move by Verizon Communication to cut the price of its high-speed Internet services could be the opening shot in a price war in which cable and telephone companies are forced to sacrifice profits to lure customers who want faster Web connections.

Verizon, the No. 1 U.S. local phone company, on Monday began offering high-speed Internet services for $34.95, about $10 cheaper than its previous rate. However, it was unclear if rival broadband service providers would follow suit right away.

"It does signal in our view the beginning of a price war," Legg Mason analyst Chris King said.

Cable and phone companies are in the best position to sell high-speed connections to their customers, as they already have "pipes" into homes over which data can travel.

For telephone companies this offers a chance to boost growth stalled by the trend toward cell phones and e-mails that has cut usage of traditional phone service.

Cable operators, which claim two-thirds of the U.S. high-speed Internet market, have much to lose if the telco version, known as digital subscriber access, catches fire.

"Cable companies are going to need to come out in relatively short order and try to create some sort of differentiation," King said.

Another independent telecommunications analyst, Jeff Kagan, said cable companies should use caution in trying to beat Verizon's rate, as a price war could cause Internet providers to meet the same fate as battered long-distance companies.

DEFECTIONS MAY PROMPT CUTS

However, if cable companies -- which currently charge rates in the range of $45 per month for Internet access -- see customers defecting en masse to rates closer to $30, it may be hard for them to resist slashing prices.

"Cable companies see broadband as a huge growth opportunity and if they see their (subscriber) numbers shrinking it could trigger intense price competition," Kagan said. "I think Verizon needed to do it to increase its market share and to create more loyal and profitable customers."

Donald Norman, co-founder of consultancy Neilson Norman Group, noted that price wars have mixed results.

"Price wars are usually good for consumers, but they are not necessarily good for business," Norman said.

Other analysts predicted that cable companies would wait and see rather than cutting rates immediately. Some noted that a similar promotion by SBC Communications in California failed to take many subscribers from the local cable companies. Two cable television companies that compete with Verizon, Comcast Corp. , the No. 1 U.S. pay-television operator, and its smaller rival Cablevision Systems Corp. , said they recently raised rates for their television customers' broadband services.

Comcast raised its fees by $1 a month in some markets while Cablevision upped its price by $5.

"We're very comfortable with our competitive position," said Comcast Vice President of Sales and Marketing Dave Watson, who did not directly answer questions about prices.

Verizon's price cut could finally make broadband services an affordable alternative for some customers who now pay for two phone lines and reserve one for Internet use.

"What could happen is the total number of new households subscribing to high-speed Internet could actually accelerate," said Davenport & Co analyst Drake Johnstone.

Johnstone, who also cited SBC's difficulties as a sign that Verizon's price cut might not hurt its cable competitors, predicted that cable companies would still continue to add subscribers and that "phone companies might even see an improvement." (Additional reporting by Kenneth Li)