Charter Pipeline Cracks $30 Data Price Barrier

Author:
Updated:
Original:

A California cable system is offering high-speed
cable-modem service for $29.95 per month, including modem charges, in an effort to steal
online customers away from traditional dial-up services such as America Online Inc.

Charter Communications of Riverside is backing its new
two-month marketing trial with cross-channel TV spots, direct mail, radio and newspaper
ads to see whether the discounts will have a significant impact on new-subscriber
penetration.

Most high-speed services still command higher price points.

Some cable services offer service for $29.95 to video
customers if those customers buy the modems. And some -- but not most --
digital-subscriber-line services offer high-speed access at prices that low, although the
charge typically excludes the cost of an Internet-service provider.

"It looks like they're trying to see how much [a
discounted price] will move the needle," Phoenix-based Kinetics Strategies Inc.
president Michael Harris said, "and whether it moves the buy-rates fast enough"
to have a real effect on penetration.

Charter Riverside general manager Robert Brown was
optimistic about the new "Charter Pipeline" promotion, which is directed at new
subscribers only.

"If we can get this into the customer's hands, 90
percent will keep it," Brown said. "Another 10 percent may disconnect, but then
they'll be back in a month to reconnect" after they try to go back to slower dial-up
services.

The system's research indicated that one year after its
service launch, Charter Pipeline's high-speed penetration was in line with the national
average, Charter Riverside manager of community affairs Dusty Garza said.

"Instead of just going after the guy who wants
high-speed, we wanted to go after other ISP users, too," Garza added.

The offer includes unlimited Internet access and e-mail
usage from Charter's ISP, EarthLink Network Inc.

But not all of the system's plant has been upgraded for
two-way service: While some areas offer full two-way interactivity, others offer a hybrid
service with a telephone-return path. The promotional price will be the same for either
technology, Garza said.

Discounting high-speed access too deeply could undermine
the perceived value of the service, Harris warned, adding that offering installation
discounts could be more effective in attracting new customers, who are often more
concerned with upfront costs than with monthly subscription rates.

As part of its current promotion, Charter Riverside is
discounting the price of installation to $29.95. In some previous promotions, it has
offered free installation.

Pricing may be more of an issue in Riverside than in other
markets, Garza said, adding that the city is "not one of the nation's top 40 wired
communities."

Once the system has completed its plant upgrade, Charter
may look at gaining incremental revenues by restructuring its pricing around higher-speed
packages.

Garza added that he'd like to be able to lower the price
even further to compete more directly with dial-up ISPs, but the number that allowed the
system to maintain profitability right now is $29.95.

The promotional monthly price is guaranteed to new
subscribers through the year 2000.

Related