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Summary:

*Time Warner Cable* is starting a trial of consumption-based internet pricing, the company has admitted, following a leak of internal memos…

*Time Warner Cable* is starting a trial of consumption-based internet pricing, the company has admitted, following a leak of internal memos (see here). A company spokesman told AP that TWC would do a test in Beaumont, TX, selling new subscribers packages based on how much data they use, as opposed to standard all-you-can-eat plans. The company’s rationale: a small minority of users that engage in bandwidth-intensive behavior burden the network; it estimates that 50 percent of network capacity goes to 5 percent of its subscriber base, so it wants to charge them accordingly. The trial, which will only apply to new customers, is expected to start some time in Q2.

As Techdirt points out, it’s good that the company will be upfront about the data-based pricing, as opposed to using other means of curbing internet usage. But it could have the effect of slowing down next-gen internet content offerings, such as online HD video. A few years ago, such schemes might have hampered the growth of YouTube and other video sites. With tiered pricing, users are more likely to think twice each time they click on some bandwidth-intensive content. If you’re a cable operator, you might like that, but if you’re in the content business, that’s obviously unappealing. Of course, at this point it’s only a limited trial. And with cable facing the heat from competitors, it’s too early to declare the death of the buffet model just yet.

As noted above, there are other, trickier means of curbing bandwidth usage. AT&T (NYSE: T) recently stated that it’s continuing with plans to filter traffic for copyright-infringing content. As Tim Wu notes in Slate, the concept is fraught with challenges, but one theory is that the company’s main interest is not copyright protection, but freeing up bandwidth currently used by heavy consumers of pirated content.

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  1. This is an interesting announcement, and while it does seem reasonable for TW and other BSPs to be able to charge based upon usage, I can't think of any analogous situations where a vendor in a competitive market has been able to move away from a "all you can eat" model once it's been established across the industry. The lower usage customers will stay and pay less while the heavier usage customers will switch to a lower cost provider.

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