Tiered Service Coming to Cable?

The price of surfing the Internet with a cable modem continues to rise, and
according to the hints and innuendos of cable executives, that price will
just get worse for broadband’s heavy hitters.

Bandwidth costs money, just ask any free Internet service
provider (ISP) customer of the past three years who saw their service
disappear after the dot com bubble burst. But that hasn’t been especially apparent in cable Internet connectivity, which until recently
had little in the way of bandwidth throttling or pricing tiers.

Before [email protected] went out
of business
,and cable operators brought its ISP operations in-house,
cable broadband users experienced virtually unlimited download and upload
speeds for their service — at somewhere around 3 Mbps, depending on
network congestion.

When AT&T Broadband announced most of its users would have
to give up their 3 Mbps speeds through [email protected] for an AT&T Broadband
1.5 Mbps connection speed at the same price, customers weren’t happy. The
cable operator justified the speed cap as the cost of doing business and
preventing future problems when more cable customers signed up for
high-speed service.

The cost of doing business has gone through some revisions at Ma Bell’s
cable division, as it integrates its network under one management team
(AT&T Broadband) and one service level. Its expected merger with Comcast
Corp. is also supposedly in the back of officials’ minds.

Network congestion is creating most of the problems for cable users. Cable
networks which, like fixed wireless or digital wireless phone service, bog
down when too many pile on at the same time, causing lags and disconnects.

AT&T Broadband and Comcast have been making noise the past few months to
combat congestion by taxing its ‘Net hogs,’ as AT&T Chairman C. Michael
Armstrong calls them. One percent of its cable modem users, he said in
testimony to Congress recently, were responsible for 30 percent of its
network bandwidth consumption.

So it should come as no surprise the cable companies would start charging
more for the customers putting its network under the most strain, part of
the cable networks’ plans to ultimately tier its service plans to get more
people transitioned from dial-up.

“These hints are getting people used to the fact that the
one-size-fits-all, all-you-can-eat model is a thing of the past and that
going forward, people who use more are going to pay more,” said Mark
Kersey, a broadband analyst with ARS Inc., a research firm based in La
Jolla, Calif.

Cable is moving in the direction of its biggest rivals — digital
subscriber line (DSL) providers, who charge different rates for different
flavors of service. The faster the speed, the more users pay in monthly fees.

While cable company officials are steadfast in saying they haven’t
announced any plans for tiered service, many analysts figure it will break
down into three levels: low-end (around 128 Kbps), mid-range (around 1
Mbps), and high-end (anywhere from 1 Mbps and up) speeds.

Suzanne McFadden, Comcast senior director of marketing, is one of those
officials who say speed isn’t the only factor — speed was one of the most
important factors for those early adopters who flocked to cable modem
service when it first became available.

Instead, she said, the carrier is looking at the feasibility of different
broadband content packages dependent on the user’s needs, targeted at the
biggest crop of dial-up users on the Internet — the 26 million plus
America Online subscribers who care more about content
than speed and are looking for a reason to upgrade.

“What we are finding is that a lot of people who are on AOL, they’re used
to a very packaged environment of content where they don’t have to go far
to find what they want, it’s easier and more convenient for them,” she
said. “We’re not looking to create tiers based on speed alone, we’re
looking to create and align to all these different customers who have not
made the jump to broadband. In addition, we’re looking to enhance our
product to meet the growing needs of early adopters.”

According to Kersey, content married with low-end speeds will be a big
factor for many dial up users migrating to broadband. Tiered plans, he
said, just make sense.

“It’s something that on the low end makes sense,” he said. “There are a
lot of dial-up users out there who just can’t justify more than doubling
their monthly fee to switch to broadband.”

For many cable modem users, though, it’s all about the speed, and changes
to the disappearing model of wide-open bandwidth connections will meet
great resistance — though alternatives are scarce; broadband options are
higher-priced DSL, fixed wireless or Wi-Fi, and two-way satellite
services. All have limited service areas in the U.S.

“There are going to be a lot of people who are unhappy with this and you
might see some defections, but ultimately I don’t see that it will have a
huge impact in terms of customer churn,” Kersey added.

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