A Lesson In ISP Pricing Wars

It seems to be a status symbol among the top dial-up Internet service
providers (ISPs): the more service plans you have, the more important you are.

Using that standard, AT&T WorldNet, soon to be a part of
AT&T Consumer when the break-up is finalized, (re)joined the ranks of
important providers with the (re)introduction of its mid-range, $16.95 a
month, plan for Internet users, a pricing plan officials hopes to use to
steal customers away from competitors like AOL Time Warner , the Microsoft Network and EarthLink, Inc.

It’s a common practice among the heavyweights in the ISP industry,
announcing offers and programs that give them an edge over competitors, but
are little more than a spin on existing services.

To do a little spin-doctoring of its own, AT&T executives launched a
service they’ve had for years. If you’re confused, join the club.

What do all the plans mean?

The “new” service is calculated to grab the tricky demographic of Internet
user in between the casual, looking-for-a-bargain pricing plan at $4.95 and
unlimited premium service priced at $21.95 offered at WorldNet. To do
that, officials decided to brush off its current $19.95 limited access plan
and give it some polish.

Ed Chatlos, WorldNet vice president and general manager, said it gives
consumers a choice, “another option beside watching their Internet bills
get bigger as a result of recent price increases from other
ISPs.” (Translation: an option that’s cheaper than AOL, which hiked
its monthly rates recently.)

The “new” service has been around years, when WorldNet launched
its 150-hour a month service plan in March of 1998. For $19.95 a month,
WorldNet users got limited hours but a better bargain than its own premium
unlimited service, which was priced to match the rest of the ISPs in the

For several years, this was the service touted by WorldNet. Visit the Web
site or watch the commercials on TV, and this is the service you’d
see. The premium, unlimited service lurked in the background, there for
the Internet junkie who needed unfettered hours.

It’s still around, and the ISP has many customers signed up for the $19.95
service. According to Janet Wyles, WorldNet spokesperson, it just hasn’t
gotten the air play it had in the past.

“It was our lead offer some time ago, and given what we’ve seen happening
in the industry lately with the price increases, we felt it was time to
introduce a lower-cost plan,” Wyles said. “We haven’t advertised the
$19.95 plan in some time. Our advertising lately has been around newer
offers because we’re constantly coming up with new offers.”

That changed in late 2000, when free ISPs like 1stUp.com and Spinway went
the way of the dodo bird, suffering messy ends and stranding the million of
Internet users who only used the Internet because it was free.

To those customers, AT&T WorldNet introduced its $4.95 plan in the first
week of January 2001. Significantly cheaper, the plan let users get on the
Internet (albeit with a still-present ad banner) and avoid the high monthly
fees for service. This new program was then given top billing on WorldNet
commercials and on the Web site.

$3 discounts…but wait, there’s more

Which brings us full-circle to Monday’s announcement, which (re)launches
the limited-access plan. Knowing they couldn’t just announce the slash of
monthly price by $3 dollars, company officials decided to pin on a service
to give the mid-range offering some appeal. After all the Web site, until
Monday, still featured the $19.95, 150-hour option. It needed something a
little more dramatic.

Enter the streaming email, an application that just wrapped up testing on
June 5. With it, AT&T WorldNet users can send video emails without
special software or large disk drives to save the messages. And since it
uses streaming technology, the download times are a relative non-factor.

Most of the major ISPs play this tiered-access pricing game…it’s a way
for them to differentiate their services.

  • A visit to AOL’s Web site shows it also has a variety of pricing
    plans, in addition to its $23.90 monthly service. The ISP has five
    different pricing plans, one for every occasion it seems. Prices go all
    the way down to $4.95 a month for the world’s largest ISP, although the
    number of people who use the Internet for only three hours a month is very
    (spelled v-e-r-y) small. But, the price is there and AOL officials can say
    they offer a small pricing plan than other ISPs.
  • Juno Online Services runs a similar deal with its free
    service. That’s a lot cheaper than the $16.95 WorldNet charges for
    Internet access, and it gives them an opportunity to bump them up to its
    premium $14.95 “super size” service.
  • Prodigy Internet offers three pricing plans for its service, similar
    to WorldNet. At the bottom of the pricing barrel, users can sign up to the
    ISP for $9.95 and receive 10 hours (not much when compared to WorldNet’s
    150 hours, but sheer Internet indulgence paired up with AOL’s $4.95
    offering). For $19.95, users get unlimited hours. For $21.95, they get
    unlimited hours plus 10 additional email boxes.

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