ISP: Price drop won’t see Canadians won’t give up dial-up

Canadians will never fully hang up on dial-up, according to the president of one Toronto-based Internet service provider.

“”We’ve got a whole bunch of people that will continue to use dial-up because of price point,”” says Ashok Kalle, president of Pathway

Communications Inc., which provides both high-speed and dial-up service to business and residential users.

Kalle’s comments come as a response to a study released last week by market research firm NFO Cfgroup which claims half of the country’s residential dial-up users would switch to a high-speed Internet service if the service was priced between $20 and $25 per month.

According to the survey, 44 per cent of Canadian Internet users connect via dial-up, down from 54 per cent in July 2001. Of those that remain on the phone line, 48 per would jump to high-speed if the price was right, the study says. Rogers Communications Inc. and Shaw Communications Inc. recently launched “”lite”” services, which offer connection speeds that are twice as fast as premium dial-up for monthly charges of $24.95 and $29.95 respectively (the Shaw service is also $24.95 for Shaw cable television subscribers). Bell Sympatico will by June be selling a similar package offering similar speeds for $29.95.

The NFO study comes on the heels of a March Yankee Group report that predicts the number of Canadian residential high-speed subscribers will increase to just over three million this year and to almost five million by 2004.

But Kalle believes the rate of broadband adoption will eventually decline unless the price of service drops to about $10, which he doubts will ever happen. While declining to offer an exact figure, Kalle says Pathway currently has tens of thousands of clients, about 75 per cent of which are dial-up customers. He says paying $9.95 monthly or $99 yearly for 50 hours of dial-up access each month will long be the most attractive option for a lot of Canadians.

“”It meets their needs,”” he says. “”Fifty hours a month is more than an hour and a half per day, and that’s more than enough — especially if you’re working (with the Internet at the office).

“”Anyone who is price-sensitive, in my view, is going to (take) the $10 plan.””

Dial-up is also more attractive for ISPs like Pathway because both the connection and support costs for new users are low, while every new high speed user requires a separate loop from the copper provider, Bell Canada in Pathway’s case.

Kalle says Bell charges his company $22 for every loop, making it economically unfeasible for Pathway to compete with Bell on a “”lite”” service.

But according to the Yankee Group report, Bell is risking this competitive advantage by putting a 1 GB cap monthly download cap on a new Basic or “”lite”” service and a 5 GB download cap on its standard service. It instead advocates incremental pricing based on bandwidth available while ensuring unlimited access, an approach used by both Rogers and Shaw and in the United States, Verizon, which offers different DSL packages, priced according to connection speed.

“”The impetus for many users to choose a high-speed solution is that dial-up services do not provide the throughputs for downloading MP3s, MPEGs or video game demos,”” Mark Quigley, director of research for the Yankee Group in Canada, wrote in the report. “”By implementing usage caps, the service provider risks putting itself at a competitive advantage to those that do not support a cap.””

Indeed, The NFO study was conducted between March 20th and 27th, before Bell announced a new capped lite service.

“”I think the caps on bandwidth are going to influence whether people decide to switch,”” says NFO public affairs director David Stark, who helped analyze the survey’s responses. “”I think fewer people would say they’re willing to convert. The assumption is unlimited access and bandwidth.””

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