Return-Path: <sentto-279987-1286-991665174-fc=all.net@returns.onelist.com> Delivered-To: fc@all.net Received: from 204.181.12.215 by localhost with POP3 (fetchmail-5.1.0) for fc@localhost (single-drop); Mon, 04 Jun 2001 07:33:07 -0700 (PDT) Received: (qmail 19275 invoked by uid 510); 4 Jun 2001 13:33:43 -0000 Received: from ej.egroups.com (64.211.240.230) by 204.181.12.215 with SMTP; 4 Jun 2001 13:33:43 -0000 X-eGroups-Return: sentto-279987-1286-991665174-fc=all.net@returns.onelist.com Received: from [10.1.4.53] by ej.egroups.com with NNFMP; 04 Jun 2001 14:32:55 -0000 X-Sender: JStClair@vredenburg.com X-Apparently-To: iwar@egroups.com Received: (EGP: mail-7_1_3); 4 Jun 2001 14:32:54 -0000 Received: (qmail 31997 invoked from network); 4 Jun 2001 14:32:33 -0000 Received: from unknown (10.1.10.27) by l7.egroups.com with QMQP; 4 Jun 2001 14:32:33 -0000 Received: from unknown (HELO vre?sd?nt.vredenburg.com) (64.242.205.6) by mta2 with SMTP; 4 Jun 2001 14:32:32 -0000 Received: by VRE_SD_NT with Internet Mail Service (5.5.2650.21) id <L7DN03DW>; Mon, 4 Jun 2001 07:30:57 -0700 Message-ID: <B30A25E2D1D2D1118021006097C3AC63C98047@CCOPO> To: "'iwar@egroups.com'" <iwar@yahoogroups.com> X-Mailer: Internet Mail Service (5.5.2650.21) From: "St. Clair, James" <jstclair@vredenburg.com> Mailing-List: list iwar@yahoogroups.com; contact iwar-owner@yahoogroups.com Delivered-To: mailing list iwar@yahoogroups.com Precedence: bulk List-Unsubscribe: <mailto:iwar-unsubscribe@yahoogroups.com> Date: Mon, 4 Jun 2001 07:32:39 -0700 Reply-To: iwar@yahoogroups.com Subject: [iwar] Net access for a price Content-Type: text/plain; charset=ISO-8859-1 Content-Transfer-Encoding: 8bit High Speed, Higher Fees For Net Access By Christopher Stern and Peter S Goodman, Washington Post WASHINGTON, D.C., U.S.A., 04 Jun 2001, 6:19 AM CST A price war is breaking out among many of the companies that provide access to the Internet: They're now racing to raise their rates. In recent weeks, at least eight major cable or telephone companies have joined big Internet providers such as AOL Time Warner Inc. to boost prices. On Thursday, Comcast Corp. became the latest to announce plans for an increase, its first since launching Internet service in 1996. Starting July 1, new customers -- and new customers alone -- will pay $5 more a month, or $44.95 -- a 12.5 percent increase. The price increases come as a shakeout in the telecommunications sector has eliminated some competitors and seriously hobbled others. With fewer strong companies providing service, there is not as much pressure to hold down rates, economists and analysts said. The rising prices are rekindling debate over the federal government's decision to deregulate the telecommunications industry and not intervene in the Internet marketplace. Concern also is growing over whether the expense will widen the gap between those who have access to the Internet and those who do not -- a worry because using the global computer network is fast becoming part of everyday life. Governments and businesses are putting more and more of their operations online, as are a variety of cultural institutions. Meanwhile, entertainment companies and others are preparing to roll out new online music, video and other data-rich services. Some Internet providers said they had set past rates artificially low to compete with upstarts that were discounting service in an effort to build a customer base. Many of those upstarts have since stumbled, forcing them to curb their activities or merge with a more established company. In the Washington region, for instance, Northpoint Communications shut down its DSL (digital subscriber line) business and UUNet was swallowed up by WorldCom Inc. Higher rates will allow the remaining Internet providers to improve service and expand their offerings, company officials argue. Cable companies are particularly eager to show Wall Street that their decision to spend billions of dollars to build fiber-optic networks is paying off. Tom Wolzien, senior media analyst with Sanford C. Bernstein & Co., said many companies now feel comfortable raising rates because they have a backlog of customers to hook up. In particular, local phone giants such as SBC Communications Inc. and Verizon Communications Inc. "are having a tough time keeping up with the installation of DSL at the rates people are demanding," Wolzien said. What customers are clamoring for most are "broadband" services that deliver data at much higher speeds than simple dial-up telephone connections. Cable modems and DSL technology provide turbocharged access to the Internet with download speeds up to 50 times as fast as a regular dial-up modem. There is a lively debate over which service is superior, cable or DSL, but both are signing up customers at a brisk pace. During the first quarter of this year, Verizon added 180,000 new subscribers and AT&T Broadband, the nation's largest cable company, added more than 200,000. At top speed, a cable modem can download a 1 1/2-hour movie in 18 minutes, a task that could take as long as 16 hours using a dial-up modem that transmits at 56,000 bits per second. But cable's Internet service is shared by users and can slow down when too many people in a neighborhood are online at once. DSL has slower top-end speeds but can offer a more consistent service. Consumer advocates cite the price increases for these services as evidence that the deregulation of the telecommunications industry five years ago was a failure. "This demonstrates more clearly than anything that there are no meaningful competitive forces in this market," said Gene Kimmelman, co-director of the Washington office of Consumers Union. "You have the cable and telephone companies claiming that they want to compete against one another and challenge each other to offer consumers better deals for broadband services. Lo and behold they both jack up their rates for broadband, demonstrating that they have no intention to compete on price." But don't look for the government to step in to keep prices down anytime soon. Federal Communications Commission Chairman Michael K. Powell, a Republican with a distinctly deregulatory bent, has said that it is too soon to make any judgments about the direction of the high-speed