May 1, 2001 4:30 PM PDT

AT&T hikes cable access rates

AT&T said Tuesday that it will raise monthly cable modem Internet fees by $6 per month on June 1.

As first reported by CNET News.com, AT&T Broadband will increase its high-speed Net access rates next month to $45.95 for most of its nearly 1.3 million customers, the company said. Customers of both AT&T@Home and Road Runner will be affected in various markets.

Because of local regulations stipulating a certain period of notice before a rate hike, some AT&T customers will begin seeing the higher fees on July 1 or Aug. 1, AT&T Broadband spokesman Steve Lang said. Legal notice advertisements began appearing in major metropolitan newspapers Tuesday, and AT&T Broadband has begun informing consumers via e-mail and letters, Lang said.

With the increase, AT&T continues a trend toward higher broadband subscription rates. Competitors in the DSL (digital subscriber line) business, such as SBC Communications and EarthLink, recently raised their high-speed Net access rates to about $50 per month. AT&T believes it offers better-quality service, which, even after the higher prices, will cost less than most comparable alternatives.

Some analysts have speculated that AT&T was emboldened to raise rates by flagging DSL competition and higher DSL rates.

"We think that these prices will be the best value in the marketplace," Lang said. "Our decision was based on what we think is an appropriate price for the value of this service."

Steady at about $40 per month for years, AT&T's cable modem service will now cost $45.95 for most of its customers. Some consumers who own their own modem, rather than leasing one from AT&T, will pay $35.95 under the new plan.

Consumers in Atlanta, where the price already is in the $45 range, and in Seattle, where AT&T previously promised regulators it would not raise rates, will not be affected, Lang said. Some Road Runner customers that already pay $49.95 also will not face rate hikes.

One financial analyst raised his annual earnings-per-share and revenue estimates on Excite@Home on Tuesday because of the AT&T rate hikes and cost savings from recent Excite@Home layoffs.

Abhi Gami, principal Internet stock analyst at William Blair, increased his per-share earnings estimates by 5 cents to 51 cents for 2001 and by 13 cents to 18 cents for 2002. Gami increased his revenue estimates by $12.5 million to $649 million in 2001 and by $38 million to $939 million in 2002. However, he maintained his "hold" rating on the stock.

The analyst said he would further raise his estimates if other Excite@Home cable partners, such as Cox Communications or Comcast, were also to raise rates.

"We view the price hikes as a turning point for Excite@Home and the broadband industry," Gami wrote in a research report. "If consumer demand firms, as we expect it to, and even just a handful of (cable operators) follow AT&T's lead, we believe that investor perception of the Excite@Home model will improve."

 

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