News

Some Ops Try Scaling Modem Charges

1/04/1998 7:00 PM Eastern

Cable operators are becoming increasingly intrigued by the
idea of charging high-speed Internet-access customers different prices for different
levels of service, despite warnings from some executives that such a move may be
premature.

High-level executives from Time Warner Cable's Road
Runner and MediaOne Express (which are set to merge later this year), and from @Home
Network, endorsed the concept of differentiated pricing for cable-modem customers at last
month's Western Show in Anaheim, Calif. While they did not set timetables for
instituting new pricing structures, some local operators have already begun offering
cable-modem customers a variety of pricing options.

But one top MSO executive warned that it was premature to
offer different prices, saying that it will confuse subscribers.

Prime Cable's 260,000-subscriber system in Las Vegas,
for example, has been offering subscribers four pricing tiers for Internet access, ranging
from $39.95 per month to $599.95, since September.

Mary Alice Bauchman, a Prime vice president who manages the
Las Vegas system, said the multiple pricing tiers gave the system 'better control
over network resources.'

What's more, she added, variable pricing 'gives
you the ability to generate revenue on a cash-flow-per-bandwidth allocation.'

Bauchman said approximately 94 percent of Prime's
cable-modem customers take the standard, $39.95-per-month service, which provides
Internet-access speed of 512 kilobits per second downstream and 64 kbps upstream. But for
$99.95 per month, customers can access the Internet at 1 megabit per second downstream and
128 kbps upstream; for $299.95, access is 1.5 mbps downstream and 256 kbps upstream; and
for $599.95, the speed is 1.5 mbps both ways.

Prime is targeting business customers for the higher-priced
tiers, Bauchman said.

The Cable Co-Op in Palo Alto, Calif., also offers various
prices for high-speed access, and Harron Communications, which is launching cable modems
in its 63,000-subscriber southeast Michigan system near Detroit this quarter, is
considering doing so, as well, said Linda Stutchell, Harron's vice president of
programming and public affairs.

But Roger Keating, senior vice president of online services
for Comcast Corp., noted that equipment constraints prevent many operators from being able
to charge different prices and to support guaranteed service levels.

What's more, he said, offering different prices for
different levels of service would be 'counterproductive' to the nascent
cable-modem business at this early stage of the product cycle.

'We have a nice, clean, simple message now,' he
said, referring to operators offering high-speed access to the Internet via cable modems
for one monthly fee, 'and we haven't won that victory yet. I think that it could
actually backfire to offer more choices at this stage.

'As we move further down the product cycle, we'll
see different pricing based on customer needs. It's not a priority today, but it will
be a year or two from now,' Keating said.