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Qwest Squeezes Internet Providers PDF Print E-mail
News/Features - Local News
Tuesday, 03 October 2000 18:00
It was meant to be a bonus for consumers – faster Internet connections at the same price – but some people got significantly less than they were promised, and a few local Internet providers aren’t happy about it, either.

In September, Qwest notified its more than 175,000 Digital Subscriber Line (DSL) customers in 14 states that they could now download from the Internet at speeds of up to 640 kilobits per second – more than twice as fast as the previous 256-kilobit rate – at no extra cost.

But when customers checked the speeds, they were the same as before. They then called their Internet Service Providers (ISPs), who initially had no idea what their customers were talking about.

“They [Qwest] didn’t give the ISPs any warning,” said William Reveal, president of Internet Revealed. A customer, not Qwest, alerted Internet Revealed about the change, he said. The day after the customer informed him, Reveal added, a notice was posted on a Web site hosted by Qwest for ISPs. “We had no indication it was coming,” said Nicholas Vermeer, a network administrator for Internet Express.

Qwest wanted to announce the change to its customers first, said Barry Hawkins, a spokesperson for the company (formerly U S West), and “that excluded communication with ISPs. We did not communicate with them as we normally do.” It’s more than just an issue of notification, however. It’s also a matter of money and customer service.

The fundamental problem is that the connection between customers and Qwest is only the first link to the Internet. From Qwest, the signal must travel to an ISP and then to the Internet itself. Qwest made its “pipe” bigger, giving each customer more bandwidth, but that by itself doesn’t mean faster download speeds.

“The only thing that’s changed is the connectivity between Qwest and the customer,” Vermeer said. ISPs can make their pipes bigger, both to Qwest and the Internet, to meet the demand, but bandwidth costs ISPs money. Or, providers can limit download speed and risk alienating customers.

In other words, Qwest’s change doesn’t make the Internet faster for customers unless ISPs follow suit.

“They basically assumed that the ISPs weren’t going to raise their rates,” Reveal said. If customers are told by Qwest that the better service comes at no cost, he said, consumers will get angry if an ISP raises its rates.

Internet Revealed and Internet Express responded to the change in different ways.

Revealed expanded its capacity – and in the process doubled its costs for DSL service. “We doubled the bandwidth right after we heard about it,” Reveal said. “We basically went from a profitable situation to a loss situation” on DSL. He said that DSL service has a profit margin of between 2 and 3 percent. “We’re realizing how little money we’re making on DSL anyway,” he said.

Revealed has about 200 DSL customers and charges $15 a month for service. Reveal said that his company “actually did make a minor change already” in its pricing structure, charging $15.95 a month for new DSL customers. (DSL is presently available in Iowa but not Illinois.)

While Internet Revealed is largely eating the cost of more bandwidth to satisfy the demand created by Qwest’s change, Internet Express offers its 250-plus DSL customers two rates for service depending on maximum download speed.

Customers who want the faster DSL downloads will have to pay $25 a month instead of $15, Vermeer said.

“Most customers have been understanding,” Vermeer said. “But there have been some interesting conversations with them.”

Vermeer said that Internet Express has not expanded its bandwidth because of the change, but he added that the company would be unable to offer 640-kilobit downloads at the $15 price and maintain the current level of service.

Reveal said that competition from high-speed cable modems makes it difficult to raise prices on DSL service. Qwest customers who use Internet Revealed are paying the phone company $29.95 a month for a DSL line and $15 to the ISP. AT&T Broadband is offering cable-modem service for $19.95 a month for six months.

“This is having some impact” on ISPs, Qwest spokesperson Hawkins said. He added that in the fourth quarter, Qwest will be making some “promotional offers to ISPs … that are going to help ease a little of the burden.” He said he did not have details on the offers themselves or when they would be rolled out.
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