seemed to be complaining.

    Also…not sure if everyone is aware, but SBC has an offer of unlimited wi-fi hotspot use at over 8,500 hotspots for an incremental $1.99/month on top of the $14.95 DSL fee. Includes McDonald’s, Barnes & Noble, Caribou Coffee, The UPS Stores, some airports and hotels and other sites. Cool! I have signed up and it works great. It is called SBC FreedomLink.

  20. Why should we care that Verizon requires telephone service along with DSL?

    (1) Many people have inexpensive cell phone plans and don’t have any need for a land line home phone.

    (2) More and more people that have Cable Internet are going with VOIP Internet phone service. Vonage is one of the better known providers. I get 500 minutes a month, with all the extras, for $15. To be fair, Verizon has to charge taxes that Internet phone companies are currently exempt from.

    Internet telephone is what is worrying Verizon. Why should I pay two or three times as much for basic phone service, plus per minute long distance charges, plus caller ID, plus voice mail, plus …? Not to mention a large deposit that Verizon wants to charge me.

    Every customer Verizon can convert to DSL is a customer that they won’t loose to cell phones, or VOIP Internet Phone service.

  21. this is some crazy shit guys after reading all that i think i might just stay right where im at with plain old dial up.thanks for bursting my bubble on the whole trip of actually getting dddssssslllllll.im just bummed now

  22. $14.95 is a good deal, considering AOL still charges $24 or something for dialup. I was paying $15 because I had the payment on my debit card. Instead of complaining how 768kb/128kb is not worth $14.95, I dare any of you to go back and deal with dialup for 5 years, and let me know how you feel then. I actually wouldn’t mind paying $30, but I don’t have it right now. Money doesn’t grow on tress, and sometimes you have to do with what you can afford. Joseph, for you to be laughing about how slow an uplaod speed is, only proves that you probably spend most of your time with face stuck to a computer screen.

  23. you get what you pay for. Verizon, SBC, Bellsouth…all the big RBOCs have already paid off the government to let them keep their monopolies, so why is anyone surprised that they use predatory and fraudulent marketing techniques. If our legislators weren’t already paid for, we’d be seeing the kind of success and broadband penetration Europe and Asia have had for years.

  24. Just read these postings & l can see the Verizon $14.95 may not be so great–but can it be worse then dialup? I do know the customer service is reported to be hideous and when I have tried to find out if Verizon will raise its fee after a yr. & if they have a USF fee attached–I was disconnected both on-line & phone w/them. Calling is a problem because they don’t offer a connection to cust. serv. only a sales ext. & you better call early in the A.M. otherwise it will be busy. My budget doesn’t allow any exp. dsl or R.R. and Yahoo dsl is not available where I am in Fla. As a AOL user I can’t afford them either and of course the Verizon deal sounds great–but I read that Verizon will absorb SBC & MCI —and it looks like the Courts don’t care if this looks like monoply–and wonder where all this is going. For a novice user w/an old computer I really appreciate the information here–but if in the end there is only 2 or 3 hi-priced dsl services–well– we all know what happens when competition disappears. Dude wheres my America? At least my Jeeves search lead me here. Since our land line is Verizon I now need to find out if they require the bundle price which isn’t mentioned in the ad here in Fla. but IF I can talk to someone–someday-perhaps I’ll find out LOL!!!

  25. Hi River,

    Verizon’s deal is marginally better than dial-up — but it’s also the case that it sells consumers far short of “broadband.” When one compares broadband speed by price, we continue to find that US residents are getting a bum deal on both (taken in combination we’re being sold a lemon and told that we should be happy).

  26. Verizon updated their $14.95/mo plan offering. I downgraded my 3Mbps/768Kbps DSL to the 768Kbps/128Kbps plan and they lowered my rate. If I decide it’s too slow I can move back up to the 3Mbps DSL at no cost, other than the increased monthly rate.

    I’m getting a solid 720Kbps down on it right now, but I know others who have the westell 6000 series (black modem) and they’re only getting 400 – 500kbps speeds. That’s pathetic. If it was that slow, I’d be back to 3Mbps in a heart beat!

  27. I’ve switched from $30 per month to this $15 lower speed offer and can tell no difference in surf speed. I have been a DSL customer for years and simply said to the phone rep “how do I get this price?” and it was offered to me with a one-year comittment – since I hate changing my isp that’s no problem. So most of the basic claims here are wrong. They add one line of $2.75 in taxes, I already have Verizon phone – most do here – and there are no added ads or ANYthing assuming you ignore their “repair” software. The network has gone down once in five years and they give me free equipment. I hope the new customers will continue to receive a free DSL modem since you can’t very well use the service without one. Most times I do feel VZ gouges with taxes. Not here though.

  28. Hi Chris,

    I’d be curious to know what your download speeds are. If you go to:

    http://www.bandwidthplace.com/speedtest/

    You can see what your download speed is on the new line. I’m also not sure what which basic claims you feel are wrong — they’re based on the written information available from Verizon. It is true that Verizon has not been following its own written policy, which is there right; but that doesn’t make the claims false.

    Either way, it would be interesting to see if you’re getting more than the allotted 768k download.

  29. Anonymous private citizen says

    First of all, I have used Verizon DSL for over a year, and here are my experiences.

    1) There is no bait and switch. As a private user, I can tell you that [over a year ago] I originally signed up for the $29.99 plan and after a year switched to the $14.99 plan as a personal home budget choice.

    2) When I called Verizon DSL and asked if I too could switch to the $14.99 plan since I wasn’t a first time subscriber, I was told absolutely. Verizon DSL told me that even though it is advertised to new subscribers, switching to a different plan [as applied to me since my 1 year contract had been fulfilled] that I could switch to a lower costing plan, change my plan, or even cancel my plan all-together – no questions asked.

    3) I did not have to “lock in a plan” to continue receiving the same service and price I was receiving. In fact, the plan I was on simply continued to be “as is” and would continued to show up on my Verizon bill “as is.”

    4) From number one, I did choose to call Verizon DSL and opt for the $14.99 plan for the next year. I asked if this would increase in price after so may months [in the next year] or service would change, I was told NO not at all and that I would continue to receive this price and service.

    5) This is the most interesting observation I have made. This observation has been observed & commented on, on many online forums. And that is, the $14.99 Verizon plan, while technically they report that it is a lower speed, and so forth and so forth, when I actually check my Verizon DSL speed [I check my speed frequently] I am still receiving the same speed DSL service that I had at the higher price. Perhaps Verizon will choak down this speed in the future to limit the broadband on users such as myself, but as of tonight I can report that I checked my $14.99 speed and it is still reporting at over 1,000 speed download and consistently over 350 speed upload – go figure!

  30. My experience with $14.99 plan is that it is considerably slower than the regular $30 one. My cousin have the regular service and he could surf the web and download at sametime with no problem. But i got the 14.99 deal and my internet service is slow, can surf the web but have trouble downloading. (And we live in the same area) So people just be aware that if u need to download stuff the $14.99 is not such a good deal after all. I feel like the are deceptive since the promote the $14.99 as broadband and u cant get speed up to 768kbps but is not like that at all…