Cablevision Cuts Prices, Targets Verizon
NEW YORK – Cablevision Systems Corp. (CVC) on Monday cut the cost of its package of cable TV, Internet and phone service to $90 a month -- a discount that takes dead aim at Verizon.
Cablevision is eager to get subscribers to take all three parts of its "Optimum Triple Play (search)" bundle, a strategy that has long been embraced by the cable industry as a way of keeping customers from defecting to satellite TV services.
Verizon Communications (VZ), the nation's largest phone company, offers a combined phone and Internet package for $90 a month and has a deal to offer DirecTV satellite TV service in the New York area for an additional $37.99.
Bethpage, N.Y.-based Cablevision, which has about 3 million cable subscribers in the New York City area, will offer it new lower rate for the next 12 months. It is a $45 discount over what the three services would cost if purchased separately.
Cable companies believe customers are less likely to switch to other providers if they subscribe to more services and get the convenience of all services on a single bill.
But some analysts were cool to the Cablevision move, saying the discounting could spark a price war, pushing down margins for both cable and phone companies as they compete for voice customers. Cablevision shares were lower at midday.
Previously, Cablevision offered digital cable and high-speed Internet service for a total of $90 a month, so the new deal essentially throws in phone service for free.
"If you give away voice, that works until your competitor does the same thing," said John Hill, analyst at SoundView Technologies (search). "It sets a precedent that they're not getting paid for something they've making capital investments on."
Merrill Lynch analyst Jessica Rief Cohen said in a research note the price cut will reduce phone service to a "break-even product" for Cablevision, but she reiterated her "buy" rating because the company's average revenue per subscriber is already the industry's highest.
Cablevision's phone service, which sends voice calls over cable lines using the same technology used to move data over the Web, includes unlimited local and long-distance calls within the United States and Canada.
Other cable operators moving aggressively into telephone service include Cox Communications Inc. (COX), Time Warner Inc.'s (TWX) Time Warner Cable, and Comcast Corp. (CMCSA).
Cablevision shares were down 75 cents at $21.25 on the New York Stock Exchange. Verizon was down 64 cents at $35.53.