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Time Warner Cable Shelves Broadband Metering Idea

Earlier this afternoon, Time Warner Cable set aside a controversial plan to charge its users extra -- in some cases, a lot extra -- for using more data.

A press release, not yet posted on its own site, said the New York-based company "would alter plans to test Consumption Based Billing, shelving the trials while the customer education process continues."

"Consumption Based Billing" is the term TW coined for a tier of service plans that would include a monthly allotment of data downloads and uploads and then charge users extra for use over those limits. For example, a $15/month plan for light use would only cover one gigabyte of data, with each extra gig costing $2. More expensive plans would include 10, 20, 40 or 60 GB each, with overage fees of $1/GB; in all these plans, TW would cap a user's surcharges at $75 in any given month.

The company touted this option as a way to let its Internet customers pay only for their own use instead of subsidizing the appetites of others -- an option that it and other TV providers do not offer to video subscribers -- but many TW consumers and industry observers were not persuaded.

Some noted that these broadband surcharges would have the effect of making online video, whether streamed or downloaded, a great deal more expensive. Others observed how much more Time Warner proposed to charge per gigabyte than other providers.

(This is, technically, not a "net neutrality" issue, as Time Warner did not announce plans to exempt some sites or services from these limits.)

In many areas, customers who object to a provider's plans for broadband caps can take their business elsewhere. But that's not an option everywhere -- which, of course, ensures this discussion isn't going away.

Nor should it. Look, I can see a cheap, limited-use plan working for people migrating from dial-up, for whom broadband's primary use is the always-on connection. But any limits would have to be spelled out in large type, not fine print, with the "penalty" for excessive use being an automatic, reversible upgrade to a more capable plan. Does that seem like a fair option? Or do you not trust your current provider to implement something like that fairly? Let me know in the comments.

By Rob Pegoraro  |  April 16, 2009; 6:00 PM ET
Categories:  Telecom  
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As a former Cisco Systems network engineer, my opinion is this: people will demand and pay to watch only jitter and pixelation-free video on their computers, and tomorrow's television will be intimately hooked up to the Internet (and not just used as a giant AV monitor as geek use it today). Providers who seek to throttle traffic to squeeze more dollars out of their customers will gain nothing but resentment, opening their business model to a smarter disruptive innovators. Their ill-advised plan is the first sign that these current 'media giants' are headed for extinction - unless they can evolve fast enough. IPv4 (the Internet Protocol) was never meant to take the load currently imposed on it. These dinosaurs invested heavily in inflexible IPv4/v6 equipment. Throttling as a response to infrastructure limitations is simple denial of the need to adapt and survive.

Posted by: rexsolomon | April 16, 2009 9:42 PM | Report abuse

Jeez: I'm glad this idea is dead if only for a little while. Here is SW Florida, I have to pay Comcast $70 a month already (Internet only)and surcharges will just end it for me. But, maybe the surcharges wouldn't apply since I watch TV on a big screen set. Still seems mighty unfair to everyone.

Posted by: jenandtomh1 | April 16, 2009 10:03 PM | Report abuse

Would you pay for a capped local telephone land line?

Would you pay for a capped cable or satellite television plan?

Would you pay for capped radio usage?

I wouldn't. The only things that consumers will ultimately accept with caps are the things that have been capped from the beginning. (Like cell phone plans.) Especially when it's difficult to say how much exactly you'll be downloading.

And here's the other thing: for most consumers, the Internet works perfectly fast enough for most of the stuff they want to do, for the time being. Yes, it can be much, much faster. But you're not going to sell many people on the idea of having limits on their usage in exchange for nebulous promises of speed increases. The current model will continue, and hopefully we'll see the ISPs put more infrastructure behind faster connections, and the attempts at capping will, ultimately, go nowhere.

But in the absence of regulation, I expect shaping to take off with a vengeance. Not that it hasn't already.

Posted by: AhhWoo | April 16, 2009 10:04 PM | Report abuse

In principle I have no problem with this.

The problem right now is no one has much of an idea of what their usage is. In the absence of transparency about actual usage, it's a non-starter. I want to know when I'm about to go over, and be told.

Oh, and not at "gotcha" prices. I like the idea of having a policy that allows you to go up to the next highest plan for "free", although it would be fair not to make it reversible immediately, otherwise no one would have an incentive to pick a high use plan.

Posted by: ah___ | April 16, 2009 10:07 PM | Report abuse

All of this would go away if we open up the cables to more competition.
Allowing a cable to have the only franchise in town or jurisdiction is caveman like in thought.

