Yahoo, SBC Bet On Broadband

Online powerhouse Yahoo Inc. and regional phone giant SBC Communications Inc. on Friday unveiled a high-speed Internet service designed to convince more people that broadband is worth the extra money.

Sunnyvale, Calif.-based Yahoo and San Antonio-based SBC have been working on the service since they joined forces last year. The new service, available in Indiana and the 12 other states where SBC provides phone service, will allow subscribers to surf the Web at speeds up to 25 times as fast as traditional dial-up modems.

The new service's content is supposed to be just as big a selling point as its speed. Yahoo has developed a souped-up version of its popular Web page that will provide subscribers with a wide range of exclusive entertainment options and other applications unavailable anywhere else.

"We have been programming to the lowest common denominator until now," said Jim Brock, a Yahoo senior vice president who oversaw the project. "This is going to change the broadband landscape."

The alliance between Yahoo and SBC stems from a recognition that the fast speeds and "always on" connections provided by broadband aren't enough to persuade most people to dig deeper into their pockets to pay for the service.

"Broadband adoption is going to have to be content driven," said industry analyst Mark Kersey of the La Jolla research firm ARS Inc. "There has to be something available on broadband that people can't get on dial-up before people will pay more."

The average monthly charge for a digital subscriber line - one of the most widely used forms of broadband - is $51.36, according to ARS. The average monthly price for a high-speed cable modem is $45.31, ARS said.

In contrast, the most popular dial-up services charge $20 to $24 a month.

To promote their new service, Yahoo and SBC will offer promotional discounts of $29.95 to $39.95 per month, depending on which of three transmission speeds a subscriber wants. After six months, the subscription rate will become $42.95 to $59.95 per month.

The companies are confident price won't discourage subscribers.

"This will bring broadband to the masses," predicted Jason Few, an SBC vice president overseeing the new Yahoo service. Subscribers should be able to launch the service within a week of signing up, Few said.

Yahoo and SBC aren't the first formidable partners to enter the broadband market with lofty ambitions.

Microsoft's MSN service and regional phone carrier Qwest Communication last year rolled out a high-speed Internet service that hasn't made a significant dent in the market, Kersey said.

The broadband market has been growing steadily, but not at the rapid clip that telecommunication providers envisioned when they made huge investments in broadband networks during the late 1990s.

There's about 15.2 million broadband subscribers today, up from 9.1 million a year ago, ARS said.

The new Yahoo and SBC service will have a big customer base to build upon.

SBC has about 35 million residential customers in California, Texas, Missouri, Kansas, Oklahoma, Arkansas, Illinois, Wisconsin, Ohio, Michigan, Indiana, Connecticut and Nevada. The company already has 1.7 million broadband subscribers and 1.6 million customers with dial-up Internet services.

Yahoo is counting on the new broadband service to help it recover from the dot-com bust that wiped out a large chunk of its advertising revenue. The company has been trying to sell more fee-based services under a new management team led by former Hollywood executive Terry Semel.

"We view this as a foundation for developing compelling subscription products," Brock said.