SYDNEY, Australia -- Is it an adroit broadband marketing move, or the spark that lights a cable modem rebellion?
That's the question facing the world's oldest commercial broadband cable provider as it readies to dramatically change its tariffs. Telstra plans to charge customers for a broader array of traffic, but provide higher flat fee thresholds as part of its volume-based monthly fees.
Ever since 1997, when it initiated residential high-speed cable modem Internet access to customers in Sydney and Melbourne, Telstra has followed a controversial pricing paradigm. Instead of charging for Net access by the hour, Telstra opted to charge on a volumetric basis.
For a US$40 flat fee, users were allowed 100 MB per month of data traffic. Additional volume was charged at 22 cents per MB. Email wasn't included in the tabulation. Telstra later introduced a few higher-priced, higher-volume plans, but they were nothing compared to the pricing overhaul set for 10 January.
Telstra plans to introduce an expanded series of volume plans with significantly higher volume thresholds as part of the monthly fee, plus lower additional per-MB charges. The trade-off is that all traffic, including email, will be metered.
The response to the changes has been loud and bitter. Some subscribers have said it may be the final straw that sends them back to the primitive world of dialup connections.
It's a remarkable situation: While most of America awaits its first cable modem connection, some Aussie users are ready to pull the broadband plug.
"The main issue is price," says Mitch Denny of Melbourne, who's found himself at the head of an ad hoc subscriber rebellion. "As the technology of the future, cable needs to be priced competitively."
With Australian dialup ISPs charging as little as $1 per hour for access, high-speed cable modem services face a stiff pricing challenge. The wild card of volumetric pricing for Telstra's high-speed access may prove a major disincentive to price-conscious consumers.
"A lot of new people who sign up for the service may not know what they're getting into until they receive their bill at the end of the month," Denny said.
Some users worry they may be subject to spam attacks and billed for the unwanted MBs. Others complain Telstra will be able to collect twice for email between existing cable modem subscribers, even though the messages never leave its own system.
Still others argue volumetric pricing places a millstone around the neck of the broadband revolution, which was intended to spur the development of content-rich, megabyte-heavy Web sites and applications. As they see it, volumetric prices are like renting out a Formula One race car, then charging the renter so much for fuel they can't afford to drive it.
Although available to 2.5 million homes in Sydney and Melbourne, Telstra's hybrid fiber-coaxial cable (HFC) Internet system has attracted only a desultory 15,000 high-speed Internet subscribers in its two-and-one-half years in operation.
But Telstra's new CEO, Ziggy Switkowski, has made it clear that full exploitation of its advanced HFC system and increasing its subscriber base are top priorities.
With its heavy reliance upon US-based content, Telstra finds itself in a disadvantageous position in the information age.
"Those transfers are subject to backbone charges, which most American ISPs don't face," said company spokeswoman Melanie Feez. "In Australia, 60 percent of our Internet traffic is with America, and 85 percent of our traffic is international."
With Cable & Wireless soon expected to offer a commercially competitive high-speed service, Optus, Telstra says it's open to future pricing changes.
Optus, Australia's second major carrier, built an HFC system in the early 1990s hoping to offer bundled cable television, local telephony, and Internet services. The aim was to get around the "last mile" problem dogging local telecommunications competition in the United States.
Optus currently offers cable television and local telephony over its HFC lines, but Optus was unable to offer broadband services until it teamed up with US-based Excite AtHome. Optus plans to start signing up broadband customers in early 2000, but it hasn't yet released its pricing plan.
Aiming for positive spin, Telstra says its new pricing scheme reflects a maturing market, one less geared toward techno-savvy early adopters and more toward a broader market frustrated with slow-speed dialup services.
"Like any emerging market, it takes awhile before the most effective business model is developed," said Telstra's Feez, who acknowledged the customer backlash over the new pricing plan and reiterated that the changes were not written in stone.
"We're currently investigating all issues raised by our subscribers and how we can address those," she said. "Our aim is to satisfy our customers, not to upset them."
