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ISPs offering slower speeds; access

Sun, 08/18/2002 - 8:00pm
Bruce Myerson

Copyright 2002 / Los Angeles Times

Los Angeles Times…08/19/2002

From LexisNexis

High-speed Internet connections may be getting cheaper, but only if you'll settle for a slower version of fast.

Hoping to attract Internet users who won't pay the $50 or so a month for a typical broadband connection, some providers are moving away from a one-speed-fits-all approach and introducing a slower, lower-priced level of service.

Covad Communications Group Inc., one of the high-profile failures of the dot-com collapse, is taking another aggressive stab at the powerful telephone and cable TV monopolies that dominate broadband.

Rejuvenated by a stint in bankruptcy, the company recently launched a digital subscriber line, or DSL, service priced at $ 39.95 a month with an introductory rate of $21.95 for the first four months.

And Charter Communications Inc., the nation's fourth-largest cable TV company, has been offering broadband for $30 or $35 a month on most of its systems in 40 states for at least a year.

The catch?

With download speeds of 200 to 250 kilobits per second, these "broadband lite" services are several times faster than a dial-up telephone connection but perhaps only a third as fast as a typical cable or DSL connection.

"It's a little bit slower but a heck of a lot faster than dial-up and well worth the money," said Steve Martin, a longtime America Online customer who recently switched to Covad at his home in San Jose.

The speed probably won't satisfy those looking to download music or set up a Web site.

But Martin, a procurement officer for a technology company, considers his Covad connection speed more than sufficient for checking e-mail, downloading photographs and making travel arrangements.

"The killer application on the Internet is still e-mail, and as long as that's the case, 200k (kilobits per second) is fine," said Mark Kersey, an analyst for ARS Research.

It's unclear whether tiered broadband will help reverse the price increases that cable and phone companies put in place as the dot-com meltdown wiped out competition from feisty rivals.

At the end of June, the average monthly charge for cable broadband was $45.31, up from $37.05 at the end of 2000, according to the latest market survey by ARS Research. DSL prices averaged $51.36 at midyear, up from $48.84 at the close of 2000, ARS reported.

Tiered pricing isn't new to broadband. For years, customers willing to pay more than $50 a month have been able to get speedier connects.

But now, possibly because of the renewed competition, the big players also are toying with a tiered approach at the lower end.

AT&T Broadband, which two weeks ago launched a faster tier of cable Internet service for $80 a month, also plans market trials with a lower-speed version this year.

Most of the companies dabbling with a lower-priced version of broadband are hoping to get dial-up users hooked on speed, confident that even the most price-conscious subscribers will quickly recognize what they were missing without an "always-on" connection.

"It's addictive. They can never go back to dial-up," said Charles Golvin, an industry analyst at Forrester Research.

Because the profit margins on entry-level offerings are less than robust, there are questions about whether such business models are any more viable than they were during the dot-com boom.

Covad believes that its model can work now that regulatory changes allow it to provide DSL over a customer's existing phone line rather than a separately installed line.

Ideally, for players both big and small, any entry-level tier of service will serve as a steppingstone to higher-revenue plans.

Once people convert to broadband, getting them to pay $10 more for faster service is easier than getting them to initially switch from dial-up, Golvin and Kersey said.

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