AT&T's network allows customers to receive up to 1.5 megabits of data per second from the Internet to their computer (the downstream speed) and to send up to 128 kilobits of data per second from their computer to the Internet (the upstream speed).
By contrast, Excite@Home's customers say they were able to receive up to 4 megabits downstream and send 128 kilobits upstream. That means AT&T customers who have been switched to AT&T's Broadband Internet system since Excite@Home cut off their high-speed Internet service have less than half the downstream abilities of their old service.
AT&T executives insist that the vast majority of cable modem subscribers--the people who use fast connections for online shopping, gaming, sending and receiving e-mail, and occasional downloading--will never notice that the AT&T network has less downstream potential. But AT&T admits that the biggest bandwidth hogs--known euphemistically as "power users"--might lament slower speeds.
Power users include music fans who upload MP3 files almost every night, photographers who constantly send and receive large files, and small-business owners who--in violation of their user contracts--send bandwidth-intensive commercial files on their residential service. Some are operating Web servers and taking customer orders for e-commerce operations.
Power users account for only 1 percent of AT&T's broadband subscriber base, but they suck up about 16 percent of the total bandwidth, said AT&T Broadband spokesman Andrew Johnson. Because of that disparity, AT&T plans to implement a "tiered pricing" system. The company won't say when that will happen, nor will it provide details of the new pricing structure.
"We are going to put in place at some time in the future a tiered service offering to our customers where we will be able to give them more choice than the one-size-fits-all system we have now," Johnson said Wednesday. "We're doing some consumer research and marketing research, and we're still trying to decide what those tiers might look like."
New pricing to get new customers?
The average Excite@Home customer pays $46 per month for the service, and rates have been rising steadily--causing a slowdown in growth rates for broadband subscribers. A survey released Sunday by La Jolla, Calif.-based market intelligence firm ARS determined that the number of total broadband subscribers in the United States increased 14.2 percent in the third quarter of 2001 from the second quarter of 2001.
Although that's a respectable jump, it's the smallest quarterly increase since ARS began tracking such data. In addition, ARS found that broadband subscriber growth rates have decreased in every quarter over the past two years. In 2000, growth rates were at least 30 percent per quarter--more than double the 2001 quarterly growth rates.
AT&T hopes that lowering the price for some users could boost overall subscription rates, Johnson said.
"The power users are different than someone who needs even less speed," Johnson said. "We'd offer higher and lower price points."
It's unclear when AT&T would increase prices for bandwidth hogs.
AT&T Broadband, which provides cable TV and Internet access for 16 million households, announced a 5.5 percent increase for 2002 cable TV prices on Nov. 2. Customers who have both cable TV and Internet access aren't likely to look kindly on another increase--even as part of a tiered system in which some light users pay less.
Timing of the tiered system launch is even more sensitive in the wake of the Excite@Home fiasco. On Saturday morning, the Redwood City, Calif.-based access provider terminated service with AT&T, and most of the 850,000 shared subscribers were completely without high-speed connections.
AT&T rushed to migrate those customers to its own network, but in the process customers had to deal with outages and flaky service, and many had to revert to dial-up access--a fate they say is almost as bad as having to write and send letters by hand. Many customers are also upset that they have to change their e-mail addresses as part of the network migration. They're also angry about a lack of customer service from AT&T in the first hours and days of the outages.
AT&T customer service representatives called some customers at their homes on Saturday and Sunday, but others say they were caught completely off-guard. Others said they had to try a toll-free information hotline as many as 40 times before they got through--only to get unhelpful, scripted comments from service agents.
Given the events of the past several days, many customers say a price increase could push them to defect from AT&T Broadband Internet.
"I'm very unhappy with the new downstream speed cap of 1.5 megabits," said Tim Gerchmez of Renton, Wash., who pays $45.95 per month for cable access. "I'll stick with AT&T as long as they don't raise prices even a single cent. I will be gone if prices increase."
Mike Baum, a Seattle-area computer programmer who pays $45.95 per month for cable modem service, is also weighing his broadband options. He doesn't understand why he should pay the same amount of money for the AT&T service when it offers half as much downstream capability.
"I was extremely satisfied with the service while using @Home. So far, the AT&T solution has not been very good," Baum said. "I am waiting a little while to see what happens...I am looking into DSL again. I will not pay for what I don't get any longer."
Tiered pricing: The wave of the future
AT&T, which has had the equivalent of tiered pricing for phone customers for decades, has been considering a tiered system for high-speed cable customers for at least 18 months, Johnson said.
In fact, AT&T Broadband Senior Vice President Susan Marshall told industry veterans gathered in March at the CableLabs media briefing in Westminster, Colo., that the cable company was testing tiered pricing in a trial market in Boulder, Colo. It was planning to do another trial in Boston later in the year.
At the conference, Marshall said AT&T was piloting its "broadband choice" service in more than 300 Boulder homes. Marshall said she expected most consumers would pay about $39.95 per month--the same rate AT&T charged customers for Excite@Home service at the time.
Whenever AT&T moves to tiered pricing, it won't be alone. Virtually all cable providers are considering similar plans, said Mark Kersey, a broadband analyst for ARS.
But Kersey said providers trying to launch the new pricing system will face extreme resistance from consumers, especially the bandwidth hogs. Many of them are technophiles who believe that as many people as possible should have affordable, reliable, fast Internet access.
"The implementation of tiered pricing is going to be a major challenge," Kersey said. "Even if you can figure out a good operational way to make that happen, I'm not sure you want to go to your customers and say, 'You spend five nights a week uploading MP3 files, so I'm going to charge you $75 per month.'...You'll see people become more frustrated and quite possibly migrate to DSL."