Broadband Gets Cheap

In an attempt to win cost-conscious consumers, cable broadband service providers are beginning to offer tiered pricing plans with faster-than-dial-up connections for as little as $25 a month.

But while cheaper service for people who have never had broadband sounds appealing, some longtime cable customers who are used to surfing at extremely high speeds complain that the move means slower connections at higher prices. They're not happy.

Cable companies are following in the footsteps of DSL providers, which have successfully offered tiered pricing for some time. Cable vendors hope their new services will lure skeptics and drive up demand for broadband, which has been weaker than many in the industry had expected.

Luring Cheapskates

"We want to make that first step to broadband much easier," says David Pugliese, cable provider Cox Communications' vice president of sales and new-product marketing.

Today, Cox offers its standard cable Internet service--with 3-mbps downloads and 256-kbps uploads--for about $35 a month. The company is now testing a $26-a-month service that offers scaled-back performance: 256-kbps downloads and 64-kbps uploads.

The test service is selling well, Pugliese says, likely in part because it costs just $2 more than standard 56-kbps dial-up service from America Online and many others.

Not every cable company will offer 256-kbps downloads for $26--providers are still working out their plans, and prices will vary widely by area. For example, Canadian broadband provider Rogers Cable took the tiered plunge earlier this year. Its High Speed Light service runs $25 a month, but with 128-kbps downloads and 64-kbps uploads. (See chart for a comparison of current plans and speeds.)

Bandwidth Hogs

Those prices may attract newcomers, but when a service alters its speeds, it risks aggravating current users--as Comcast and AT&T Broadband learned earlier this year.

The millions of orphaned Excite@Home users who were shifted to the two companies' networks found their download speeds, which were up to 3 mbps, reduced to 1.5 mbps. A vocal minority cried foul. Soon after, the companies also raised rates by several dollars per month.

AT&T says the bandwidth cut impacted about 850,000 former Excite users. Speeds were dropped to match services offered in other markets, as well as to help AT&T better manage its network and ready itself for tiered services, according to Sarah Eder, a spokesperson for AT&T.

For now, AT&T users can't get 3-mbps downloads. But the company plans to roll out tiered services as soon as this summer, Eder says.

Comcast customers have an ultrafast option--with speeds of 3.5 mbps down and 384 kbps up--for $95 a month.

Gotchas

Tiered pricing doesn't offer a wholly rosy picture, even for new users. Some providers introduce additional costs for those choosing a lower broadband tier, by charging for modem rental or for a mandatory subscription to cable TV.

Cable companies will probably try to lure users into paying more by adding new services, just as DSL providers have done. If they follow the DSL model, they may push subscription-based antivirus and firewall protection, special gaming packages, and other deals that could add $10 or more to the monthly bill.

In any case, tiered pricing is here to stay. As early as this fall, one-size-fits-all pricing may become the exception rather than the rule, according to Dylan Brooks, senior broadband analyst at Jupiter Media Metrix. In fact, Time Warner Cable is the only major broadband cable company that says it has no immediate plans to offer tiered pricing.

Areas with competition in broadband service should have the best prices. If you don't live in such an area, shop wisely and look out for hidden costs before taking the plunge.