Posted by: Rocc00 | April 17, 2009 12:11 AM | Report abuse

This would be a disaster. I am a subscriber to MLB.TV and watch at least an hour or two of baseball games streamed live onto my computer in high-definition. And there are thousands of people like me.

Posted by: PhilliePhanatic | April 17, 2009 12:17 AM | Report abuse

in the end, it's just a case of bad monopolies. 22 other countries have a better penetration rate of the market, while I here at home, and at my place of work are dealing with sub-par Comcast service at exuberant pricing.

If ISPs were held to the standards that they ought to be, rather than allowing customers in low-competition areas to deal with constant outages, poor customer service, consistent lost packets (40% or more), then people would be less adverse to it.

However, I vaguely remember these companies making record profits, still, and yet they refuse to invest in the infrastructure needed, and actively campaign against other companies that try to improve said infrastructure to the local governments. My city denied Fiber Optics because of Comcast lobbying. As a result the choice in my city is either Comcast at it's poor state, or an unguaranteed 512Kb/s DSL.

Posted by: Freyar | April 17, 2009 12:19 AM | Report abuse

this is just one more reason for the consumer to hack into cable tv without a drop of remorse. look folks, dont you see a pattern emerging here? this is the pattern. first we have a financial meltdown, then the taxpayer bails out the corrupt banks and investmenttbanks, then only those who can afford to be in the stock market hedgefunds can really benefit from this jobless recovery, then and this gets my goat, in the guise of trying to be more competitive, these completely rich cable companies, who have a captive market monopoly, ream the consumer once again to pretend they need to do it to stay alive. wrong. they already are getting 50 dollars a month for ISP bandwidth. and they are trying to keep things from getting better. they just want to slow things down, put toll collectors on an obsolete piece of junk. hey if they really want to make a difference, they should put porn on an xxx address and charge people a fee for downloading porn which is probably 90% of the bandwidth usage to begin with, but for legitimate use, leave us the hell alone.

Posted by: healnghanz | April 17, 2009 12:44 AM | Report abuse

A better system would be to involve multiple types of caps and to make sure that you self-throttle your own usage. What do I mean by that?

I think a good analogy would be equivalent to how we use hot water. Most people still prefer to get their hot water from hot water heaters. The heaters store hot water in addition to having a minimum flow of hot water even if they run out their tank. For example one way doing the system would be to give a minimum data rate that you would expect the system to give you no matter how much you had downloaded. The second would be cap would be how much download in an hour without some sort of throttling coming into play. Also caps or limitations could be different depending upon the time of day so people who like to download could simply use the system when it less inconvenient for the rest of the people on the system.

Posted by: Hartmeister | April 17, 2009 1:00 AM | Report abuse

Can someone explain why a television show delivered over a cable wire costs a relatively small amount and the same television show delivered over the same cable wire for Internet customers would be fairly expensive?

I mean, many people have more than one television set on in their houses many hours per day. The ones who have their television sets on for more hours don't pay more than those who have them off all day. The people who have their TVs on all day are getting media streaming all that time. Why isn't that a problem for cable companies?

Posted by: geneven | April 17, 2009 1:14 AM | Report abuse

People people people.

and Rob, why didn't you do 5 minutes of digging on TW's site.

If you look on TW's last annual report to shareholders, two things should jump out at you:

1) They trumpet the fact that cost of providing high-speed access to their customers...HAD GONE DOWN SIGNIFICANTLY!

2) They caution shareholders that people are downloading TV shows from legitimate sources (Netflicks, Hulu, Joost, etc) and that this was a fundamental threat to the cable-TV business, therefore they were going to act to protect their revenue.

When you add up these two important facts from TW, it's clear that this was all about making downloading TV shows less desirable and to protect their revenue stream.

It had nothing to do with "unfairness", because frankly, if you look at their caps, it's so low, that everyone on TW was going to pay more.

It's also my opinion this will be back in 6 months.

Posted by: Ombudsman1 | April 17, 2009 5:16 AM | Report abuse

Metered use is primarily to protect the cable companies television business.

Plus it's one heck of a way to rip folks off in the name of "fairness".

Cable, and telephone companies should be put out of the internet business, and telephone should be separate from cable, with a new industry formed around broadband so as to put an end to these protectionist tactics.

Posted by: maxtor0 | April 17, 2009 7:19 AM | Report abuse

The industry comes up with all these uses that require major consumption of downloaded data, and now want to put a charge on it, when all along it has been unlimited. Talk about shooting yourselves in the foot. And they still can't provide me, a DSL user, with smooth video streaming. When they have something worth selling maybe people will pay.

