Prodigy expands, improves local Telco service - computer shopping service

Discount Store News, Oct 16, 1989 by Arthur Markowitz

Prodigy Expands, Improves Local Telco Service

WHITE PLAINS, N.Y. - Prodigy has taken a number of steps to improve and expand its service. These steps include: moving into a new operation center; signing its first deal for a local telephone company to distribute its service; and, completing plans to put new advertising rates into effect next year.

The changes are part of Prodigy's ongoing expansion and refinement of its interactive computer shopping and information service. The moves come as two potential major competitors, American Telephone & Telegraph and Nintendo, operating separately and also in a joint venture, are getting set to enter the nascent business.

500,000 Customers Added

The agreement with the Rochester Telephone Co., an independent local phone company that serves about 500,000 customers, could presage Prodigy using similar telephone companiesto aid the service to rapidly expand into other small markets.

Using an independent telco would be more cost-efficient for Prodigy than installing and maintaining its own network in smaller markets. Unlike regional Baby Bells, the independent telephone comapanies aren't prohibited from originating services and they can, therefore, provide specific services for their local markets, making Prodigy more attractive to consumers.

Prodigy's new advertising charge will be detailed in an updated rate card this fall. This "Value Based Pricing," is designed to reflect actual consumer use of the service, according to a spokesman. Marketers - retailers and other companies that sell merchandise - will continue to be charged a "small percent of sales." Advertisers - firms that just provide information on its goods and services - will be billed based on the number and extend of actually access of its presentation.

By the time the new rates take effect in January, Prodigy will have expanded its service to 20 markets from its current 16 and will have at least doubled its mid-year base of 75,000 subscribers.

The four new cities, Chicago, Minneapolis/St. Paul, Dallas and Rochester, N.Y., mean that Prodigy by the end of this year will be available in markets that contain 40 percent of the nation's homes that have IBM and compatible computers. Apple computer owners are due to be able to connect next year.

Prodigy executives said information on the number of consumers and their usage of the service would be released "soon." The sketchy data that has been cited in the past few months was $60 to $70 as the range for general merchandise sales; $80 to $90 for grocery purchases. Consumer usage ran the gamut from light to heavy shopping to people who just accessed information services like banking, with electronic mail the most popular service.

Under 200 Companies

Just under 200 companies are now on Prodigy, with marketers - ranging from specialty merchants like Coffee Anyone? and Sam Goody to mass retailers like Sears and K mart - presently offering over 60,000 different sku's, up from 2,500 sku's at the start of the year.

Prodigy's introduction into over a dozen markets this year and another two dozen in 1990 was the reason for the relocation of all operations and a number of computers to sustain the service to an 82,000-square-foot National Support Center near its White Plains, N.Y., headquarters.

Besides easing the service's entry into the Rochester market, the deal with the Rochester telco will enable Prodigy to probe the advanced phone technology that the company is eyeing for use in the future. The speed at which Prodigy delivers its service is limited by the 1200 and 2400 bit-per-second modems used by subscribers.

Prodigy is planning to offer a higher speed service accessible by a 9600 baud modem when such a device becomes available on a mass basis, an executive said.

The Rochester telco currently offers 2400 baud service and can provide 6400 baud service. But it is one of the few telcos that has a local network whose switching - directing calls to customers - is almost 100 percent digital. Such an ISDN (integrated services digital network) system can process information at up to 1.5 million bits-a-second through lines that can simultaneously handle two voice and one digital channel. The multi-channel line means that a subscriber could make a phone call using one voice channel while also accessing Prodigy, which is being carried on the digital and other voice artery.

The synergistic agreement calls for the phone company and Prodigy to share in the cost of the computer equipment used in the Rochester market.

In addition, Prodigy will supply its basic shopping and information service while the telephone company will maintain the network and provide some services, either originating them or acting as a gateway for other companies to add local services.

As an independent telco, the Rochester company isn't affected by U.S. District Court Judge Harold Greene's judgement in the 1984 breakup of AT&T. The judge proscribed regional Baby Bells from being information providers, originating any videotex, computer, financial or other information service. The Baby Bells are limited to acting as gateways, connecting IPs to customers. A number of regional telcos earlier this year launched gateway services (see DSN, May 8, page 5).