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Summary:

[qi:004] Time Warner Cable will offer users unlimited broadband for $150, it said last night when it released pricing plans for its metered broadband efforts. A quick check this morning shows that the pricing isn’t just a 285 percent increase over my current $39 a month […]

[qi:004] Time Warner Cable will offer users unlimited broadband for $150, it said last night when it released pricing plans for its metered broadband efforts.

A quick check this morning shows that the pricing isn’t just a 285 percent increase over my current $39 a month (previously unlimited) broadband package, it’s also the perfect amount to keep Time Warner’s revenue stream intact should I start consuming all my video and voice via my broadband connection, rather than by purchasing a triple-play bundle.

Buying all three services as part of a triple play would cost me $139.95 a month — $10 less than it would cost to consume anything and everything via broadband without fear of caps. Coincidence?

twc

    1. They are creating their own battlefield for us to fight them. Either way we lose. You don’t wan’t to argue whether it’s fair to pay such amount at such and such price. That is exactly what they want you to do, because in the end you’ll be under their control. If you accept one, you’ll accept all. Just step back and don’t get trap on their arena. See it with bigger picture.

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  1. How long until they give you this answer:”Just expense it for your business. What do you care?”

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  2. Another company that thinks its customers are stupid.

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  3. That’s hilarious. For that price in France I could get FIVE connections at €29.99/month. And for each of those FIVE connections I’d have:

    28Mbit ADSL
    Unlimited *fast* downloads
    Free installation
    Tivo-style PVR with 200 channels of TV, video on demand, etc.
    VoIP phone line and non-geographical number with FREE calls to 70 countries
    Two CPL adapters
    A bunch of email addresses and the usual guff
    IPv6, LAN video streaming to TV, and other goodies for nerds
    http://www.free.fr/

    This is certainly something France has got right (even if they’re toying with three strikes laws)

    Sam

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  4. Shouldn’t this blatant pricing move be challenged by FCC, FTC, and perhaps the department of consumer affairs?
    There are organizations and consumers who have been using unlimited broadband services for many years now … a service that has very directly shaped consumer behavior. For these service providers to now radically change their pricing, and in effect exploit their most loyal customers, is clearly unethical, and likely illegal too.
    Beyond hitting our pockets, this trend will raise barriers to future adoption of digital media/apps, and will certainly deepen the digital divide. Appears to be a worthy cause for consumer rights activists and regulators to take on.

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  5. $150 per month is actually an incredibly good price for unlimited Internet at 50 Mbps downstream. Here’s why.

    Internet service providers buy backbone bandwidth according to the continuous capacity of the link (usually measured in megabits per second). That bandwidth can be very expensive (in our case, $100 per Mbps per month; in some ISPs’ cases, $325 per Mbps per month or more). In certain big cities, you can sometimes get bandwidth at $3 per Mbps per month, but only if you purchase huge amounts of bandwidth and pick it up at a major hub. (In other words, the $3 per month doesn’t include the delivery system.)

    End users, on the other hand, want a palatable flat rate price for service. Typically, it’s $30 to 45 per month (though what they really want is $15-20). And even at the lowest service level, they expect Web pages to arrive quickly. They want VoIP to work. And they want interactive games to be responsive.

    And so, what ISPs must do to provide them with reasonable monthly rates is reminiscent of the old engineer’s joke:

    Q: How do you carry two tons of canaries in a one ton truck?
    A: You keep beating on the sides as you drive along, so that at least half of the canaries are airborne at any given moment.

    In other words, to satisfy consumers, and ISP needs to oversell bandwidth and rely on the fact that not all users are consuming network resources at the same time. The ISP can let users burst to very fast speeds, but you can’t have all of them doing things which continuously take up megabits of bandwidth for extended periods of time.

    ISPs can also leverage the fact that most users have a limited capacity to produce new content. They may be prolific writers, but this isn’t even a blip on the radar because text takes so little bandwidth. They may be avid photographers, but even good still photographs take lots of time to compose, crop, and post. They may even create a lot of video, but since video is generally uploaded to servers close to the backbone (e.g. YouTube) for general distribution, this also does not create much continuous upstream traffic. For this reason, ISPs can buy more downstream than upstream bandwidth, and design their systems so that they have more downstream than upstream capacity.

    Now, enter two classes of applications that don’t lend themselves to oversale. One is P2P. Leaving aside for a moment the fact that P2P is overwhelmingly used for illegal activity, the two big problems with P2P are that it often has a 100% duty cycle and consumes precious upstream bandwidth. This wreaks havoc with the careful engineering that is done to reduce the cost of users’ service.

