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Non-Tech : Proposed $.10 per Minute Internet Charge
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To: John Grandy who wrote (39)2/9/1997 6:03:00 PM
From: John Grandy   of 112
 
Hambrecht & Quist go on to explain exactly how the ISPs tried to take advantage of present laws and ended up ham-stringing themselves:

<<<<<

Flat-rate Internet access exists because of the exemption that
Enhanced Service Providers (ESPs) have from usage-sensitive access
charges. ... At a more subtle level, the
entire commercial Internet is based on inefficient pricing models and
heavy doses of subsidy.

The principal subsidy to dial-up Internet users is rooted in the
exemption that "enhanced service providers" (e.g., an Internet service
provider) have from paying local exchange carriers (i.e., the regional
phone companies) usage-sensitive access charges. ... Today, a long distance
company pays the local exchange carrier (LEC) an average of
$0.0325 per minute on each end of a connection - this represents
between 40 percent to 60 percent of the cost of a long distance
phone call. Since ESPs do not pay per minute access charges, they
are able to offer unlimited usage, flat rate Internet service plans. This
allows subscribers to dial-up their ISP, park on the line for as long as they want, and still
pay only $19.95 per month.

Yet it is not clear whether flat-rate pricing is such a great deal for the
ISP either. Netcom recently scrapped the $19.95 monthly charge it
had helped pioneer, presumably after figuring out that it was losing
money on every subscriber. More recently, AOL has faced a string of
public relations nightmares following its shift to flat-rate pricing. With
customer usage surging and the inability to get a connection becoming
ever more prevalent, the company is being sued by members who say
that AOL has employed deceptive marketing tactics and that the
quality of service has been so compromised that it has resulted in
"undue hardship."
>>>>>
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