AT&T considers tiered pricing structure for broadband Internet

AT&T Broadband is considering a tiered pricing structure for its high-speed Internet service that would force “power users”--those who account for 1% of the company’s customers but eat up 16% of the available bandwidth--to pay for what they use.

According to an AT&T spokesman, typical customers who use their cable-modem connections for “normal residential use,” including the downloading of MP3 and MPEG files, would not be impacted appreciably by the new pricing structure.

However, it would affect customers who use their connection for small-business applications--such as Web servers and “running a Net service out of their garages”--said the spokesman.

“We understand the power users will be most affected by this, but their impact on the network considering the amount of customers they represent, is inordinately large,” he said. “So, to be fair to the other 99% of our customers, we are leveling out the experience.”

Since the unraveling of its deal with Excite@Home, AT&T has placed a downstream cap of 1.5 MB/s to “optimize the broadband experience of all users,” said the spokesman. He added that the former Excite@Home customers had been receiving download speeds ranging from 2.0 MB/s to 2.5 MB/s, a negligible difference.

“The average customer cannot tell the difference between 1.5 and 2.5 megabytes. It is literally an invisible issue to them. A file that used to take 39 seconds to download now takes 42 seconds,” he said, adding that most of the complaints the company has received since the transition have come from “a vocal minority.”

In addition to the power users, AT&T’s new broadband network is being burdened with an unusually high volume of traffic that should “level off” when users catch up with e-mail and other usage that had been put on hold for up to a week after Excite@Home pulled the plug on 850,000 AT&T customers on Dec. 1.

“Once we get to more normalized usage patterns, our customers will find that the 1.5 megabits will be more than enough for their use,” he said.

How they will react to a tiered pricing structure might be another matter. While the spokesman acknowledged that some customers might migrate to digital subscriber line (DSL) services, AT&T believes most will not because--even at 1.5 MB/s--cable performs better than DSL. He also said customers have been asking for more choices in packages, instead of the “one size fits all” approach the company has implemented over the past five years. The company will not identify the tiers or an implementation timetable until it has conducted market research on the matter, said the spokesman.

Patrick Comack, telecom analyst for Guzman & Co., said AT&T needs to be careful with this strategy.

“If they increase their prices, they’re going to be subject to some loss of market share. All of their customers were dark for at least a day, and many were down for three days or more … Their brand has been hurt by the Excite ordeal.”