Posted by: tojo45 | April 17, 2009 7:52 AM | Report abuse

Look, evidently a lot of you people have no clue about the infrastructure of the internet and how data is actually transported around the globe. It's very expensive to purchase and maintain the equipment used to transport the data, and there's a limit as to how much data the links interconnecting networks can carry, it's called load. Porn, Netflix, Hulu, YouTube, etc are stretching the limits. ISP's have to spend millions and millions of dollars to keep up with the growth. ISP's don't print currency. Someone has to pay for it. What you may not also know is content providers, i.e. Netflix pay LESS for network access than you do. They negotiate cheap rates with ISP's because they play ISP's against each other for price. They can house their servers anywhere and have access to multiple ISP's. In other words, they are placing enormous amounts of data on the internet for less than the amount you pay to receive it. Doesn't that sound backwards? Do the homework people. I realize it's easy to accuse TW of being greedy, but if yuo do your homeowork, you might come to a different conclusion.

Posted by: davidwg46 | April 17, 2009 8:24 AM | Report abuse

Plan That Victimizes NEWBie DSL & Cable, just beta O/S here would have cost $10 to download & left me month of even more fantastic costs with updates, etc. thats not right to volunteer time & equipment just to PAY Scab & Rogue company for little, if anything. You; American TaxPayer, PAID For those Cable Lines, Owned By Your City, fundumentally, NOW Government regulations ALLOW service to be Priced Out of Most Peoples Reach.


Posted by: thomasxstewart | April 17, 2009 8:37 AM | Report abuse

Once the cable co's offer up Cable Ala Carte then I will be for internet limit pricing. Until then I am against it as they are just doing it to try to gouge more out of the consumer.

Posted by: Krazijoe | April 17, 2009 8:53 AM | Report abuse

Charging for use is superficially attractive but in reality there is no mechanism for ensuring that it is not simply another ripoff of the consumer. Cable companies have been raising prices far faster than inflation for the last decade despite increasing profits, a classic sign of a monopoly. That is one reason why we have an FCC. If and when there is real competition, and not simply a duopoly with Verizon and Comcast collaborating rather than competing, variable pricing might be reasonable. Perhaps you should take a look at the UK model where access to the pipe is open to competition and increased rates that stem from increased services are allowed but not price gouging. The result has been much faster access and greater penetration of coverage all at prices far less than we pay.

Posted by: iansmccarthy | April 17, 2009 9:31 AM | Report abuse

Stop watching YouTube, it's free, and free sucks. Stop using flat-rate instant view on NetFlix, buy our Pay Per View movies at an affordable $5 each. Don't download porn, subscribe to Skinemax and (yawn) Spice. Cry havoc, and blame the dogs of piracy!! That's pretty much all there is to this. Time Warner is a mom and pop store on a business route, and the Internet is a bypass.

Posted by: bowlasoup | April 17, 2009 9:49 AM | Report abuse

Your statement that Time Warner's "Consumption Based Billing" is "technically, not a 'net neutrality' issue" is conceptually incorrect. Time Warner sells two kinds of services: information delivery service (cable capacity) and various product services that use that capacity (IP telephony and content services, e.g., their movie, television and music programming).

Their "Consumption Based Billing" or metered billing notion is rationalized on the basis of charging customers for the amount of cable capacity they use. That is, since the cost of providing capacity is related to the amount of capacity used, the price of capacity should therefore reflect the amount used.

While this argument has intuitive appeal it oversimplifies and ignores the reality that Time Warner's media content and IP telephony products which use Time Warner's cable capacity are actually in competition with the other content (e.g. HULU and Netflix) and IP telephony providers (e.g., Vonage and Skype) who also use Time Warner cable capacity. Economically, these competing product services all have one common input necessary for their provision: Time Warner cable capacity. But since the Time Warner "Consumption Based Billing" proposal is to meter all capacity use of their cable except what Time Warner uses for the provision of its content and telephony services, it's metered billing proposal is not net neutral under any possible definition of neutrality that takes into account actual use of the Time Warner cable network capacity.

