CompuServe to offer flat rate

CompuServe (CSRV) said today that it plans to introduce a $24.95 monthly flat-rate price as of October 1, hoping that its reputation for network speed and reliability will be worth the extra money.

The new fees, which will apply to service in the United States and Canada, are the latest example of an Internet access company charging higher prices for top-notch service--much as airlines try to differentiate themselves by highlighting the quality of business class vs. coach. In both cases, the companies are trying to boost their bottom line in cutthroat industries.

Most mass-market online services and ISPs, such as America Online, Microsoft Network, and AT&T, charge $19.95 a month for unlimited usage. They have sought to boost revenue by striking e-commerce and advertising deals. AOL, for one, has been charging extra for so-called premium services, such as online games.

But CompuServe called flat-rate pricing below $20 "unprofitable." It may not be the only service to raise its rates.

Sprint, for example, said it is considering a higher price for a guarantee of more reliable access. Netcom already has switched to a higher rate, also stressing service quality.

CompuServe's decision comes less than a month after the company said it was testing the waters for a flat-rate pricing structure. Analysts say the move could also cut into profitability for the company, which just today announced quarterly earnings results that beat Wall Street expectations. (See related story)

In its announcement, the ISP stressed what it called "our award-winning CompuServe Interactive service. In addition, subscribers will be able to use our network, rated No. 1 in the industry for reliable access and speed."

The company also sought to alleviate another concern that comes with changes in pricing, as online services such as AOL have learned firsthand. "There will be no involuntary upgrades from current plans to the flat-rate plan," CEO Frank Salizzoni said. "We will let subscribers choose."

CompuServe now charges $9.95 a month for the first 5 hours with an hourly charge of $2.95 after that. It also has a pricing scheme that was originally intended for heavy users, in which members pay $24.95 for the first 20 hours and $1.95 for each additional hour.

The company said the strategy is consistent with its core business, serving professionals who are willing to pay for higher-quality service.

CompuServe's previous move into the mainstream market for consumer access was not successful. Last year, the company killed its family-oriented Wow service.

Today's pricing announcement came as part of CompuServe's quarterly earnings report. "This new pricing plan may affect our ability to achieve our stated goal to reach or exceed the break-even point in earnings sometime in the second half of the current 1998 fiscal year," it said.