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Time Warner trial ends flat-rate Internet fees

Posted Jan 17 2008, 03:32 PM by Kim Peterson
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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." 

Comments

 

Did any of you people read the whole story?  It said that the other companies like Verizon, Comcast, and the etc are sitting in the back seat to see how this works out and they too will jump on the band wagon to rip us off! This is going to affect TW people for now.  Like someone else stated, it they are allowed to get away with this crap, then why can't the FCC do something to enforce packages based on what I watch.  These cable companies brag about all the channels they provide. It's over 100 channels of garbage. Me personally don't give a rat's a## about HD tv. It's those fools who pay cable companies over $130/month that also brag about their channels that are pushing the cable companies to continue getting away with raising prices.  These companies are laughing the whole way to the bank while everyone is complaining. If you subscribe to every channel offered, then don't complain to us about what you pay..cancel it.  As for me, go ahead, charge by usage. I hardly use it so in theory, my bill should go down from over the $50 they charge now.  Just remember that these companies are paying those CEO over millions of dollars in wages to come with the brainy ideas.

The majority of these comments are completely idiotic.  They restructure pricing which will probably help 90% of consumers and its corporate greed.  And people are complaining about the new cost and how much basic cable is.  Does anyone on this understand that they don't have to have cable, or internet, or even a TV?  They provide a service, you pay for the service.  If the service is too expensive, don't pay for it.  The sense of entitlement in this country is insane.  

SO, when do we see a price break for those of us that are not using allot of bandwidth??

Why is TW not upgrading it's system?  Cost?  Well, it's costing them now to have a system that's not able to expand.  

"Al our bandwidth is being used, so....let's limit how much customers can use." What kind of thinking is that? Great way to turn away business.  Bandwidth users are not all movie downloaders.  Many are gaming players.  Watching gaming networks, the bandwidth that passes along the US lines is phenominal.  You start limiting bandwidth and you're going to have some very upset people.....the gaming industry.  I'd certainly pass up a few more online games if TW changed the pricing like this.  I still don't inderstand why several European countries can offer ADSL with 20Mbps bandwidth, and the US still has 7Mbps at many of it's best areas.  We need to pull up the old phone lines and lay new upgraded material.  With all the hidden fees, the phone companies should easily be able to fund it.  

People say the low bandwidth users shouldn't be penalized, but why is Grandma paying for a 5Mbps connection when the 1.5Mbps connection is more than enough for the 5 times they go on and check email.  Dial Up is still feasible for these people.  Many people are going to VOIP calling.  People went to VOIP to reduce their phone bills, now this could potentially increase their bill.  What a bait & switch tactic.  It says only for new customers, but how long will it be before it covers everyone?  

Poor move TW.  But I guess that's what you'd expect from a company that thought AOL would be a great company to partner with.

I am a Time Warner Employee, The increase will not Be on Internet nor Phone service.... It's on the dgt equip and hd equip ect.. If your Basic dgt pak is $44.95 ... it will now be $47.95 .. The price varies on each area ..But that is the extent of the increase...    you will get 3 notices starting on Jan 18th in your bill...

When all of the cable subscribers are gone the cable companies can worry about what to do with their equipment that isn't being used and what new profession they will join.

Uhm, I'm missing something.  I didn't see anywhere in that article where it says that they're raising rates.  It says that they're charging based on usage - I'd assume that their new total revenue would be nearly the same as before (of course, people will reduce usage somewhat so its not exact).  If this is what they do, then yes, some customers will leave - the ones that use tons of bandwidth.  That will leave their competitors charging a flat rate for high bandwidth users, while low bandwidth users will switch to Time Warner to stop subsidizing the high use customers.  In the end, the other companies will have to switch to a similar system or they'll end up with only high-use 'bad' customers.

Ultimately, this adding accountability back into the marketplace and will make people use their internet bandwidth more efficiently - how is that a bad thing?

This is just a way to generate more profit from the same product. You won't see any decrease in rates for low end users, just an increase in high end. T-W is just looking to get something for nothing.

I AGREE KIM

Internet access should be classified as a utility and your bill should be based on usage. I hardly use my Comcast HS when I do the service is slow but have to pay as much as the heavy downloaders. I also have no other service available in my area.

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