    The second application that causes problems is video streaming. An HD stream can easily take up several megabits per second… and users, who are used to leaving the TV on, don’t realize just how much it would cost the provider if they left the stream on in the same fashion. So, they often stream content for hours — EVEN WHEN THEY ARE NOT WATCHING IT. (The same is true of music; many users leave Sirius/XM or Pandora running all day even if they are out of the room.)

    The problems are further compounded by the fact that the Internet is not a broadcast medium. When another user tunes into an over-the-air television station or even a station on a cable TV network, no new resources are consumed. But on the Internet, each video is an individual stream which consumes more resources and creates additional costs.

    For all of these reasons, ISPs MUST either discourage continuous use of bandwidth-hogging applications (analogous to beating on the side of the truck in the joke above) or raise their prices. This creates a serious dilemma. They do not want to insist that customers pay the full price of backbone bandwidth plus a markup, because the higher prices would anger consumers and cause many of them — especially those not financially well situated — to drop their service. It would also discourage potential new customers from signing up.

    ISPs likewise do not want to charge by the bit, because so many applications that download (e.g. virus checkers, which download updates frequently) are beyond the average user’s control.

    So, they have been forced to adopt a hybrid approach. They start with a low flat rate that applies when the user obeys the assumptions that allow cost reduction. They then add surcharges which — if they’re designed correctly — will approximate the direct sale of backbone bandwidth on a “cost plus” basis to heavy users who push their connections to the limit.

    Of course, all such schemes are approximate. The crudest approximation — caps plus overage charges — tends to discriminate against users who do lots of long, low bandwidth downloads, and also tends to cause nasty surprises (as do overage charges on cell phones). But as one makes the formula more sophisticated (and more accurate), it starts to look like the abovementioned “Skittles bag of caps” and becomes less and less comprehensible to the customer.

    The result: more and more naive consumers are already claiming that ISPs are discriminating against online video because it competes with their own offerings (at least when the ISP is a cable company) or leveraging market power. One member of the US House of Representatives, Rep. Eric Massa of New York, has gone as far as to say that any sort of metering should be illegal. “I firmly oppose capping Internet usage,” he said in a press release posted at

    http://massa.house.gov/?sectionid=24&sectiontree=23,24&itemid=205

    “and I will be taking a leadership role in stopping this outrageous, job-killing initiative.” The Congressman also claimed that metering and capping Internet

    I called and e-mailed the Congressman’s office and asked, “Would you also be opposed to metering of electricity? Of natural gas?”

    As of this morning I haven’t gotten a response.

    In any event, the fact is that $150 for 50 Mbps is really a great deal. It’s literally below the lowest obtainable wholesale cost, and doesn’t cover the expenses of maintenance, billing, support, etc. (Time Warner must be hoping that users won’t use all 50 Mbps 24×7.) So, there’s no reason to gripe. That pricing may be higher than a consumer would like, but it is not at all unfair.

    –Brett Glass

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    1. free.fr can do it in France, complete with HD streaming no less, for €30/month with free installation and essentially no contract. If they can do it, you can do it.

      Your comparison to wholesale cost is bogus too – as you well know customers will only get a small fraction of the 50Mbps the last mile link is capable of. $1,800 per annum for what is fast becoming an essential service is absolutely outrageous.

      Sam

      PS Can’t help but to notice you appear to be an ISP yourself Brett. Figures.

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      1. Alas, Sam, your response is typical of those greedy bandwidth users who refuse to accept the realities of the business and/or compares apples to oranges. (The logistics of doing business in France are very different than those in the US, and the service you mention does indeed have usage limits and restrictions. See their terms of service at http://adsl.free.fr/cgv/CGV_FORFAIT_hors_opt_01022009.pdf.)

        What will you be demanding next? Unlimited natural gas for $30 per month? Sorry, but ISPs are not charities. We work very hard for razor thin margins.

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      2. Comparing US and French internet costs is stoopid. And no one here cares.

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      3. Thanks JD for your unjustified assertion that “comparing US and French internet costs is stoopid”. Why should they be any different? If anything it should be more expensive here given much of the content comes *from* the US rather than vice versa.

        If I were in the US and paying 150 $local_currency every month then I’d be very interested to know that the people on the other side of the water were paying 30 $local_currency a month for a better, faster, cheaper product (with a bunch of extra features like unlimited, free international calls to most of the world).

        Sam

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      4. @jd – sure we care!

