Cheap Internet?

by Rob Zorn
from the March 2005 Newsletter

Speaking of throwing your money away...

Customers may be aware of various companies advertising Internet access, often unlimited, at very low prices. I'm impressed that a number of customers have mentioned that they've looked a little more closely at what's being offered and have easily spotted a few pitfalls and hidden hooks. Nevertheless, we are occasionally asked when we're going to start offering unlimited Internet at $9.95/month, so I thought it would be appropriate to clarify a few matters in this regard.

Firstly, I'm not aware of anyone really offering a premium unlimited service for $9.95. Where that price is offered, there are always conditions and extras which might include:

Now, at Actrix, we're not afraid of fair, honest competition, but it's a tad irritating having it implied on TV that our customers are not spending their money wisely, and then they're offered an alternative that, at first glance, appears to be a much better deal than it really is. Knowing about industry costs as well, it seems fairly obvious that the only way to offer Internet at that price and still make any profit at all is to strip away the added benefits, and oversubscribe the services. This leads to busy signals and very slow traffic.

At this point some might suggest that the cheaper deals are still good for people who use the Internet very little. That might seem to make sense at first glance too, but does it really? Why buy an unlimited package if you're a light user? With an Actrix pre-pay plan you could spend an hour online each week and the cost would be under $5.00/month. Or, we'll give the light user 30 hours per month for $9.95, but that will include all the extras such as spam and virus protection, fast traffic, free renowned help desk, no busy signals, this newsletter and more. People who want unlimited plans tend to be heavier users who don't want to get busy signals or slow traffic, and they tend to want the extras. Therefore it makes little sense to offer an unlimited but stripped down product.

The danger with this sort of approach is that it ends up doing a disservice to Internet consumers in general by encouraging the sort of scenario we started to see during the days of the free providers. Customers are misled in their expectations and the pressure is on ISPs to drop prices. Oversubscription starts to occur as ISPs make service cutbacks to compensate for lost revenue, and then customers complain about degraded services until prices go back up again and quality services are restored.

As always, customers do determine the market. It would just be a shame to see this occurring based on assumptions where the full story hasn't always been given.

I'll conclude by confessing that I could hardly be viewed as an independent commentator. Nevertheless I think what I say makes sense. Feel free to check out the facts for yourself. Use your freedom of choice by all means, but ask a few hard questions along the way!