AT&T looking at charging heavy Internet users extra

AT&T Inc., the country's largest Internet provider, is considering charging extra for customers who download large amounts of data.
"A form of usage-based pricing for those customers who have abnormally high usage patterns is inevitable," spokesman Michael Coe said this week.

The top 5 percent of AT&T's DSL customers use 46 percent of the total bandwidth, Coe said. Overall bandwidth use on the network is surging, doubling every year and a half.

AT&T doesn't have any specific plans or fees to announce yet, Coe said.

Most cable companies have official or secret caps on the amount of data they allow subscribers to download every month. Time Warner Cable started a trial earlier this month in Beaumont, Texas, under which it will charge subscribers who go over their monthly bandwidth cap $1 per gigabyte.

Cable companies are at the forefront of usage-based pricing because neighbors share capacity on the local cable lines, and bandwidth hogs can slow down traffic for others. Phone companies have been less concerned about congestion because the phone lines they use to provide Internet service using DSL, or Digital Subscriber Line technology, aren't shared between neighbors, but AT&T is evidently concerned about congestion higher up in the network.

Those who mainly do Web surfing or e-mail use little data and have scant reason to pay attention to traffic caps. But those who download movies or TV, particularly in high definition, can hit the caps imposed by cable companies.

Download caps could put a crimp in the plans of services like Apple Inc.'s iTunes that use the Internet to deliver video. DVD-by-mail pioneer Netflix Inc. just launched a TV set-top box that receives an unlimited stream of Internet video to a TV set for as little as $8.99 per month.

Apple now sells HBO shows on iTunes store

Apple Inc. has scooped up Time Warner Inc.'s HBO to feed television shows to its online iTunes store, reeling in one of the last holdouts among major channels and agreeing to a rare pricing concession to land hit shows like "The Sopranos," "Sex and the City" and "The Wire."The Cupertino, California-based company said HBO programming began appearing on iTunes Tuesday and the shows cost either $1.99 or $2.99 per episode, making HBO the only channel allowed to charge above the standard $1.99 for their episodes on iTunes.

Eddy Cue, Apple's vice president of iTunes, said the higher prices for some of HBO's shows — in particular "Deadwood," "Rome" and "The Sopranos" — are still cheaper than buying the DVD sets of the full seasons of those shows, which translates into prices two or three times higher per episode.

"I don't think it's a shift in strategy — I view this as an extension of the strategy we've had," Cue said in an interview.

HBO is also trying out a service of its own that allows cable customers with HBO subscriptions and high-speed Internet connections to download shows and movies and play them on personal computers, but it's not widely available.

Apple splits the revenues from iTunes sales with content providers, with most of the money going back to the movie studios, television channels and record labels whose work is sold through the Web site.

That's made iTunes a favorite of independent musicians and other artists whose works wouldn't be distributed as broadly without the service, but has rankled some big-media companies because of Apple's tight control over the pricing.

In a high-profile rejection of Apple's pricing tactics, NBC Universal stopped offering TV shows on iTunes last fall after a spat over its inability to set different prices for certain shows. NBC then defected over to Microsoft Corp.'s camp, offering its TV shows on Microsoft's rival service, Zune Marketplace, where the network was given more flexibility over pricing.

Cue said NBC is the only major channel currently not offering its shows through iTunes. The store currently carries 800 different shows and has sold more than 150 million episodes.

The iTunes store isn't a big cash cow for Apple, making up less than 10 percent of Apple's $24 billion in sales last year, but is a big driver of iPod and Macintosh computer sales.

Apple's iTunes Store Becomes No. 1 in Music Sales

With new online music retailers springing up to challenge its Net dominance, Apple's iTunes Store moved the goalposts again Thursday. It announced its store has overtaken even Wal-Mart as the number-one music retailer in the U.S. -- online or off.

The new designation is based on data during January and February from the NPD Group, a market-research firm. NPD's MusicWatch survey compiles unit purchases in a given week.

Physical CD Sales Drop

According to news reports, Apple now has 19 percent of the market and Wal-Mart, including both its online and brick-and-mortar sales, has 15 percent. Best Buy took third with 13 percent, and Amazon, which has launched a music store to compete with Apple, is fourth at six percent. Target, also with six percent, is fifth, followed by FYE/Coconuts, Borders, Barnes & Noble, Circuit City, and Rhapsody.

Apple's move to the top of both the real and virtual worlds of music retailing is a milestone not only for the Cupertino, Calif.-based company, but also for the industry. Physical CD sales have been plummeting as the industry tries to adjust to the new digital reality. In fact, NPD reports that nearly half of all teens in the U.S. didn't buy even one physical CD in 2007, up from 38 percent in 2006.

But it's not just the real-vs-virtual ratio that is radically changing the music industry. There was a 10 percent decline in overall music spending in 2007.

Michael Gartenberg, an analyst with industry research firm JupiterResearch, said the new position for the iTunes Store "demonstrates the remarkable shift that has taken place in the music industry." He noted that this shift not only means an increasing role for online distribution, but the "reinvention of the single."

Four Billion Songs

The new claim to fame for Apple's store comes as it faces new competition. Apple said its iTunes Store, which launched less than five years ago, has sold more than four billion songs, has 50 million customers, and has "the world's largest music catalog" with more than six million songs.

One potential new competitor launched Thursday as social-networking site MySpace joined with three of the four biggest music companies, Sony BMG, Universal Music Group and Warner Music, to create what MySpace described as a "fully integrated 360-degree global music solution."

In addition to music sales, there will socializing tools, ad-supported audio and video streaming, a mobile storefront, concert tickets, artist T-shirts, and integration with MySpace's millions of artist profile and user pages.

And recently Earth's biggest store -- Amazon -- got bigger, as it launched Amazon MP3, with music downloads free of digital-rights management and more than two million songs. Those downloads are generally priced lower than songs from the iTunes Store.