Broadband ISPs Mull Healing Power of Price Cuts

Charter Communications, which first started tiering cable modem service in 2001, offers three standard packages nationwide, ranging from $35 a month for 256 kbps downloading to roughly $55 for 1.5 mbps. Cable modem rental adds $5 a month to those prices, while bundling service with certain cable TV packages can cut $5 or $10 from the monthly fee.

About half of Charter's 1 million Internet customers choose the lowest-priced package, says Shahid Butt, vice president of marketing for new products and channels. Of the remaining customers, slightly more than half take a 768 kbps service priced at $43 a month; the rest take the top-level service.

Butt downplays the problem of lower tiers cannibalizing higher tiers, saying that the low-priced tier tempts dial-up users to try broadband. "If you offer them a price point that's comparable to dial-up, you get more people to trade up," he says.