AT&T hikes private-line prices by up to 12%
7/27/98
By David Rohde
AT&T last week increased private-line prices across-the-board, putting new pressure on users to examine sharednetwork alternatives, such as frame relay.
As with other AT&T price hikes over the past two years, the increases were more severe at higher bandwidth levels. The carrier jacked up the prices of its long-distance T-3 and T-1 leased lines by 12% and 6%, respectively.
AT&T also increased its local channel rates but by lesser amounts, such as 3% for T-1 access lines (see graphic). These local-channel services, sometimes known as "Tariff 11," involve AT&T buying dedicated access lines from local carriers and passing the cost on to users.
Rate increases will vary based on the origination and termination points of individual AT&T private lines. But most customers will get hit with price increases that fall somewhere between the maximum long-distance and local circuit rate increases.
For example, a Seattle-to-San Diego T-1 line that previously cost $10,211 per month end-to-end, now costs $10,744 per month, a 5.2% increase. A Philadelphia-to-Baltimore T-1 rose from $5,990 to $6,276, a 4.8% increase.
Analyst Tom Nolle, president of CIMI Corp., a Voorhees, N.J., consulting firm, said AT&T needed to raise private-line prices to keep encouraging new users to move to frame relay. With network capacity tight, AT&T and other carriers are keen to shift traffic to frame relay and other shared networks that don't permanently tie up paths for each user, he said.
Frame relay race
The problem for carriers is that recent enhancements to frame relay services throughout the industry have effectively raised frame relay's cost, bringing frame and private lines closer in price and discouraging user migration.
For example, AT&T and other carriers now frequently require users to buy or lease enhanced DSUs/CSUs to measure performance if they want a strict frame relay service-level agreement.
Those arrangements have raised frame relay's cost back to within 25% of the cost of private lines, Nolle said. And users need at least that much in savings to make the switch from private lines to frame relay. "A number of carriers have told me that the rate of frame relay adoption is slowing," he said.
The steeper rate increase for T-3 lines is meant to discourage resellers and other carriers from attempting to buy AT&T capacity, which has been in short supply, and use the lines to support their own services.
"AT&T has to be very careful to look at their price of raw digital bandwidth," Nolle said. "If it's too low that creates an arbitrage opportunity for competitors who can buy it up and convert it to frame relay or IP bandwidth."
For AT&T's part, the carrier said it needs the extra revenue to pay for its Synchronous Optical Network (SONET) and ATM network upgrades in a program collectively known as Fast Automated Restoral (FASTAR) II.
FASTAR's original version several years ago provided five-minute restoral of physical line breaks rather than the millisecond-restoral capability of SONET rings.
