AT&T to hike prices on dial-up

AT&T will jack up its rates for dial-up Internet access by as much as 60 percent on Dec. 1, going well above the price of faster DSL (Digital Subscriber Line) in many cases.

Customers who are now charged US$9.99 per month will start paying $15.95, and the $15.95 customers will see their bills go up to $22.95, said company representative Dan Callahan. $22.95 is the flat rate for all new customers, up from $21.95. AT&T made the change to be competitive with other dial-up providers, Callahan said. The lower rates are left over from previous carriers that have been absorbed into AT&T, namely BellSouth, he said.

AT&T offers basic DSL for as little as $10 per month for new customers, with some conditions. But the dial-up price hike is bad news for some AT&T customers in areas where DSL isn't available. One user complained about it on the forum BroadbandReports, saying he would have already signed up for DSL if he could have. "For a buck less, I could have service that is 15 times faster," wrote the customer, who used the screen name "GorbGuy."

Traditional carriers and other service providers have been backing away from their dial-up offerings as more Internet users adopt broadband. With the market penetration of DSL and cable Internet service in the U.S. at 50 percent to 60 percent, nearing the percentage of people who have PCs, dial-up is becoming a niche market, said Ovum analyst Mark Seery. Carriers don't like serving that market because, like any large corporation, they're interested in doing one thing, he said.

"Any time something becomes not the biggest part of what you're doing, it becomes potentially subscale and inefficient," Seery said.

In addition, they can't upsell customers to additional services such as video on demand until they're on broadband, he said. And their dial-up customers aren't a captive audience, because there are many competitive providers of the service, due to technical and legal factors, he added.

DSL providers have already tried low introductory prices on DSL, such as AT&T's $10 offer, to entice their dial-up customers to switch.

"I think they think the people who remain on dial-up are not looking to move to broadband," Seery said. "Perhaps the only way to get them to move to broadband is to raise the prices."

Competition is the good news for those who want to remain on dial-up. Juno, for example, offers a service for $9.95 per month for the first 12 months and $14.95 per month thereafter. Most dial-up providers include a variety of e-mail, storage and security features. But even the major competitive ISPs (Internet service providers) are steering customers toward broadband. EarthLink, for example, offers dial-up at a $9.95 introductory rate and then $21.95 per month. Its broadband plans start as low as $12.95 per month.