Think $35 or $40 is too much to pay for high-speed cable modem service from
? Well, just wait a few months and you might be able to get it for $20.
Starting in the fourth quarter, the company plans to test-market a cut-rate version of its broadband cable service, Excite@Home CEO George Bell said Thursday night. Designed to compete with
, the unnamed service will feature a connection speed that's 10 times faster than AOL's dial-up service but slower than Excite@Home's current cable modems, at about half the price of the flagship
service, Bell says.
Several institutional shareholders of Excite@Home said they'd heard rumors that the company might launch such a product, but had never gotten such a confirmation from the company itself.
The proposed "fighter brand," as Bell describes it, is evidence that Excite@Home is hoping to lure Internet users with a variety of brands and pricing options. It's also a possible harbinger of upcoming price wars among Excite@Home, AOL and other Internet companies over the cost of both broadband and traditional dial-up, or narrowband, access.
As Bell explains, what the company is doing is planning an array of products to capture customers at different stages in their lives. He calls the strategy similar to that of
, which might sell a convertible to a young car-buyer, a station wagon later in that person's life and a Cadillac when he or she reaches 50.
The strategy is also similar to that of AOL, which markets its AOL service as a full-priced brand and
as a cut-rate alternative.
Excite@Home's offerings already range from the
free dial-up Internet access service and its
Blue Mountain Arts
Web properties to its $40-per-month
broadband service. A less expensive broadband service, says Bell, is a natural fit among an array of products such as these.
What Might Change
Though the new service would presumably use the same infrastructure as the current @Home service, the company could find several ways to differentiate it from the costlier version in addition to providing a lower data rate, Bell says. It is possible that subscribers would have fewer email addresses per account, be able to connect fewer computers to the connection per household and have a different level of customer service than the more expensive offering, he says.
Buy-siders were generally positive about the prospective service. "I think it's a natural progression. I think it's pretty smart," says Marc Weiss, senior technology analyst at
Amerindo Investment Advisors
. Right now, the bottleneck to Excite@Home's growth is its ability to meet consumer demand, he says; introducing a lower price would indicate that supply is no longer a bottleneck. "And that is very, very positive," he says. For Excite@Home, getting as many people on its network as possible is more important than subscription fees, he says. Weiss' firm holds shares in Excite@Home.
Building a Base
The effect on Excite@Home's competitors is unclear. With the new pricing, Excite@Home could win customers who might otherwise have signed up with AOL or another Internet service provider, Weiss says. "You're taking opportunity away from AOL, but you may not take away AOL customers," he says. "Will people drop out of AOL to take advantage of this? I don't know."
Another buy-side analyst, who spoke on condition of anonymity, says the new brand would be a slight, but inevitable, negative for Excite@Home and AOL, which are both trying to build a critical mass of broadband customers.
"I think all of these guys basically realize that subscriber revenue is going to be a difficult thing to depend on," says the analyst, whose firm doesn't own either stock. For Excite@Home, the move would be negative if the firm couldn't accelerate broadband adoption rates, the analyst says. The new service would pressure AOL to upgrade users from its $21.95-a-month rate for dial-up service, the analyst adds. "AOL just has got to migrate narrowband to broadband just as fast as they can."