By AT&T shook up the Internet-access industry today by offering its long-distance customers five free hours per month of free dial-up access to the Net.
Once the company’s long-anticipated dial-up AT&T WorldNet Service becomes available in March, AT&T long-distance customers will get five free hours per month for one year from the date of registration plus an “all you can eat” flat-rate option for $19.95 per month. Customers won’t be obliged to subscribe to anything beyond the five free hours, but pricing does not include local, long-distance, or 800-facility access charges.
The five-free-hours promotion will continue through the end of 1996.
AT&T will also try to woo customers who don’t have AT&T long-distance service by offering it at $4.95 per month for three hours (plus $2.50 for each additional hour) or $24.95 per month for unlimited access.
All AT&T WorldNet Service customers will get 28.8-kbps access to the Internet and all the software required to get online, including an AT&T-branded version of Netscape Navigator. At first, users will have to pay for the service using credit cards, but eventually, AT&T officials said that AT&T customers will be able to have their Net access charges tacked onto their phone bill if they want.
But it’s the promotion with the magic word free that will put other consumer-oriented Internet service providers (ISPs), including MCI, NetCom, and PSINet, on alert status in an increasingly competitive arena.
“It would be a new development in the pricing of Internet service,” said Beth Gauge, broadband consultant at TeleChoice, a telecommunications consultancy based in Verona, New Jersey. “I would be impressed [by free Internet access].”
AT&T’s soon-to-be competitors have been dropping their access rate for months. On February 6, CompuServe announced a low-cost Internet-only service called SpryNet that starts at $4.95 per month for three hours and costs $1.95 for each additional hour. Prodigy is likewise testing a $1-per-hour service in the New York Metro area.
But even with rates free-falling, AT&T’s free service, combined with the company’s marketing muscle, customer service organization, and vast database of 80 million residential telephone customers, will prove formidable to smaller ISPs. And with the five-free-hours promotion, AT&T may be able to quickly change the competitive landscape for Net access.
“Competition among [ISPs] will fall back to the quality of the AT&T service offering,” said Telechoice’s Gauge. “But AT&T is in a better position to provide customer service [than other ISPs].”
Although it has one of the largest existing customer bases, AT&T is by no means the only telephone company muscling into the ISP arena. Pacific Bell, for example, is among the regional bell operating companies (RBOCs) planning to capitalize on the consumer Internet access market. Beginning in April, Pac Bell will offer dial-up access in the Sacramento, San Francisco, Los Angeles, and San Diego areas. Company officials would not confirm pricing, but reports have placed the company’s pricing at as low as $10 per month for 10 hours.
AT&T’s and Pacific Bell’s entry into the dial-up ISP market also comes at a time when the “churn rate” is high among consumers who are dissatisfied with their current ISP and want to change to another provider.
A survey released recently by market research firm Finds/SVP reported that 47 percent of respondents are planning to switch ISPs within the next year. Respondents cited a need for faster access, lower flat monthly fees, and local dial-in access as the primary reasons for wanting to switch.
AT&T WorldNet has been selling dedicated Internet connections to businesses since last September.
