Challenged by SBC price cut, Great Basin Internet steps up

Bruce Robertson knows he's not going to win a price war with SBC Communications.

But he figures that his Reno-based Great Basin Internet Services has enough customer loyalty and a sufficiently good reputation for customer service that he doesn't need to match the San Antonio telecommunications giant dollar-for-dollar on pricing.

SBC on June 1 cut its price on residential DSL service to $14.95 a month about half what Great Basin was charging at the time for comparable service.

Robertson, the president of Great Basin Internet Services, believes that SBC's move targeted cable companies and other big providers of broadband service.

But the threat was the same no matter whether Great Basin was the target or an afterthought.

"We can't match $14.95," Robertson said a few days ago.

"So we couldn't afford not to get more creative." That meant some fast changes in the basic business model for Great Basin Internet.

The biggest change: The introduction of customer contracts.

Customers who sign a one-year contract for residential DSL service pay $21.95; customers who continue paying month-tomonth face a $29.95 monthly charge.

Although Great Basin Internet during its 11-year history had thought customers would resist signing contracts, the use of contracts for services ranging from cell phones to Internet service has changed the environment.

"People have become contract-numb," said Brent Hutchinson, sales manager for Great Basin Internet.

Great Basin Internet also got some wiggle room on pricing.

The same carrier a unit of SBC, in fact provides the basic Internet pipeline to the telephone company as well as Great Basin.When it cut its prices to SBC, it was required to provide the same reduction to Great Basin.

Still, Great Basin Internet's $21.95 residential DSL rate for customers who sign a contract remains $7 higher than SBC.

"If someone is totally price-conscious, we'll lose them,"Hutchinson said."We're getting the same squeeze that Wal-Mart is putting on retailers." But Great Basin Internet figures it can cover the difference.

Robertson said, by marketing itself as a hometown company that continues to invest heavily in customer service.

It looks to protect its margins by providing more add-on services such as "SafeNet," a $4.95 monthly service to keep kids away from Internet pornography.

And, Robertson says that the 7,000-subscriber company continues to work toward building its share of the business broadband market, where margins are stronger than the residential side of the business.

For the moment, at least, the pricing strategy appears to be working.

Hutchinson said new DSL customers number in the hundreds since Great Basin Internet rolled out its new program, and the company may need to add staff in its customer-service department to keep up with the increase in customer traffic.

"That," he said,"is a good problem to have."