A few Internet service providers are calculating that the fast connections they provide are just as valuable to traffic-starved Web sites as to the surfers themselves. Study after study shows that commerce sites lose customers because of slow connections.
Now several high-speed ISPs want to turn this fact into cash by making the online sites help pay for the privilege of having regular high-speed visitors.
AT&T, in its hunt for new revenues, is the latest company to flirt with a version of this model. The long-distance giant is mulling plans to create partnerships with companies that could result in payments to AT&T, and a cut of any e-commerce revenues, when a surfer on AT&T's high-speed network hits their site. This would apply only to companies AT&T entered into a deal with, not to all of the sites that encompass the Web.
"The value is that we can bring the customer (to the site) and the transaction can be done in a very economical way," said Eileen Connolly, an AT&T spokeswoman.
A smaller company, FreeDSL.com operator Winfire, is already moving down this path. By next quarter, it will have a program in place that allows Web sites to buy into "channels," where surfers' download speeds will automatically be turned up a few notches. Those Web sites will then look much better to potential customers, Winfire executives say.
Analysts agree it's too early to tell just how much ISPs can tap Web sites for new revenues. In the dial-up world, only America Online has successfully inserted itself between subscribers and their Web destinations, many note. But a few analysts say high-speed ISPs potentially are looking at fertile ground for new revenues.
"We're entering into new territory here," Gartner analyst Ken McGee said. "But the precedent is there." He cited the billions of dollars spent through 800 numbers, in which the telephone companies sit in the middle of transactions taking a small fee.
Who should pay for speed?
At the core of these nascent plans is the idea that Net commerce and content is still losing massive amounts of business from people fed up with waiting for Web pages to load, or audio and video files to download.
Market watcher Zona Research estimated last year that more than $4.5 billion in e-commerce sales are lost annually because of consumers' frustration with slow connections. Gartner estimates that broadband consumers will spend an average of 20 times more money online than will dial-up Net surfers.
Analysts say the demographics of high-speed surfers, which tend to be concentrated in high-income urban or suburban areas, also signify that these people will be better-than-average potential customers. From all of these figures comes the idea that it is in a Web site's interest to make sure they are reaching out to high-speed customers.
But will Web sites, many of which are running notoriously short of cash these days, pay to make sure their customers are faster?
To some extent, the answer is already a resounding yes. Akamai Technologies and other "content delivery" services have persuaded many of the biggest online companies that turbo-boosting their customers' downloads is a basic cost of doing business. These companies operate largely by offering huge networks of servers that host Web site content, making sure that any given Web site is stored in pieces--or "cached"--as close as possible to individual Web surfers' computers.
But ISPs such as AT&T, Winfire and others may have found a different way into this speed-induced market.
A service provider controls a consumer's connection to the Web. Traditionally, ISPs have allowed subscribers to go as fast as their dial-up modems would take them, but this has changed in the high-speed world. Here, subscribers often pay for varying download speeds or have seen their connections slowed to improve bandwidth available to other people on the network.
In Winfire's case, the company has created technology that allows it to ratchet up a customer's Web download speed instantly. It offers its subscribers the ability to pay for extra speed on demand, turning the jet-boost on when they visit a streaming media site or begin to download MP3 files, for example.
This capability will be offered to Web companies beginning late this quarter or early next year, Winfire vice president of marketing David Steinberg said. Winfire offers free or subsidized DSL connections in many of the large markets across the United States.
"We think content providers are going to start to realize that the end user has to pay for their bandwidth as well as the services," Steinberg said. "A lot of people don't want to pay for that."
AT&T's plans are a little less technologically ambitious.
The long-distance giant's broadband offerings operate largely through Excite@Home's cable Internet service. AT&T also has some fixed wireless and DSL customers apart from Excite@Home. Cable companies Cox Communications and Comcast each have small stakes in Excite@Home but have the option to sell to AT&T beginning early next year.
AT&T is considering doing a kind of portal deal on steroids, in which it would push as many of its high-speed subscribers as possible to partner Web sites, taking a referral fee and a cut of any e-commerce revenues. That model could work for AT&T's interactive TV business as well as its cable Internet service.
That is similar to what happens with portal companies like America Online and even with some commerce directories like CNET Networks, publisher of News.com. But those referral-style relationships have worked in only a limited number of cases, some analysts warn.
"This will never happen unless you make a formal partnership," Forrester Research analyst Bruce Kasrel said. "And then it is going to become a portal deal."
Other analysts say this may not be as attractive as Akamai's strategy, however. Akamai and other content delivery services speed delivery, even if only marginally, to all Web surfers. Any deal with AT&T or a given ISP would provide fast access only to that ISP's subscribers.
But a portal deal with the ability to deliver high-speed consumers--and potentially make consumers' connections even faster for individual Web sites--might not be something to sneeze at. If AT&T is looking at this now, or even if smaller ISPs like Winfire make the model work first, other high-speed providers looking to replace declining traditional revenues might follow suit, some analysts say.
"When you consider being in the middle of all those transactions, and being able to charge for everything that goes to a Web site, that's a heck of a compelling answer on how to replace falling long-distance revenues," McGee said.