To Tier or Not to Tier?

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New Orleans -- Panelists at a Cable & Telecommunications Association for
Marketing session Sunday all agreed that high-speed-modem penetration is
exceeding expectations.

But they differed on whether the cable industry should tier data services to
generate higher take rates.

Although tiering may make sense in the future, David Watson, Comcast Corp.'s
executive vice president of sales, marketing and customer service, said: 'It's
premature to go to a lower speed and lower price. The demand is very
strong.'

Watson said weekly demand for cable modems is as strong in markets with 20
percent or more penetration as in Comcast markets where high speed has just been
introduced.

A second issue is that the cost structure for lower tiered, lower-priced data
services is nearly the same as higher speeds. 'We have to figure out a way to
differentiate our cost structure,' Watson said, to maintain profit margins for
lower-tiered products.

Michael Lee, VP of product development at Rogers Communications Inc., said
the Canadian MSO launched a 128-kilobit-per-second service four weeks ago after
studying modem-churn figures.

'People who didn't use it enough were dropping down to dial-up,' Lee said.
The new tiering structure is designed to 'capture them on the way out,' he
added. 'It's been very successful to this point, and we haven't seen almost any
cannibalization.'

Lee said Rogers even had some people who tiered down to 128 kbps, then called
back and said they wanted to go back up to high speed.

Cox Communications Inc. has been testing a lower-speed tiered service in Las
Vegas, vice president of multimedia John Hildebrand said. The MSO has found it
successful.

Hildebrand believes tiering is 'a good thing' to examine. 'The concern is, is
there a segment that doesn't want to make the big jump from narrowband to high
speed,' which makes a lower-speed service a viable option, he
added.

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