Jun 19, 2012 07:47 AM EDT
Verizon Communications is raising prices for some FiOS customers as it offers higher speeds, a move that one analyst says will potentially lead to higher prices from cable rivals such as Cablevision Systems Corp .
The telephone company said it expects the majority of its FiOS Internet customers to have to pay $10 to $15 more per month to avail of new offerings, but it noted that they could change their television package to keep their monthly fee unchanged.
Verizon competes with cable operators for television and telephone customers as well as Internet users with various bundle service options.
ISI Group analyst Vijay Jayant described the new pricing structure as aggressive especially for consumers who have instead seen price freezes or even promotions from rivals like Cablevision. He said it may lead cable companies to charge more.
"The glass half full ... is that Verizon's pricing posture is a sign of increased price rationality," said Jayant adding that this "could perhaps foreshadow renewed price increases for the incumbent, Cablevision."
Verizon will stop selling its 25 megabits per second (mbps) and 35 mbps service plans and will instead offer 50 mbps and 75 mbps plans to new customers or existing customers at the end of their contracts.
It will keep its entry level 15 mbps service available but Arturo Picicci, Verizon's director of product management, said he expects most customers to move away from this service as they are craving more bandwidth to connect more devices, tablets and smartphones on top of traditional computers inside their homes.
"We're expecting that 80 percent of customers will want more than 15 megabits per second," said Picicci referring to Verizon's slowest FiOS service speed.
Today a Verizon customer paying for a $109.99 plan would get unlimited phone calls, 15 mbps download speeds and 290 channels. An upgrade to 50 mbps would cost $124.99 a month unless the customer opted to receive a package with fewer TV channels.
Verizon also said on Monday that it is cutting the price of what was previously its fastest Internet service as it introduces a new service that has double the speed, amping up technology competition with rivals Comcast Corp , Time Warner Cable and Cablevision.
Excluding other fees, Verizon said it has cut the price of its 150 megabits-per-second service to $99.99 a month from $209.99, bringing it in line with pricing against its rivals' fastest speeds.
Verizon also said on Monday it will charge $209.99 a month for a new 300 megabits per second (mbps) service, or $204.99 for users with a two-year contract, starting today.
This compares with No. 1 rival Comcast's fastest service, which costs $200 a month for speeds of 105 mbps, and rival Cablevision's speediest offering which is $104.95 for 101 mbps.
"We're bringing 150 mbps more to the mainstream," Picicci told Reuters. "Cable cannot touch us here."
However, Verizon customers who do not opt for two-year contracts for either of the two fastest services would have to pay an upgrade fee of $100 to have those services installed.
According to Verizon, it would take 2.2 minutes to download a two-hour high-definition video file over a 300 mbps connection compared with a download time of 44.4 minutes for a 15 mbps service.
Verizon had 5 million FiOS Internet customers at the end of the first quarter and 4.4 million FiOS TV customers, making it the seventh-biggest U.S. pay TV service.
Verizon shares closed up 27 cents or 0.62 percent at $43.82 on the New York Stock Exchange.
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