AT&T raises prices for cable modem owners

While having my morning read of /. I came across this story...

A new pricing structure from AT&T will result in modem owners paying an extra $7 for their high-speed Internet service whilst those who rent the cable modems from AT&T will pay whay they have always paid.

AT&T's marketing executives, who have framed the changes, say that the price reductions is based on the decreasing cost of hardware, but the end result will be higher costs for roughly 162,500 AT&T customers who own their own cable modems.

If you rent a cable modem from AT&T (like I do), your monthly bill will stay the same (the monthly service rate will increase by $7 to $42.95, and your lease of the modem will drop by $7 to $3 per month).

BUT, if you are like the 10% of the 1.63 million customers of AT&T who OWN their own modem, this will mean that your monthly bill will jump by $7, as the standard monthly serice rate for ALL customers gets raised to $42.95.

Based on the number of people paying an additional $7 per month, AT&T stands to gain $1.14 million in monthly revenue from the restructuring.

These rates take effect for any new customers signing up to AT&T Broadband cable service, but existing cable modem owners will, for the next 6 months, recieve a coupon for $7, letting these cable modem owners off the hook until the new rates take effect in January 2003.

Asked why the change of pricing for AT&T customers, Darrel Hegar, vice president of Internet services for Englewood, Colo.-based AT&T Broadband, said that the changes reflected price reductions for cable modems. When home broadband access became popular in the late 1990s and in 2000, cable modems cost $300 or more. But in the past two years, the price has dropped to $100 or less, thanks in part to aggressive marketing promotions at computer hardware stores.

"If you look at the price of our service, it really still reflects one of the best values in the marketplace," Hegar said Tuesday morning. "Cable Internet continues to be the best way to access broadband vs. DSL or satellite. If you look at availability, speed and price, we are still a value leader."

The decision to increase prices for modem owners could be due to the fact that owners have sunk more of their own money into the service and would be less likely to switch to DSL or another broadband alternative, according to Mark Kersey, broadband industry analyst for La Jolla, Calif.-based research group ARS.

"People who own their modems are pretty much locked in to staying with AT&T," Kersey said. "It's a way to extract a little more money out of a small percentage of people. That's a fairly politically smart thing to do because it doesn't affect the vast majority of customers."

News source: ZDNet News

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