Starting May 1, AT&T WorldNet will charge 99 cents for each hour beyond the 150-hour monthly limit. WorldNet said the adjustment would allow it to maintain its monthly flat fee at $19.95 and vowed to hold the rate steady this year.
The new plan is expected to affect about 3 percent of WorldNet's more than 1 million customers, the company said. Those affected by the new pricing will be notified by email and postcard.
With today's announcement, AT&T WorldNet becomes the latest in a string of Internet service providers that have changed their pricing structures. In February, America Online announced an increase in its monthly unlimited usage rate to $21.95 from $19.95, largely to cope with the costs of heavy usage.
But AT&T said the announcement was made to free network space from subscribers who abuse unlimited access privileges. "It's not about pricing, it's about network performance," WorldNet spokesman Michael Miller said. "If it were just about pricing, we would do what AOL did and raise prices--but we don't think that's fair."
"We looked at who was online, and we found a small percentage were using more than 150 hours a month and consuming a disproportionate share of network usage," Miller added. "We could've thrown more modems at the problem, but when we looked at the finances, we realized it would become harder and harder to support."
Analysts believe that the move is an attempt to wean out bandwidth hogs and will not affect mass-market users. As an indication of the breadth of the 150-hour limit, there are typically 160 working hours per month.
"There's a small minority of users who abuse the privilege of unlimited access at a free price," said Shaun Andrikopoulos, an analyst at BT Alex. Brown. "The real opportunity [for ISPs] is in the mass market, and those people aren't. Bandwidth is not free."
Kate Delhagen, an analyst at Forrester Research, agrees that the issue at hand was one of network management. She also believes today's decision will free up the network and allow WorldNet to allocate its resources toward loftier goals. The changes may allow WorldNet to focus its efforts toward fending off other rivals, such as Sprint and MCI.
The price change "sets the stage for them to crank up the marketing machine, because the other guys are getting aggressive," Delhagen said. "They can attach WorldNet promos to any channel, and they will get customers."
Reuters contributed to this report.