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    2. Actually my response is not “typical of those greedy bandwidth users who refuse to accept the realities of the business”… I’m a business user who appreciates a fast connection and limits that (even as a power user) I didn’t even know existed after two years of service. And we’re not talking lightweight use here either… we watch HD movies from iTunes a few times a week, stream music from Deezer, download software from MSDN and make phone and video calls.

      The reality is that we don’t have every man and his dog running traditional utilities and the same will (for better or worse) soon be true of connectivity.

      Sam

      PS forgot to mention that if you’re in Paris you’ve got a reasonably good chance of having 100Mbit fiber instead of 30Mbit ADSL. For the same €29.99 per month.

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      1. Internet is not a “traditional utility,” and the very worst thing we could do is regulate it as such. Like gas stations, grocery stores, and other local businesses, it is a business which is best run locally and by local small businesspeople. Users need support and hand holding that no huge, nationwide corporation can adequately provide, and only someone who lives in an area can really serve it well. Folks, you may have an option for two pipes from the cable company and the telephone company, and that’s fine. But the third pipe is local, and it’s the best pipe of all.

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    3. At the point that Internet use is a truly competitive market, you’ll be free to develop pricing plans as you like. But today, residential broadband is a virtual monopoly or duopoly in most locals, with just 1 or 2 companies (cable/telco) offering high-speed broadband internet. And there’s limited wireless spectrum, so WiMax or other wireless technologies are not going to create true competition.

      So long as we’re talking about regulated utilities, then you should be required to act as one. Let the local utility boards set your Internet rates according to cost plus a reasonable profit. If high-use services truly increase your costs, then you will be free to pass these costs to the users. You should also be subject to uptime guarantees, and to offer truly plug-and-play modems and routers that guarantee uptime.

      I don’t know much about the situation with Time-Warner, but I think the 250GB cap from Comcast is not unreasonable, except for the following. First, they should publish a rate for exceeding the cap. Let the customer know what are the consequences for excessive use. Second, provide tools to show the customer their usage. It is NOT reasonable for customers to meter their own use. All other utilities provide meters that clearly state the usage.

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    4. @Brett – Either get your facts right or stop lying. According to TWC their costs to maintain their networks have went down considerably not up over the last couple of years. To find this out you just have to look in other places than the lies they are telling their customers. If you look at what they are telling their shareholders you will see the truth. For more info go to stopthecap.com or look at the revenue facts in the lastest TWC article on Wired.com

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      1. If you’re going to be so hostile (e.g. saying things such as “stop lying”), there is probably no point trying to talk sense to you; you obviously do not care about the facts. The truth of the matter is that the wholesale cost of backbone bandwidth is going up, not down. I know; I buy it for my ISP. And Mr. Drake here seems likewise not to know a thing about the realities of the ISP business.

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    5. Brett,

      Your comments on wholesale bandwidth pricing is completely out there… if you’re paying $100/Mbps I feel sorry for you as you’re either buying transit off of a 2003 contract or you’re including significant network costs that are not variable per usage. Current rates from any tier 1|2 is <$15/Mb for anything over 50 Mbps at any colo/carrier hotel facility in the US (and that’s on a 1 year term).

      Do you really think TWC is paying for transit at anything more than <$10/Mbps for their connections? Add to the fact that they’re probably settlement free for ~20-50% of their traffic this is nothing more than a money grab to either hedge themselves against becoming just a dumb pipe providers or disincenting consumer behavior that could potentially lead to that.

      The usage model makes sense if we’re talking about ~$.10 per GB as that’s the rate can be correlated back to current Mbps pricing (see CDN offerings for LLN and others) otherwise all this just a business decision that if replicated across other providers will drastically change the way people use the internet.

      oh and you can’t use the gas analogy since bandwidth is not a finite resource only your access to it is

      Jerry

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    6. A megapoly like TWC is only paying a few cents per gig.

      Natural gas providers don’t charge the consumer TEN TIMES what the gas costs them.

      The latter are allowed to charge a nominal facility fee to cover fixed costs – here it’s $10/month for a residential customer.

      TWC is bucking to be regulated on the state level.

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      1. Comcast could be asking for the same; their prices are pretty obscene really.

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    7. If P2P is a problem then perhaps they should cap upstream bandwidth. I’m sure this wouldn’t be a problem for legitimate users and would not cause the heartburn this is causing in Congress.

