BOSTON (CNN/Money) -
When SBC Communications reports its third-quarter earnings tomorrow, the results of its new pricing plan for DSL subscribers won't be included.
But by this time next year, investors could be seeing increased revenue as the company's DSL customers pay an additional $1.99 per month to use any of its roughly 3,900 Wi-Fi hotspots for Internet access away from home. That's the lowest price around for a nearly national Wi-Fi plan. (Verizon offers free Wi-Fi access in New York City.)
SBC's plan addresses head-on two of the biggest problems facing DSL providers: flat to declining revenue, and churn.
If you wanted just the Wi-Fi service, SBC would charge you $19.99 per month -- the same amount charged for a similar plan by T-Mobile.
As an added service priced at $1.99, however, "it's a check-box item on someone's bill," says Keith Waryas, an analyst with IDC. "It's less expensive than adding voice-mail."
Smart moves
Two bucks a month could give SBC a 7 percent revenue boost. To put that in perspective, the company's revenue from data services increased last quarter by 9.5 percent to $2.7 billion and Wall Street applauded the gain.
Obviously, investors shouldn't expect 16-plus points in revenue gain from the combination, but the Wi-Fi plan carries minimal costs. SBC already owns and operates the back-end infrastructure required for Wi-Fi access at its hotspots.
SBC, the nation's largest DSL provider, needs to hang on to its 4.3 million subscribers, while cable companies are trying very hard to lure them away.
SBC's plan builds on its subscribers' affinity for wireless -- the company says it daily sells 3,000 Wi-Fi access points (typically for home users setting up a wireless network). In the race against cable broadband, stopping customer churn is key to DSL's growth, and the hotspot access offers DSL customers something they'll never get from cable.
Playing good D
Finally, the plan is good defense for SBC. The next few years will be tough for it and other telecommunications companies as they try to fight off threats from cable and cellular, as well as VOIP.
SBC forged a very smart partnership with Yahoo! (with a marketing plug from Pixar's "The Incredibles" movie) in co-branding its DSL package. And the Wi-Fi plan is a win because it should partially alleviate concern about the erosion of SBC's (and other phone companies') core business: phone access.
Obviously, this won't single-handedly take the company to a new level, but it's a bright strategic move, with a lot of upside potential.
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