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Posted at 11:47 AM ET, 12/ 7/2010

Pay-as-go Internet access boon for cable, troublesome for Internet firms

By Cecilia Kang

Analysts say the Federal Communication Commission's endorsement of usage-based pricing for Internet broadband could be a boon for Internet access providers who are concerned that video Web streaming could cause customers to cancel TV service.

Craig Moffett, an analyst at Bernstein Research, wrote in a note to investors Tuesday morning that the agency's approval of pay-as-you-go broadband access "can't be overstated."

"Usage-based pricing will preserve, and even enhance, the economics of cable’s infrastructure... even if consumers eventually get some, or even all, of their video content over the Web," Moffett wrote.

FCC Chairman Julius Genachowski said in his net neutrality proposal that he recognizes the need for cable and telecom firms to manage congestion on their networks and recover the costs of building that infrastructure by charging for the highest users.

"Our work has also demonstrated the importance of business innovation to promote network
investment and efficient use of networks, including measures to match price to cost such as
usage-based pricing," Genachowski said.

This, analysts say, could be a way for cable firms to prevent users from "cutting the cord," or canceling their television services.

"Usage-based pricing is a clear positive for cable/telecom/wireless providers, but it also might be a concern for Netflix," said MF Global analyst Paul Gallant. "Depending on where the tiers were set, usage-based pricing on wire line broadband could end up deterring some people from dropping cable for over-the-top video."

Netflix has argued against paid prioritization of services that would allow a carrier to prioritize their own content or that of partners over streaming Internet content such as Netflix's videos. In its third quarter conference call, Reed Hastings, chief executive of Netflix also said the company is watching warily as broadband providers introduce tiered pricing plans.

"We have some vulnerability depending on cap usage and what happens," he said. Comcast puts its cap at 250 gigabytes, but AT&T mobile data is capped at 2 gigabytes, which is "not enough room to deliver hours and hours of high def," Hastings said.

We are definitely sensitive, as you point out, to in the long term, whether most of the
industry ends up 250 gigabytes… or two at the other extreme," Hastings said.

Related stories:
FCC net neutrality plan gets picked apart from all sides

By Cecilia Kang  | December 7, 2010; 11:47 AM ET
Categories:  Comcast, FCC, Net Neutrality  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: FCC net neutrality plan gets picked apart from all sides
Next: Microsoft puts 'Do Not Track' function in next IE browser


A better solution is to simply stop watching television.

By doing so you will: Feel less brainwashed, be more mentally alert, have more money, and have a better ass.

Posted by: LM3456 | December 7, 2010 12:37 PM | Report abuse

There's an awful lot of sleaze at work here. Cable & phone companies really need to lose their monopoly protections.

Posted by: Nymous | December 7, 2010 12:41 PM | Report abuse

Just another way for the cable companies to RIP us off. They are greedy little B@st@rds. This will kill the internet.

Posted by: riichie | December 7, 2010 9:59 PM | Report abuse

In a pay as you go model, people will very quickly learn to block all ads and larger images, flash apps, etc -- the browsers will be smart enough to let users choose what they are willing to download. The big losers will be all the sites that depend on advertising, as well, consumes will have a less robust experience.

Have any of the cable companies gone out of business? Why can't we leave well enough alone? Greed............

Posted by: bvdon | December 8, 2010 10:12 AM | Report abuse

Let them know what you think here:

Posted by: jgmann | December 8, 2010 3:21 PM | Report abuse

Do not lose sight of the fact that this is hardly a big company vs consumer issue...These are big businesses fighting over the wallet-share of the consumer and who gets what piece of that pie. Companies like Netflix benefit from the big pipes that the ISPs have put in place and reap tremendous commercial benefit w/o the need to invest capital in that delivery infrastructure. So we (the internet user paying for access) can subsidize the the bandwidth hogs (the 250GB user vs the 2GB user noted in the article above)and perhaps suffer the quality of service consequences or we can allow pricing options that help address these issues. There is no free lunch...just a question of who is paying the tab...

Posted by: terp34 | December 8, 2010 4:34 PM | Report abuse

Bad plan all the way around. Just leave it alone please. It is working rather well as it is.

Posted by: dswift11 | December 9, 2010 4:50 PM | Report abuse

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