Internet providers on verge of introducing two-tiered pricing policy for subscribers

Bell Canada is just weeks away from introducing a two-tiered system for its Sympatico high-speed Internet service that will see heavy users of bandwidth paying more, with a reduction for less active web surfers. This would be the first volley in what is likely to be a reconfiguration of how Internet access is priced in Canada. Peter Costanzo, director of product management for Sympatico, tells Network Letter that the company is currently developing a "two-tiered pricing structure with a higher value, higher speed service". He says it will be rolled out soon, but could not provide a specific date. "I would say we’re still probably a couple of months away before we would have final details to go public with," he notes.This comes in the wake of a newspaper report that Rogers Cable Inc. is considering moving to a different pricing schedule. The company has hinted for the past few months that it is contemplating such a move. "We’ve been looking at this for about a year," Rogers spokeswoman Taanta Gupta tells Network Letter. "Sometime this year we will have to make the business decision whether we’re going to launch those and that’s sort of the stage we’re at right now." The peak price charged by both Bell and Rogers is $44.95 per month, although Bell is currently running a special discount introductory offer and Rogers is offering monthly rebates for new customers. The Rogers plan would see "bandwidth hogs" shell out more for their access, while those who use the service less frequently would see a reduction in their current rates. Those who can expect the lower fees would be Internet users who restrict their use to email and occasional web surfing. Heavy users are those who download music and video applications. Sympatico expects Rogers will follow the same path that it is proposing. "It’s very similar because we both face the same situation," Costanzo states. "There’s a bandwidth trend that’s on the rise and bandwidth is not a free commodity." One important element of the Bell offering is that bandwidth speeds will be increased for those paying the higher rates. "Roughly it would be double the speed of what you get on Sympatico today," Costanzo says. Gupta stresses the need for less bandwidth-hungry users to realize savings for connectivity. "I don’t want to pay the $45, but I might be prepared to pay something less for a high-speed version, but not as high-speed as some of the others." Costanzo believes the marketplace is ready for a new pricing plan. He expects those who do more online to be the most enthusiastic."There’s different segments in the broadband market. We believe this higher speed, higher value service will meet the needs of a small but vocal and heavy user segment in the Sympatico base," he suggests. "There’s roughly five per cent or so of our customers that consume a disproportionate amount of the network." While subscribers in central Canada may get a break on their Internet service, it is less clear what will happen in the west. In an email to Network Letter, Nick Culo of Telus admits that the telco is looking at the market dynamics, especially with consideration to the actions of its main cableco rival, Shaw Communications Inc. "We don’t think we’re in a position right now to lead the market or be first with any pricing changes because of our current market share and our intent to aggressively grow that position," he writes. "It’s no secret the high-speed market is margin-challenged. We’re going to keep a close eye on where the market goes and what our competition is doing." Shaw was not available for comment at press time. Most Internet subscribers across the country pay roughly the same amount (see table) but there are special allowances. Bell, for example, currently charges new customers $24.95/month for the first five months before implementing the $44.95 fee. The Aliant companies give a discount rate of $22.95/month for the first six months before imposing the regular rate. Manitoba Telecom Services charges its Internet customers $39.95/month, but knocks two dollars off the price if the subscribers also sign up for the telco’s local and LD service. The most broad-based is Sprint Canada’s suite of services. Prices range from $9.95/month for 10 hours of Internet time, $14.95 for 50 hours, and two different unlimited time packages, one retailing for $22.95, the other for $26.95. Subscribers to the unlimited packages are eligible for a two-dollar rebate if they sign up for Sprint’s LD service.

Internet providers on verge of introducing two-tiered pricing policy for subscribers

News | February 11, 2002

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