Internet marketplace. "We're talking about services that, in reality, really only became a retail alternative in '98. We have early adoption going on. I don't think that it's a mass market yet," Powell said in comments to a group of industry analysts and researchers. In those same comments, Powell predicted that the fee increases would slow the rollout of the high-speed Internet. "I don't know whether they're justified or not, but I think that they're going to hurt growth," Powell said. The cable industry is under particular pressure to show profits from a business it has been building for several years. "There is a push by Wall Street to get some payback for the capital investment," said Cynthia Brumfield, president of Broadband Intelligence Inc., a Bethesda-based research firm. It was no surprise to Brumfield that AT&T Broadband was one of the first cable companies to announce it was raising rates. Its financially struggling parent company is in the middle of a major corporate reorganization and it needs to find ways to generate more revenue, she said. On Friday, AT&T Broadband raised rates for almost all of its 1.3 million cable subscribers from $39.95 to $45.95 a month -- a 15 percent increase. AT&T insists the price hikes are not related to its overall financial situation. "We think the new pricing best reflects the value of the product," said Steve Lang, AT&T Broadband spokesman. Of course, not every Internet provider is raising rates. Some see opportunities to win new business by holding the line on bills. Last week, Microsoft Corp., the nation's No. 2 Internet provider, pointedly said it will not follow online giant America Online's decision to boost its monthly fees by 9 percent, to $23.90 from $21.95, effective in July. Microsoft said AOL customers who switch to its MSN service will receive three months of free Internet access and a guaranteed rate of $21.95 a month for unlimited service until Jan. 1, 2003. Comcast, meanwhile, raised rates only for new customers. The dominant cable provider in the Washington area said existing customers will continue to pay $39.95 a month for service and use of a special modem. Analysts say the latest pricing strategies are part of an ongoing experiment to find the right mix of price and service. Verizon, for instance, announced on May 3 plans to require new customers who subscribe to its lowest tier of service -- which costs $39.95 per month -- to pay a $200 set-up fee. Previously, that fee was waived. In fact, Verizon no longer even advertises that tier; instead, it steers new customers to an introductory package at $49.95 per month that has several promotional features including a free DSL modem, a PC camera, four e-mail boxes, and space on the company's servers to store e-mail and Web sites. Verizon spokesman Larry Plumb noted that customers are getting more for their money, including faster speeds and more storage capacity, under the company's new pricing plans. Plumb said the company felt it had to boost its access speeds and storage capacity because more of its customers are using the Internet to zap music and photos to one another -- applications that gobble up capacity. "The whole thing is to make the service more capable and match what people are doing today," Plumb said. John Orlando, a lobbyist who lives in Bethesda has subscribed to Verizon's DSL service for 18 months at the $39.95-a-month rate. The few times the service has gone out, Orlando said, he became frustrated by the slow speed and inconvenience of having to use a standard telephone line to connect to the Internet. "I'm probably willing to pay more than I would have as a new subscriber because I have gotten used to it," Orlando said. But if newcomers become turned off by the cost, analysts say, the Internet providers may not be able to win over more people like Orlando. It also could be a huge disappointment to several industries that are counting on the speedy rollout of a national broadband network to launch new businesses of their own. For instance, Hollywood and other entertainment industries are planning to sell movies, music and video games over the Internet. But this new business depends on the development of a high-speed Internet service that allows mass-market customers to download products quickly. Some economists question whether a marketplace dominated by cable and local telephone companies, two industries that once enjoyed life as regulated monopolies, is competitive enough to keep prices in line. Many of the companies that have gone out of business or sharply curtailed their offerings were upstart telephone companies or Internet providers that leased lines from the traditional local telephone giants. "Two players is not enough for a horse race," said Lawrence J. White, a professor of economics at New York University's Stern School of Business. With fewer players in the market, he said, the possibility is increased that big companies will coordinate price hikes and service offerings. "Two [primary players] is not as good as three or five or 20," said White, who served as chief economist for the Justice Department's antitrust division during the Reagan administration. Keith Kennebeck, a broadband analyst with Strategis Group, a Washington-based telecommunications consulting firm, predicts that even if rates for high-speed Internet service rise now, they will eventually have to come back down. For the Internet to really take off, cable and DSL service must fall back down closer to $30 a month, Kennebeck said. Until the price comes back down, the service will remain a luxury item for most homes, he predicted. And with so much riding on the widespread distribution of a high-speed Internet service, some analysts question the latest round of rate hikes. Instead of building profit margins, the analysts say, now may be the time to continue building market share and demand. "The jury is out as to whether or not this is the time to raise rates," Brumfield said. High-speed Internet service "is not yet a must-have," he said. Reported by Newsbytes.com, http://www.newsbytes.com © 2001 The Washington Post Company Jim ------------------ http://all.net/ Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
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