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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.

  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?

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  2. [...] 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 [...]

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  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.

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  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.

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  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.

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  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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  7. [...] Roadrunner Won’t Run Video Killed the Broadband Buffet Time Warner can’t sustain a huge increase in power users on the current infrastructure; with a [...]

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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.

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  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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  10. This post is very hot, it is high ranked at our site (daily weblog, weblog post ranking site). See http://indirect4.blogspot.com/ for more information

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  11. bliemey – what would happen to broadband companies now — ?

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  12. [...] Video Killed the Broadband Buffet – GigaOM Time Warner Cable this week said it will move away from the “buffet” model of broadband and start experimenting with a “metered” model, many are saying due to the rise in online Hi Def movie downloading [...]

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  13. I’m not sure why anyone is surprised by such a move. For ISPs, broadband is a golden goose. It’s a utility that people love to use and are willing to pay a premium for better/faster service. The ISPs look at this kind of demand, and figure it’s ripe for the introduction of tiered services to squeeze more out of the market. Simple supply and demand.

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  14. [...] their cable service? Don’t think that will stop with the Cable Companies. I happen to agree with Om Malik, the Achilles Heel of broadband access is video. And just think, HD video over the pipes hasn’t [...]

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  15. Bye Bye Unlimited Flat-Rate Internet

    Say buh bye to unlimited Internet access, or at least if Time Warner Cable has its way. In an effort to stop excessive bandwidth usage caused by "bandwidth hogs", mostly caused by P2P networks like Bittorent and video downloading, Time…

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  16. I live in Texas and have been considering dumping Time Warner for a while now — their HD DVR has issues, and their broadband has been spotty lately.

    I won’t wait around for them to slap on metered access. I’m dumping them now.

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  17. I call shenanigans. Countries like Japan and France manage to offer one magnitude higher bandwidth than US providers despite:

    1) having expensive workforces (someone has to pay for those high-quality healthcare systems)

    2) higher bandwidth costs (when a Euro/Asian ISP peers with a US ISP, it’s usually the non-US ISP that picks up the tab for the international transmission cable costs).

    This is just an example of TWC trying to abuse the oligopoly their lobbyists have obtained for them by capturing the FCC and exploiting the venality of Congress. Japan and France had far less competition than the US 10 years ago, yet somehow they managed to foster vibrant competition. We should simply adopt the exact same policies they used: force open the incumbents’ networks to competitors at true cost. It’s only the future of the US as an information economy that’s at stake.

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  18. Surely, we don’t expect our electricity, heating, or water to be a “buffet” so why should bandwidth? The current model forces light users to subsidize heavy users. Metered pricing is an excellent alternative to traffic shaping: instead of discriminating by content type and distorting choice, let people choose with their wallets. Isn’t that how it works in most other markets?

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  19. I really can’t comment on metered pricing without some hard numbers. I already pay Comcast $42 per month for broadband – how much data transfer is reasonable?

    “Buffet” is a good choice of words. Everybody pays the same but some eat a lot more (myself included!)

    http://www.RSSLiveTV.com – an easy way to tune into live internet television (and consume lots of bandwidth!)

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  20. “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.”

    Answer – legally mandated unbundling of the copper loop and cable at low wholesale cost. As has taken place in France where one can get up to 25 Mbits/sec internet + free phone calls to 50 countries + free cable TV replacement, which can carry HDTV, all for EUR 30 per month. Some TV channels come at additional cost.

    The incumbents are busy rolling out fiber as a result. Traffic limits don’t exist in France. No minimum contract periods for most providers either.

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  21. Dimitrios Matsoulis Saturday, January 19, 2008

    The trend of reversing the current situation will be very hard to enforce. Business users are more likely to pay for extra broadband use. Non-business users are more likely to migrate to ISPs that have no usage limits. Now if ISPs all enforce volume measures I think the internet will stop being the medium of freedom it is now.
    http://electronrun.wordpress.com/

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  22. Douglas Frank Sunday, January 20, 2008

    Several comments and questions for the readers here:

    1. Has anyone seen any recent (2007) monetary loss studies or figures from the BB providers? We could have a much more robust discussion if we knew at what average vendor-promised customer bandwidth (CIR/Committed Information Rate) the providers start seeing losses. In other words, by how much have they “oversold” their pipes?

    2. Q dub, I don’t fully agree with your Public Utility metaphor. If a telco has a fiber network deployed, upgrades to handle higher usage are fixed-cost. Granted, for some areas and telcos that’s a BIG “if,” which is why they’re griping; They don’t want, or can’t afford line upgrades at the moment.

    3. In any service-oriented market, the natural market pattern progression is to START with a usage-based structure to defray costs until economies-of-scale are realized, at which point they announce fixed-fee services, customers cheer and migrate to the first vendor to make the announcement. In this case, several vendors had already undergone this process in 2004-2005, but now are forced to regress.

    Ultimately if all major telcos move to metered rates, ultimately the first one to perform major upgrades and revert to fixed-cost will gain a HUGE marketing advantage. The real question, and it’s a technical one, is WHEN endpoint and infrastructure technology will again hurdle consumer requirements, P2P included.