If Time Warner wants to bill on use, it should be required to charge all users, including itself, on their relative use of the system. In other words, it should not be able to price discriminate among the users of its cable system capacity. This is to say that each bit or byte of cable capacity used should cost the same, no matter who uses it. Moreover, this is exactly what is done in the electric industry. Local electric consumers have two different bills: one bill for the electricity they use, whether they buy it from the local electric company or a competitor, and the other bill for the use of the local electric company's transmission and distribution lines that deliver the electricity. This price neutrality for the use of the line capacity prevents the owner of the power lines from unfairly competing in the power generation market against other electricity providers. Of course the technological details between the two industries are vastly different; economically and fundamentally, however, they are identical.

Posted by: RLawlis | April 17, 2009 11:06 AM | Report abuse

They have not stopped, they have only delayed until they can use their lobbying clout to get Congress to back off and the FCC to permit it. I have to ask why we cannot have competition throughout? No one cared that ATT had put the infrastructure in place when telephony was unmonopolized.

Posted by: Ethicist | April 17, 2009 11:07 AM | Report abuse

"Would you pay for a capped local telephone land line?"

I do, my landline was $27/month unlimited local calling, now $20/month for pay per call.

"Would you pay for a capped cable or satellite television plan?"

I do, and will drop it soon for OTA (has great HD reception).

I just got off the promo comcast 16MB plan that would now cost $60/month?, and downgraded to their 1MB plan for $25/month and see little difference for my use. However, I'd love to subsidize your porn, bitorrent and youtube use, so please one flat rate for everyone eh?

As for fine print suggestion, that's a good idea for pretty much every contract service.

Posted by: blackbear336 | April 17, 2009 11:12 AM | Report abuse

Oh yeah, forgot the best idea. The ISPs need to start charging a penny, half a penny? for each email. It'll kill the spam, and maybe the endless lame jokes that find their way to my inbox.

Posted by: blackbear336 | April 17, 2009 12:52 PM | Report abuse

Quoted from davidwg46: "content providers, i.e. Netflix pay LESS for network access than you do. They negotiate cheap rates with ISP's because they play ISP's against each other for price."

Isn't this the way the "free market" is supposed to work for all customers? You've just described how the process of competition theoretically results in lower prices/better service for the customer. TW has an effective monopoly in several markets, so its proposed business practices become immediately suspect in my mind. Of course their PR flacks will come up with some rationale for charging people more, but let's not forget that the whole point of their existence is to maximize revenue.

Posted by: rchadha5 | April 17, 2009 2:02 PM | Report abuse

Also, people should stop using the word "subsidize" in this setting, it's inaccurate. A subsidy is generally defined as money provided to a private enterprise by a government, not money provided to a business by a customer. The misuse of this word is getting out of hand. Do I "subsidize" other customers at Best Buy who only purchase loss leaders when I buy a flat screen tv?

Posted by: rchadha5 | April 17, 2009 2:12 PM | Report abuse

I concur with the comment by ah on April 16, 2009 10:07 PM. I have no idea what my Comcast usage is at present. Does anyone know a way to find out?

Posted by: jjbode | April 17, 2009 3:29 PM | Report abuse

haha time warner aol & comcast are already doing this in order to keep you from watching tv/ movies online. they are deliberately holding down the speeds for the internet and using more costly options to make high speed networks to make subscription tv & dvds competitive. the japanese have a cheaper way to make the internet access much faster. this is what the US gets for letting companies get so big & to have interests in so many areas.

Posted by: am_jim | April 17, 2009 4:49 PM | Report abuse

“…The recipient of the subsidy may need to be distinguished from the beneficiary of the subsidy, and this analysis will depend on elasticity of supply and demand as well as other factors. For example, a subsidy for consumption of milk by consumers may appear to benefit consumers (or some subset of consumers, such as low-income households); but if supply of milk is constrained and results in higher demand and higher prices, the milk producer may benefit and the consumer may derive no net gain, as the higher prices for milk offset the subsidy. The net effect and identification of winners and losers is rarely straightforward, but subsidies generally result in a transfer of wealth from one group to another (or transfer between sub-groups)….”

If a single price is paid by everyone for the same broadband access, regardless of useage, and that universal cost is higher than I would pay for broadband were we all to pay for what we use, then the difference is a wealth transfer and subsidy to the heavy user. The fact that the heavy user is often (but not always) running an server prohibited by his broadband contract, downloading illegal copywrite material, spamming the universe, or surfing porn makes it all the more offense and reason not to allow that subsidy as either a preferred business model or matter of regulation.

Posted by: blackbear336 | April 17, 2009 4:52 PM | Report abuse

Boy, maybe I am missing something, but it sure would seem you are paying through the nose over there. Here in Germany, we are paying about $60 for unlimited broadband and unlimited phoning throughout Europe, about $ 20 monthly for 2 cellphones and get our TV free via satellite.

