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Jim Hu

Staff Writer, CNET

Yahoo and Verizon Communications on Monday inked a multiyear agreement to package the Web portal into the phone company’s broadband Internet services.

The deal represents a competitive win for Yahoo because it replaces Microsoft’s MSN as the default Web portal for new Verizon customers. MSN and Verizon struck their original agreement in June 2002, but the combined service was slow to get off the ground.

Verizon will package a Yahoo-branded Web browser and default home page to its broadband users. The deal spans beyond Verizon’s DSL (digital subscriber line) service and into its upcoming fiber-to-the-home offering called Fios. In a bid against its cable rivals, Verizon is spending billions of dollars stretching fiber, which is significantly faster than DSL, into customers’ homes. The phone giants plans to sell video programming through its fiber lines, as well as speedier Internet access.

“This is a milestone in Yahoo’s strategy of partnering with access providers and adding another U.S.-based partner,” said Steve Boom, Yahoo’s senior vice president of broadband access and bundled services.

The tie-in with Verizon mirrors Yahoo’s current agreement with SBC Communications, which was recently renewed by the two companies. Like the SBC deal, Yahoo will receive a cut of revenue for every new Verizon DSL or Fios subscriber, while Verizon gets a slice of online advertising, search and premium services dollars through Yahoo.

Yahoo’s Boom declined to comment on the financial terms of the deal.

For Verizon, the deal highlights the Baby Bell phone company’s concerted push to battle cable. After years of heel-dragging, the Bells are trying to regain lost ground now that cable companies dominate broadband market share. The Bells have fought back by introducing cheaper, though slower, DSL access in hopes of chipping away cable’s lead. Cable broadband typically costs about $45, but the Bells have priced their DSL as low as $26.95.

The strategy has worked well, since the Bells have watched their DSL numbers skyrocket during the past two years. However, cable has matched, if not edged past the Bells during the same period by raising download speeds to counter the Bells’ pricing advantage. Some cable providers now offer speeds of up to five times that of DSL.

Unlike the Bells, cable companies have resisted striking deals to package portals into their broadband services. Industry giants such as Comcast and Time Warner Cable have largely taken efforts into their own hands by continually refurbishing their home pages to serve as a starting point for their subscribers.

Yahoo’s Boom said the company is in discussions with “everyone” but declined to name specific cable companies. With the addition of Verizon, Yahoo now counts SBC, Canada’s Rogers Cable and Britain’s BT as access partners.