Time Warner trial ends flat-rate Internet fees
Posted
Jan 17 2008, 03:32 PM
by
Kim Peterson
Talk about bad timing. Apple just announced it will offer downloaded movie rentals (including high-def) over the Internet. Netflix is working on a set-top box to do the same thing, and Microsoft has been ramping up its downloadable movie offerings over Xbox Live.
Now, one cable company is starting to push back at excessive bandwidth usage caused mainly by video downloading. After an internal memo was leaked, Time Warner Cable confirmed it's planning a trial in Beaumont, Tex., in which it will charge Internet subscribers based on usage. (Time Warner's shares closed down 22 cents to $22.35 Friday.)
It's a tricky situation for Time Warner and other cable companies. Customers generally pay a flat rate for Internet (about $50 a month in my case), but a small minority are basically torrenting HD movies like crazy and sucking up a bunch of bandwidth. According to the leaked memo, 5% of subscribers were using up half of the total bandwidth.
So a few people are fiber hogs. Time Warner probably could have handled that motley crew of torrenters, if it was just that. But the cable operator sees what's coming. Video downloading -- particularly high-def downloading -- is moving more into the mainstream as tech companies make it easier to rent and buy movies online. A few months of that and Time Warner is going to have a real bandwidth problem on its hands.
This new billing system will reportedly apply to new customers only, and Time Warner isn't giving any details about how it will structure the system or how much it will charge people. I'm assuming there will be some sort of tiered-rate scenario. The idea raises some questions.
1. What if you have an unprotected network? I know someone who only torrents albums when she's able to get on her neighbor's open network, thereby avoiding the wrath of the RIAA. Will people be punished for not locking down their networks?
2. Will there be "peak" and "off-peak" hours? Some areas give electricity customers a reduced rate during off-peak hours. If you download a movie at 3 a.m., when bandwidth usage is down, do you get a break?
3. How much is too much? Time Warner will let subscribers track their Internet usage so they know how close they're getting to a bandwidth cap. But what will that cap be? Will I cross the line if I download three movies a week? Or five? And does YouTube viewing factor into this as well?
4. Will Time Warner direct any new revenue from this into badly-needed network expansion?
At least Time Warner isn't doing a Comcast-style termination of the accounts of heavy downloaders. That's bad business.
Here's what others are saying about this:
TLF: "Is it written in stone that the we have some sort of God-given right to flat rate pricing forever more? More importantly, is flat-rate really the fairest way to price access for light users? I appreciate all the old grannies out there who are essentially cross-subsidizing my bandwidth usage every time I download massive HD movies on my Xbox 360, but is that really fair to them?"
Gizmodo: "Reason number 149 I won't move to Texas..."
GigaOM: "Time Warner can’t sustain a huge increase in power users on the current infrastructure; with a buffet model, such an increase would force it to either expand the network or force heavy users out of it altogether. Metered pricing, if it works, would allow them to do both."
Silicon Alley Insider: "With their stock in the toilet and increasing competition from telcos (and soon WiMax), cable companies will try anything to free up network capacity without increasing capex. So we aren't surprised that TWC is testing consumption-based pricing."
