A word of caution .....
Inter@ctive Week February 1, 1999
AOL's $42 Fast Access Alarms ISPs
By Louis Trager
Holly Wallace is ready to advise customers to sign up for Asymmetric Digital Subscriber Line service from competitor America Online -- and just hope they maintain accounts with her Maryland-based Internet service provider, RadixNet, for its e-mail and newsgroup interfaces.
AOL (www.aol.com) plans to charge East Coast customers only about $42 monthly for low-end Asymmetric Digital Subscriber Line (ADSL) service, under a deal with Bell Atlantic an-nounced last month. Wallace said she sees no way Internet service providers (ISPs) can compete against that pricing.
"We were so completely and totally shocked over it," Wallace said, noting that an electronic mailing list for ISPs burned with wishful speculation that $42 was erroneous or omitted significant Bell Atlantic charges. "It's a complete and utter disaster for other ISPs."
"Awesome," was how Gary Arlen, at interactive services researcher Arlen Communications, characterized the competitive challenge.
"The way it's set up now," concurred The Yankee Group's Jim Wahl, "there's not much hope."
"Amazing," mused Sean Brophy, corporate development vice president at ISP consolidator Verio.
Bell Atlantic's low-end ADSL is fixed by tariff at $39.95, a price not subject to discounting without regulatory approvals, said Wallace and Earl Anderson, executive vice president at CAIS Internet, which resells Bell Atlantic ADSL from $57.95 monthly. The lowest price from Bell Atlantic's ISP is $59.95.
"We're certainly not going to break out any financials of our deal," said AOL spokeswoman Wendy Goldberg.
Bell Atlantic (www.bellatlantic. com) officials could not be reached.
Analysts and ISPs said AOL set its pricing to compete with cable-modem service, often priced at $40. They speculated that AOL and Bell Atlantic can make money even at $42. Cincinnati Bell and SBC Communications recently took prices down to about $50, incl-uding Net access. AOL, which domin- ates with 15 million subscribers, presumably commands volume discounts significantly greater than most ISPs.
But AOL is widely thought to regard e-commerce and advertising, not subscription fees, as its juiciest broadband profit prospects. "AOL is a media play," Verio's Brophy said.
"This is going to be very helpful getting people on the Internet," he added, "and it's going to put pressure on all of us to make sure we offer maximum value at the right price."
--------------------------------------------------------------------------------
Unbeatable Deal?
Some East Coast Internet providers worry they won't be able to compete with the Bell Atlantic-supplied Asymmetric Digital Subscriber Line (ADSL) service that America Online plans to offer.
Internet Service Lowest Monthly Charge For ADSL With Internet Access
BellAtlantic.net $59.95
CAIS Internet 57.95
America Online 42.00*
* ESTIMATE
|
