News

AT&T Hikes Modem Owners' Rates

5/29/2002 7:22 AM Eastern

AT&T Broadband cable-modem subscribers who own their own modems won't be
getting as much of a discount soon.

The MSO is adjusting its cable-modem fee schedule effective July 1. Customers
who lease their modems have paid $35.95 per month for the service and $10 to
lease the modem. That will change to $42.95 with a $3 leasing fee for the modem,
effectively keeping the overall monthly charge the same.

For those who have bought their modems, the $35.95 monthly charge will rise
to $42.95. But they won't feel that pinch right away -- AT&T Broadband is
offering a $7 discount coupon for six months, effectively delaying the price
increase until January.

They are also in a minority: About 90 percent of AT&T Broadband's
customers lease their modems, according to spokeswoman Sarah Eder.

The changes reflect the dropping cost for cable modems, down from an initial
$300 two years ago to $100 or less with discounts, according to Eder.

'We have to price our leased rate around what we think the equipment is
worth, so it is a decline in the equipment cost with the leased price coming
down,' she said. 'Now, at the same time, we recognize that the value of our
service is higher, and we think this price adequately reflects the value in the
market today.'

In comparison, Cox Communications Inc. charges $49.95 per month for similar
service with a leased modem and $34.95 for service where a customer owns the
modem. Comcast Corp. charges $44.95 for service and a leased modem and $39.95
for service where the customer owns the modem.

In its defense, AT&T Broadband is arguing that its service is still a
cost advantage based on the competition.

At a maximum of 1.5 megabits per second downstream and 256 kilobits per
second upstream, AT&T Broadband delivers its service for about 3 cents per
kbps monthly.

That compares to 16 cents monthly for Qwest Communications International
Inc.'s symmetric 256-kbps service and 4 cents monthly for Verizon
Communications' 1.5-mbps downstream, 356-kbps upstream
service.

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