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ISPs back away from flat-rate plans
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Faced with increasing losses, excessively congested systems and increased numbers of subscribers who spend many hours online each day, ISPs in the USA are rapidly backing away from the previous benchmark of "All you can eat for $19.95 per month".

The first to pull out of the Net-smorgasbord market was Netcom who announced last month that they were intending to reposition their services so as to cater for the more lucrative "top-end" of the market.

Observers believe that this is the start of a trend that will see most of the existing flat-rate providers eventually revert to an hourly-rate plan. As users become more demanding of performance and availability of service, the market itself may decide that paying more could result in better "value" in the longer term.

It is estimated that in the US, a flat-rate ISP will be losing money on any customer who spends more than 11 hours per month online. Eric Paulak, an analyst for the Gartner Group believes that the average level of use for Internet users in the US is around 16 to 18 hours per month.

Odds are that flat-rate access won't disappear but that users will be able to buy a rate which best suits their own preferences. Users on a lower budget or to who the availability of access is of low importance will still find ISPs offering a $19.95 per month deal but look for an increase in services which charge by the hour or raise their flat-rate fees to $40/mth or more - in return for better performance.

Here in New Zealand, the country's largest flat-rate ISP, IHUG, is making a move across the Tasman into the Australian market although some believe this "grass is greener" approach could see them struggling in a sea of competition from comparative giants such as Telstra and OzEmail.

Related stories:

IHUG sets Aussie rate at $29.95 a month

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