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Author: TMFNico Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 31  
Subject: CompuServe testing flate rate. Date: 7/29/1997 4:45 PM
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In an article apparently based on a report in today's New York Post, Dow Jones is reporting that CompuServe is testing a flat rate for access to their service. CompuServe reportedly told the Post that there were no plans to renew the focus on the consumer online market. This story first surfaced on CNNfn on July 21.

CompuServe has established two test groups, with price points at $24.95 and $27.95. Services that normally have additional fees will continue to do so during the test period. The test began in mid July and are scheduled to run for 90 days.

CNNfn quoted CompuServe spokeswoman Teresa Owens as saying CompuServe doesn't think "members have left because of pricing issues" and that "content and access quality" are more important. It's hard to tell what's really going on there. When they last reported earnings, CompuServe spoke of starting national advertising in late June.

In that same article, DJ reports that "market watchers" anticipate the days of flat fee online services are numbered and could end this year. Some ISP's are finding the standard $19.95 to be a "costly sales gimmick" which can't go forever. Two solutions mentioned to this problem are higher prices for heavier users, and instituting cable TV-like tiers for levels of service above basic.

I think a tiered system makes the most sense, assuming an acceptable profit point can be found once advertising and other non-access fees are established. For customers, it's got the same simplicity as a flat rate, and allows them to use the system without concern for either the ticking meter, or uncertainty about having entered into a premium area. The ticking meter was a problem that CompuServe and AOL shared with other services before the
flat rate days. But charging extra for premium features was CompuServe's real drawback as far as cost issues went. When Magazine A's area charged extra, it created uncertainty about Magazine B, and so on with other categories of features. This added to the user's reluctance to leisurely explore the system. That was never a problem with AOL -- everything you saw was yours for the taking. If a per-feature premium can be limited to only one category of product, then the problem is mitigated. But as more premium features come online, that will be difficult to do. Adequate notification works, but probably still only goes so far. My guess is that the possibility of stumbling into a premium area, or finding an area you want to go to but -- what? it costs extra? -- would still be inhibiting. That was part of what was behind the controversey over AOL's announcement of premium games debate last month. It'll be interesting to see if AOL has any preliminary numbers on that when they report earnings next week (as per First Call.)

TMF Nico
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