Netcom Ditches All-You-Can-Eat Pricing

By Elizabeth Owen Monday, Mar. 24, 1997
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SAN JOSE, Calif.: In a move that may help break the grip of the flat-rate pricing trend sweeping the online industry, Netcom Online Communications Services is ditching the unlimited access approach. Netcom, the first Internet provider to offer flat-rate pricing in 1994, said that taking the sting out of long online sessions had led a small fraction (three percent) of users to tie up nearly a third of its capacity, blocking other customers from getting connected: "Unlimited access, unlimited usage and quality those things do not go together at $19.95," said David Garrison, Netcom's chairman and chief executive officer. Starting next month, Netcom will disconnect customers who remain connected indefinitely to the server. The decision marks a shift away from the population segment traditionally seen as the target market for Internet providers. Rather than focusing on casual, cost-conscious home computer users, Netcom look for new business among self-employed professionals and small businesses and corporations, Garrison says. While customers who signed up for the flat rate can continue using the service, no new $19.95 accounts will be available. Instead, Netcom's basic service will sell for $24.95 per month plus a one-time $25 set-up fee. An upgraded service which includes "premium support" for Internet connections and access to online research libraries will go for $30. The top service level will be aimed at corporations that can afford to plunk down up to $800 per month for guaranteed Internet connections. Says Garrison: "We're not trying to provide Internet for everybody." Despite an identical flat rate pricing policy that has severely damaged the company's reputation for reliable connections, America Online claims it will not be following Netcoms example. Telecommunications providers such as Sprint and AT&T, who own the network that provides Internet access to subscribers, also say they're content with things as they are. But then again, they add, in the Internet business, it's better never to say never.