Posted by: jim24 | April 17, 2009 6:31 PM | Report abuse

Hey rchadha5, whats you point man? Of course what the content providers are engaging in is free market but what's that got to do with the main point of my comment which is someone has to pay for the internet? The internet is not just some abstract concept. Do you know how much a Juniper T640 costs? (that's a router if you don't know)

Posted by: davidwg46 | April 17, 2009 8:10 PM | Report abuse

Despite davidwg46's ranting, he does not demonstrate any comprehensive knowledge of the Internet. Commercial ISPs such as Time Warner and Comcast do not own end-to-end Internet infrastructure. Most of the internet has already been paid for with your tax dollars. If they did, then an e-mail sent from a Comcast subscriber would never be able to find its way to a Time Warner recipient. Of course large businesses don't buy bandwidth from commercial ISPs. The notion of, say, the Defense Department depending on a public ISP is laughable. What commercial ISPs DO own is the last-mile infrastructure that gets the bandwidth from a backbone to the residential or small-business end user. How much I use my computer does not seem to affect the quality of my cable TV picture, which comes into the house on the very same coaxial wire, and which was there a long time before they started selling internet bandwidth.

They do own much more of the traditional cable TV/video infrastructure which does not depend on TCP/IP and which carries their proprietary content and services such as VOD.

Posted by: 54Stratocaster | April 17, 2009 9:49 PM | Report abuse

54Stratocaster you are a moron. The internet was built with private money not public money. You're shooting off at the mouth. I'm guessing you're aligned with the teabaggers Do you homework then we'll talk.

Posted by: davidwg46 | April 17, 2009 10:43 PM | Report abuse

"Look, evidently a lot of you people have no clue about the infrastructure of the internet and how data is actually transported around the globe. It's very expensive to purchase and maintain the equipment used to transport the data, and there's a limit as to how much data the links interconnecting networks can carry,"

Ah, someone always says this and it's a 1997 view of how the internet operates. TW doesn't pay to transport data across the globe, they pay for two things: (1) maintenance of the local connections on their network (their biggest expense, BTW), and they pay to maintain the physical plant.

Now at this point, you'll try to explain how they have to buy "T1's and DS3's..." and at that point, I'll have to ask you to stop because you've just shown complete ignorance how/when large ISP's peer with the rest of the internet. It doesn't work this way. When Verizon (for example) connects with the internet, it's at large co-lo's that have virtually unlimited bandwidth. This is certainly an expense, but it's a fraction of what you think it is.

But more to the point, download TW's annual report and in there you'll find a nuggest that the cost of providing connectivity went down significantly last year.

Seems to me a lot of you guys know a little bit and are dangerous, if you remember the old expression.

Posted by: Ombudsman1 | April 18, 2009 5:51 AM | Report abuse

Ombudsman1, you display arrogance but demonstrate total ignorance of the topic. You must be another one of them teabaggers.

"When Verizon (for example) connects with the internet, it's at large co-lo's that have virtually unlimited bandwidth".

What's this got to do with the price of tea in China? What you're talking about here is a telco hotel or neutral colo like Equinix where ISP's interconnect with each other and exchange traffic destined for each others networks. These are just fiber interconnections within the same building. Do you really think this is all there is to the internet backbone? Wow. Once the traffic is exchanged, it has to go somewhere. You understand hosts aren't sitting in the colos right? It's kind of uncomfortable in those colos. I've been inside a few. After traffic has been exchanged, carriers use their extremely expensive transit networks to forward the traffic to its destination.

"TW's annual report and in there you'll find a nuggest that the cost of providing connectivity went down significantly last year".

Evidently you don't understand networking. This is just the cost of providing connectivity from TW's network to their customers. It's called the last mile. The last mile connects to the transit network. See above.

Posted by: davidwg46 | April 18, 2009 9:43 AM | Report abuse

The plan to roll out metered usage is nothing but a blatant grab for more money in a market without a significant competitor (Rochester, NY). Thank goodness TWC came to it's senses and decided to postpone the plan, hopefully indefinitely. In the middle of a recession, within an industry whose operating costs are generally agreed to be falling, what a ridiculous idea!

The proposed plan would not 'save' any money for anyone I have talked to.

From TWC, the plan is put on hold "while the customer education process continues."

Holy bulldung, Batman! I'd need more than a teaspoon of sugar to swallow that!

Posted by: MikeyB71 | April 18, 2009 11:54 AM | Report abuse

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