Rezoning Broadband Space With Tiered Pricing

Communications Today, June 21, 2002

Over the years, the dial-up Internet market evolved, sometimes painfully, toward a flat-rated business model. As DSL and cable providers began migrating customers to broadband service that model was carried over. At least at first. Now, however, with networks starting to get crowded, and actual broadband applications coming online to serve that growing base, the industry is backing away from flat rates toward a segmented pricing structure with different prices for different classes of service.

In some ways these tiered pricing plans are a shell game aimed at raising prices without appearing too greedy. In some ways they are a necessary adaptation to market conditions and changing customer demographics. Whatever they are, though, they represent a tacit admission that the industry is simply not ready to provide the service as envisioned in the long-term view of broadband as engine of the economic future.

A typical tiered strategy is that used by Rogers Communications [RG] in Canada. Rogers has split its service into something very much like its original high speed offering (1.5 Mbps down, 192k up) and a new "lite" offering which gives users 128k up and 64k down. The fast offering is $44.95 a month, up from $39.95 when it was the only offering. The lite version costs $24.95. For indepth analysis about this important development in broadband marketing, go to http://www.telecomweb.com/broadband/feature.htm

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