    Doug Frank

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  23. Douglas Frank Sunday, January 20, 2008

    Fazal, regarding the U.S. adopting new policies, you used the phrase “simply adopt the same policies,” which is perfectly ironic, as our policies are anything but simple to sway, even IF there were large lobbyists behind the issue. The government treads lightly these days regarding private corporation interference, and has a “hands off” private industry attitude. That attitude is an incredibly sharp double-edged sword.

    It also doesn’t help that the people in power (for the most part) haven’t yet rotated out, giving a more tech-savvy generation power.

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  24. [...] is that a new generation of routers may be needed to take us to the next level.  I agree with Stacey Higginbothom who says this is really a symptom of the duopoly or poor number of choices among broadband providers that [...]

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  25. Douglas, if anything the French power elite is even more clueless than US ones, and the French government had a vested interest against change as it was the majority owner of France Telecom. Circa 1998, the telecom regulator refused to even consider the possibility of unbundling.

    And now my friends there are being offered 100Mbps down/25Mbps up for the same price I pay for my 8Mbps down/512Mbps up “premium” DSL connection in San Francisco, and I hear the telco/cableco oligopolies shedding crocodile tears about how evil P2P users are taking the money from their children’s mouths unless they are allowed to gouge even more than today.

    Comparisons to electricity or water are fallacious. A better comparison would be local phone calls, which manage to be unlimited in the US, despite having a sub-population of users who talk their ears off.

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  26. [...] To subscribe, you must already have HBO and you must be a Time Warner Cable subscriber (Time Warner Cable, don’t forget, is considering charging for broadband based on usage). [...]

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  27. I’m not the first person to say that the cable companies are some of the most disoriented, consumer-averse in the country. They take full advantage of their tight control over the market to screw over everyone.

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  28. [...] Example: Metered Access and Video Don’t Mix Time Warner recently said it plans to test metered Internet access in Beaumont, Texas, and is looking at Bell Canada’s DSL plans as inspiration for pricing. [...]

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  29. It’s not video that’s killing broadband, it’s greed and mismanagement.

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  30. [...] for free or $10 a month); paying for capacity, on the other hand, is anathema to most netizens. But Time Warner is implementing the idea in Beaumont, Texas, with per-byte overage [...]

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  31. [...] for free or $10 a month); paying for capacity, on the other hand, is anathema to most netizens. But Time Warner is implementing the idea in Beaumont, Texas, with per-byte overage [...]

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  32. Just another excuse by an oversized corporate structure to stick it to consumers. The pure fact is…if its a bandwidth issue..limit bandwidth speeds. I have tested my speeds a hundred times and have never gotten above 1.2Mbps…DSL goes faster. Ive heard “Its Your end” so dang often that it sickens me…Its not my computer(s). All 3 have been tested with the other two turned off…still no change.
    So stop making excuse TW and just own up…”We are switching so we can charge You higher prices per month for less.Our CEO and other corporate officers want new cars this year…their current ones are two years old now.”

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  33. Oh…and since over 70% of the resources are being used by corporations……so called “Power Users” those statistics should be seperated from the home users for fairness.

    But be warned…if I have to start paying per MB…I will demand better service than I get now…low speeds…going as low as 732Kbps when testing….I WILL get what I pay for.

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  34. [...] provider’s tiered levels of service, I can’t help but wonder that. Earlier this year, the company said it would experiment with tiered pricing in Beaumont, Texas, and now has set up a pricing plan that ranges from $29.95 a month for something [...]

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  35. [...] bytes you send and/or receive from the Internet on a monthly basis. Time Warner has suggested that usage-based pricing will be tier-based, with tiers at 5, 10, 20 and 40 gigabytes and overage charges applied for bytes that exceed [...]

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  36. [...] Warner got the ball rolling back in January, and in June it announced a trial limiting folks to tiers from 5 GB per month to 40 GB per month. [...]

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  37. [...] AM PT | 0 comments Poor Beaumont. The tiny Texas town gained fame in the technology world when Time Warner Cable said in January that it would use it as a testbed for its tiered broadband trial. Then Hurricane Ike hit in [...]

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  38. [...] metaphor is unfortunate, since prior to this, broadband has been compared to an all-you-can-eat buffet, and the point is that everyone pays the same price and eats what they want. Changing the rules of [...]

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  39. [...] broadband are that bandwidth costs are rising so ISPs need to a way to recoup them, and that tiers are a way to control bandwidth hogs. Given that so far, providers have been tight-lipped about their bandwidth bills, and that most [...]

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  40. [...] of the bandwidth and 1 percent consume 20 percent of the bandwidth, which is in line with what ISPs have been saying to justify caps, tiers and other restrictive pricing plans, oftentimes citing P2P use as a leading problem generating congestion on the [...]

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  41. [...] to get some clarity regarding the rumor that even it would eventually face constraints under the onslaught of video. Whitton quickly disabused me of that notion, pointing out that the network is built to be [...]

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