      For broadscale Internet access, this can be procured by a cable operator at 4 cents per GB. At this rate a 100 GB/Month cap would cost the operator $4/month, still leaving a lot of room for margin in a $40/Month cable bill. Even further, content providers like XM/Sirius and Apple pay content delivery networks like Akamai to cache these files directly into cable operators head-ends, eliminating the 4 cents per GB Internet fee for these feeds and streams.

      This is clearly intended only to protect their cable service which forces people to pay for channels they don’t watch. Why do I have to subsidize doper A-Rod’s $28 Million/year salary made possible by the fees I am forced to pay by Time Warner Cable for ESPN when all I want to watch is the Discovery Channel? This is your cable operator at work.

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    8. Interesting…

      So, why did twc NOT upgrade their networks to fiber-optic and give everybody 20 Mbps, no-cap, for under $50??!

      Also, if the FCC and government start to put these broadband companies under a good amount of regulations and policies, then I guess fews would have anything to fight against these companies for the unfair schemes. But then again, someone could also argue that internet networks is not like electric or gas. You don’t turn on your gas oven and Nettlix jumps and ask you to pay the premium to watch gas… I mean, video.

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    9. Brett. The facts don’t bear out your case. Total direct costs of providing bandwidth are 3% of internet isp provision revenues. Even if they doubled it’s not a significant cost driving factor. See this analysis: http://www.verizonfiber.com/Blog/tabid/58/EntryId/9/A-trip-through-the-company-books.aspx

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      1. No, Lee: The facts do not bear out YOUR case. You are taking figures from Time-Warner which lump cable TV service (a high profit item) together with Internet service and attempting to derive information about Internet service from them; sorry, but you can’t do that. You are also greatly misinformed when it comes to bandwidth costs. Bandwidth is far and away our ISP’s largest expense, and costs per megabit have been going UP lately, not down, due to consolidation in the backbone market and price gouging in the “middle mile.” I know; I’m in the business, while you are merely a busybody.

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    10. Dear Brett,

      We sincerely thank you for being the voice of reason on this important topic. I have personally been assured that there is nothing wrong with our Internet tubes. We are the greatest country in the world, and our telecommunication policy is working for the American people. God bless America, and the FCC.

      yours truly,

      JM

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    11. Alfred Newman Monday, April 13, 2009

      Thats all well and good but Verizon has been spending billions in upgrading their infrastruture to handle all this “wasteful” bandwidth because they realize they are not the cable company and they don’t need to compete with online streaming videos, let alone downloadable video games.

      The money has been there to upgrade the network but they have chosen to not do so like Comcast. They could have already had their hardware switched over to DOCSIS3.0 which would have solved most, if not all, the problems you bring up but the fact that the money was merely wasted. Sure I can’t say all the money was wasted but I can point out were some of it went – http://gizmodo.com/5018572/ten-million-pixel-comcast-display-wows-viewers-with-un+throttled-ultra-hd-video

      And heres the icing on the cake. Australia, the country that has always been pro teired services when it comes to bandwidith has stated it will spend up to 30 billion dollars in upgrading it’s network to fiber. Hmmm… I wonder why that is. Maybe because they realize that with all the services available online they will have to upgrade the network mediums to be able to provide those streaming videos, video games, etc.

      Brett, you may be speaking of smaller ISPs that could benefit from metered bandwidith but we are speaking of Time Warner Cable, not your business. Instead of looking at the bigger picture you’re focused on the TWC feed-bag that has been strapped to your head.

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  6. So cancel their sorry service and pick up something else! That’s the great thing about Time Warner. NO CONTRACTS! (at least today). I heard they were going to institute contractual pricing, although I don’t quite understand what the contract gets you in terms of subsidized pricing. These guys are completely confused by the changing marketplace.

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  7. @ryan,

    I wish that were the case everywhere. In some munis you have one or two choices. Where I live in Michigan, we have Comcast and ATT. But ATT does not provide internet on its own (only double or triple play). So, it’s Comcast only if you want broadband and nothing else. It’s a monopoly.

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  8. What makes it all that much more ridiculous is that the chances of them actually delivering you the downspeed consistently you’re paying for is effectively nill. Sure, they’ll sell you all sorts of great connection speeds…so long as you don’t actually expect to use them at that speed consistently. Gotta love the pure bait and switch and non-stop consumer abuse. Nothing like false advertising and price gouging to keep it classy.

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  9. Makes me jealous of you people. In India we pay 15 dollars for 256 kbps unlimited. Now they have introduced 16 mbps which costs 100 dollars and what more you can just download 50 gb. Dont cry you are far better off.

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