Price Cut Gains Data-Only Subscribers

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Over the last eight months, Charter Communications Inc. has targeted homes that don’t buy its cable service by offering the same price for high-speed Internet to non-video homes as it offers current cable customers.

The result: Charter has added more than 130,000 high-speed Internet customers by dropping the “non-subscriber penalty” assessed to customers who don’t also buy video packages.

Now, subscribers who don’t take video can sign on for high-speed Internet at $39.95 per month — the same as video customers — instead of $49.95.

COMMON PRACTICE

The non-subscriber “penalty” is a common pricing strategy. But it raised howls of protests in former AT&T Broadband markets, including the San Francisco Bay area, when new owner Comcast Corp. applied it two years ago.

A spokesman for the Internet division said Comcast chooses to reward multiproduct customers with pricing discounts.

For other companies, pricing can vary. Time Warner Cable’s Los Angeles division charges the same rate for standalone HSI customers as it does for multi-product customers, company spokesman Mark Harrad said.

In New York City, though, a data-only Time Warner Cable customer pays more for Internet access than someone ordering a bundle of services.

STARTER SERVICE

Startup Atlantic Broadband, which recently acquired 130,000 cable customers on the East Coast, said it is trying out a “starter” package of high-speed data for as little as $21.95, marketed to non-video households. Atlantic bought its properties from Charter.

Senior vice president for sales and marketing Kip Simonson knows about bundling, having come to Charter from Cox Communications Inc.’s Orange County cluster.

“We bundled, but we started out with one product at a time,” he said of his old operation.

When he arrived at his current shop, Charter had 50,000 data-only customers among 5 million households passed.

In the middle of last year, when telephone companies became more aggressive with digital subscriber line pricing, Charter’s data-only penetration dropped to 30,000.

HSI AS LURE

In many markets Charter has had trouble winning customers back from direct-broadcast satellite services. Simonson began to ask why Charter couldn’t start rebuilding around the popular high-speed Internet service.

So last September, Charter began sending direct-mail pitches to non-subscriber households. They were targeted to neighbors of high-speed data users, in the hope that the recipients would have at least heard of the product.

Not only was the $10 “penalty” gone, but new subscribers could avail themselves of other offers in the marketplace, such as free installation, Simonson said.

Now, data-only penetration has increased to 160,000 homes, Simonson said.

After consumers have used the product a while and have a “good customer experience,” Charter will use personalized pieces to attempt to upgrade them to video and other offerings.

Charter also plans to convene focus groups among data-only users to assess their purchasing decision, impressions of the product and what it would take to convince them to buy more.

“We’re closely watching for what’s working,” Simonson said.

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