AT&T hikes prices of popular frame relay speeds

Prices of 56K, T-1 port and all PVCs go up, though costs of intermediate-speed ports go down.

By David Rohde
Network World, 11/09/98

Bedminster, N.J.- Attention all you users with plain-vanilla, 56K bit/sec frame relay sites: Carriers may start treating you better if you upgrade those branches to a higher port speed.

AT&T late last month quietly slipped through a frame relay price change that raises the cost of the two most popular frame relay port speeds - 56/64K bit/sec and T-1.

At the same time, AT&T lowered the price of all the in- between port speeds, cutting a break for branch offices that support more than simple LAN interconnection traffic to the network.

In explaining the action, AT&T officials emphasized the benefits of the intermediate price drop, which becomes increasingly generous at higher speeds below the T-1 threshold (see chart below).

Many users who are implementing enterprise resource planning software packages require frame relay connections of 128K bit/sec or above at multiple locations, says Keith Falter, marketing manager for AT&T frame relay services.

As far as the higher 56/64K bit/sec price goes, "there's not a specific rationale for that," Falter claims. And even though AT&T raised the low-speed port price and lowered the higher speed port prices, "this is not intended to force existing customers to move in any direction at all," he says.

Some analysts found that explanation difficult to believe. AT&T's action is part and parcel of a campaign to get as many of its customers' small sites as possible onto dedicated T-1 access lines, says Tom Jenkins, a senior consultant at TeleChoice, a telecom consulting firm in Tulsa, Okla.

Users with a basic frame relay port can use a dedicated 64K bit/sec access line, he explains. But he says moving to a 128K bit/sec port usually requires users to jump to T-1 access to the long-distance carrier's point of presence because of local carriers' provisioning practices. And that T-1 would offer 24 digital channels of 64K bit/sec for use by AT&T services, only two of which would be chewed up by a 128K bit/sec frame relay interface.

"AT&T is concerned about all these new providers out there talking about integrated access and trying to offer bundled services," Jenkins says. "But if AT&T can get their own T-1 in there, now they have another 22 channels on that local access line that they can sell services on, including Internet services."

Users agreed. "What AT&T is trying to do is create incentives to move users to higher bandwidth architectures because that's most efficient for their network," says Kelsey Hill, executive vice president for telecommunications and network services for the IT subsidiary of MBNA Bank in Wilmington, Del. "AT&T is saying that if you're utilizing network resources in the most inefficient way, you're going to have to pay a premium for it." The overall price increase to MBNA will be "moderate," Hill says, because the bank has some 1024K bit/sec ports in addition to T-1 frame relay and T-3 ATM, plus generous volume discounts.

Also adding to the bite: Not only did AT&T raise rates on the two most popular frame relay port options, it also hiked prices across the board on permanent virtual circuits (PVC).

For example, a PVC with a 32K bit/sec committed information rate (CIR) - the amount of bandwidth reserved that cannot be dropped in case of network congestion - increased from $61 to $65 per month. A reservation for a PVC with 384K bit/sec of CIR increased from $709 to $744 per month.

Analysts say they assume that means AT&T will enjoy a net revenue gain from the pricing action. Falter would not confirm or deny that, but he says the pricing action as a whole "supports the network improvements that we're doing, such as the deployment of our suite of Web tools." AT&T recently put its Order Manager and Ticket Manager applications on the World Wide Web for customers to place orders and trouble tickets.

AT&T officials also cited financial requirements of its infrastructure upgrades, such as the movement of its national network to SONET rings.

Enticing?
AT&T hiked prices for its popular 56/64K and T-1 frame relay ports, but offered reductions to entice users to intermediate speeds.

Port speed Old monthly price New monthly price Percentage change

56/64K bit/sec $285 $295 +3.5%

128K bit/sec $570 $520 -8.8%

256K bit/sec $850 $770 -9.4%

512K bit/sec $1,405 $1,215 -13.5%

T-1 $2,535 $2,690 +6.1%

Prices for all permanent virtual circuits increased 4%-12%. All listed prices are before term, volume and negotiated discounts.
Source: AT&T, Bridgewater, N.J.