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Summary:

Time Warner Cable this week said it will move away from the “buffet” model of broadband and start experimenting with a “metered” model. The cable operator is rolling out a trial program in Beaumont, Texas, in which customers will be charged based on the amount of […]

Time Warner Cable this week said it will move away from the “buffet” model of broadband and start experimenting with a “metered” model. The cable operator is rolling out a trial program in Beaumont, Texas, in which customers will be charged based on the amount of bandwidth they use. Given the rise in bandwidth-sucking content, such as high-definition movies streamed over the Internet, the move is hardly a surprise. Of course before HD movies, the culprit was peer-to-peer file sharing and before that, gamers.

But HD streaming appeals to the masses, and that could be a problem for the cable industry, which is reluctant to spend when it comes to expanding network capacity. Comcast has already tried controversial methods to reduce bandwidth-sucking activity on their network; other providers have undisclosed bandwidth caps and disconnect those who exceed them. Time Warner (TWC) claims that 5 percent of its users occupy 50 percent of its network — and as more people start downloading video, those numbers will rise.

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. Depending on the pricing structure, some power users will have to reduce their usage, and in an ideal world money generated by the service would go toward network expansion.

Given that the U.S. is way behind other nations in terms of its broadband speeds (and users in many other countries pay less per megabit), I’m not a huge fan of metered pricing. But it’s really a symptom of the duopoly that exists in most communities when it comes to broadband access. And I’m not sure how to solve that problem, either.

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  1. “5 percent of its users occupy 50 percent of its network — and as more people start downloading video, those numbers will rise.”

    What is that supposed to mean? Both numbers will rise? The latter number will rise?

  2. Time Warner trial ends flat-rate Internet fees – Top Stocks Thursday, January 17, 2008

    [...] 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 [...]

  3. Stacey Higginbotham Thursday, January 17, 2008

    impatient, both numbers will rise. A small increase in the power users will lead to a disproportionately larger increase in the amount of bandwidth they consume.

  4. First reaction: #$%%#$$!!

    Now that we have that out of the way, my second reaction: This is a regressive move. Wonder what type of choices the people in Beaumont, Texas for broadband access. If it’s a duopoly of cable and DSL, then it’s not really a choice. Most people will be forced to continue service with Time Warner. Time Warner cannot then term the trial a success.

  5. Cornell University has had metered Internet access university wide for three or four years. Same sort of reasoning– file sharing services (including for video) was taking up lots of bandwidth. In the case of Cornell, it really did result in cheaper prices for average users (< 10 GB transferred per month from outside the university network), but more for people who transferred more.

    It also encouraged students to set up local file-sharing services, so that popular items would be obtained by only one or two students, and then shared across the campus network for free. From the university’s perspective, this was fine, as bandwidth was being used more efficiently.

  6. I think what Time Warner is saying to the 5% is: Go ahead, switch to DSL and put the burden on them. We’d like to have low-usage customers.

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  8. Finally, metered pricing is the only model that makes sense for bandwidth because of the power law usage patterns. Now, of course there are grandmas who don’t know how many MBs those pictures of their grandkids take up so there should also be bandwidth-capped plans available for them. So the optimal approach is:

    1. multiple tiers of bandwidth-capped plans for those who know approximately what their usage is going to be each month and don’t want to worry about it (say 1 GB, 5 GB, 10 GB, 50 GB), with easy upsell to higher plans if you end up using more

    2. metered pricing for the heavy users who don’t fit into any of the tiers, or for people who are in a bandwidth-capped plan but temporarily exceed their cap in one month and don’t plan to do so in subsequent months so they don’t want to upsell to a higher bandwidth cap.

    The fact that it takes the dimwits at the telcos this long to figure this out tells you all you need to know about the industry. As for the duopoly that exists, all it would take is for congress to actually enforce the provisions in the telco act of 1996 that force them to open up their COs to all comers. Companies like Covad or Earthlink could then deploy their own equipment in all those communities. Also, congress could legislate a reversal of the shameful Brand X decision, that Scalia rightfully lambasted (his pizza analogy is hilarious). The twin reasons for the currently dismal state of broadband are the technical ignorance of congress (and the public that oversees them) and the millions of dollars that the telcos/cablecos have poured into lobbying to allow them to keep their monopolies.

  9. This is another case where bandwidth has impacted profit margins. http://fishtrain.com/2008/01/17/the-impact-of-bandwidth-costs/

    I think that if TW is getting $0.10/GB and their high-speed Internet access costs the consumer $50/month, then they could cap it at 250 GB/month and still have $25 leftover. Just my thoughts. Sounds like they’re being a little too greedy.

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