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TWC Defends Tiers, Plans Speed- and Consumption-Based Plans

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When Time Warner Cable (s twc) rolls out its new pricing plans, it won’t base its tiers simply on consumption, but will also consider broadband speed as part of the equation, according to a statement released this afternoon by TWC Chief Operating Officer Landel Hobbs. As it deals with the backlash generated by its expansion of tiered broadband trials to four new cities, among them San Antonio and Austin, Texas, the cable company is getting its messaging together. From the statement:

Our current pricing plans require all users to pay the same amount, whether they check email once a month or download six movies a day. As the amount of usage has dramatically diverged among users, this is becoming inherently unfair and not the way most consumers want to pay for goods they consume.

When you go to lunch with a friend, do you split the bill in half if he gets the steak and you have a salad?

This 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 the game now does a disservice to everyone, from consumers to innovation to companies such as Amazon (s AMZN), Google (s GOOG) and Microsoft (s MSFT), which stand to lose if consumption-based broadband forces people to reconsider certain of their online services. If your favorite buffet changed to a standard, entree-based menu, you probably wouldn’t eat there as often, especially if you had other options. Luckily for Time Warner, being an ISP isn’t as fraught with competition as the restaurant business.

However, Time Warner may add a wrinkle to the debate over consumption-based broadband by mixing speed- and consumption-based plans. It also could make this more interesting if it rolls such plans out with its DOCSIS 3.0, super-fast broadband upgrades, that are affirmed in the statement.

Furthermore, I am convening a series of meetings this week to develop plans that will allow customers to choose among tiers that provide tradeoffs between speed and consumption. If one family prefers to have lower download speeds but a higher data tier, or vice-versa, we want them to be able to make that choice.

We’d like to make enough speed and data tiers available so that it’s possible for customers to reduce their monthly Internet bill based on the choices they make. Obviously this is still in the planning stages and details are fuzzy, but this is a priority for me this week.

Currently many ISPs charge based on the different speeds of service, but in the U.S., I only know of  one: Charter Communications, which mixes speed and capacity limits and plans to cap capacity based on the level of speed a customer chooses. Its smallest cap is 150 GB and is tied to customers who sign up for its 15 Mbps-and-under service. That’s a far cry from Time Warner’s smallest cap of 5 GB, which is currently tied to speeds of about 7 Mbps. If Time Warner is now operating restaurant with a menu, the options aren’t between steaks and salads — they’re between overpriced dishes of greasy burgers and iceberg lettuce topped with a few soggy tomatoes.

20 Responses to “TWC Defends Tiers, Plans Speed- and Consumption-Based Plans”

  1. Willie

    So if it is consumption based that means that my unused Gigs will rollover to the next month right? Have they mentioned anything about this?

  2. The issue here is Video-On-Demand via the Internet.

    The cable companies can’t stand the idea of HD movies being viewed by their customers and these companies not getting a penny from it.

    Has absolutely nothing to do with network infrastructure issues.

  3. When you go to lunch with a friend, and you only want salad, and your friend wants salad and steak, does the restaurant serve you both steak and salad, but warn you that you’ll pay much more if you touch the steak they put in front of you?

    Anyway, the bottom line is that ISPs need to simply charge different rates for different speeds (i.e., differences in services) and NOT different rates for different volumes transferred through identical fast connections. There are no bandwidth shortages! Bandwidth is 100% recycleable! It is not consumed by using it!

  4. Jesse Kopelman

    “When you go to lunch with a friend, do you split the bill in half if he gets the steak and you have a salad?”

    No, unless he is an asshole, the steak guy pays the whole bill. So, I guess TWC is about to offer a free tier of service. What, they’re not? Well I guess we know who the asshole is then . . .

  5. Time Warner, Comcast, et al have an inherent conflict of interest in pricing Internet service because they compete in the TV and movie market with Internet providers. Why would they want cheap Internet service? It only lessens demand for their pay movie offerings.

    What has made this patently unfair is the fact that the government GAVE these companies Internet and TV monopolies in local municipalities. Now that these companies have their infrastructure paid for (with ample assistance from tax breaks and taxpayer dollars), it’s virtually impossible for anyone else to enter the market. Hate to say it but the government is the one that screwed this up AND is going to have to fix this problem. Time Warner and Comcast (among others) have clearly demonstrated that self-regulation simply won’t work. Their primary pricing motivation is greed.

  6. I shudder to add to the buffet metaphor but..

    Video changed the upper limit on what a customer can consume. It’s like they prepared a buffet expecting few people to go back and refill their plate; only to find 20% of the people that turned up are going back three and four times.

    The 20% of people with this veracious appetite bitch and moan that the food runs out and the operator is considering changing prices for them rather than up the price for everybody.

  7. A la Carte is not the solution here. We need to be asking our smirking TWC representatives WHY IS IT UNFAIR for us to utilize a higher percentage of the potential monthly bandwidth we are currently capable of? They’ll try to make it “obvious” that it costs them more to serve “bandwidth hogs”…. except that it practically doesn’t! We’re all promised “unlimited” bandwidth at a given rate/sec through a given billing period, and noone really utilizes 100% of that. What’s “hoggish” about using the bandwidth we’re contracted for?

    Newsflash: A fully-utilized network costs the ISPs about 7% more to operate than an idle one. They’re dragging their heels on updating their old equipment (which still actually isn’t maxed out), because there is no practical competition. Also, they want to asphixiate rival movie and “tv” providers who compete for the same customers over the same lines (Netflix, Joost, Beeline, etc.). Ya think TWC REALLY needs to charge $1/GB overage fees to the same customers who they’ll deliver 6-8GB HD movies for $4?

    What would be “fair” is if they used their magnificent profits to expand the networks to meet their customer’s needs. Instead, they want a non-neutral (hostile?) network which lets them milk the customers even more than they have been all along. They’re stagnating innovation. They’ve set their thresholds at precisely the level needed to squelch competition. And they’re lying lying lying about why.

    There is no bandwidth crisis! TWC and other ISPs are using the same tactics of pretense which our government uses to take our rights away! The public has been fooled into thinking that there is a problem and that the ISPs have an urgent need to take action.

    Read some of the comments on the online petition, especially #840 (not mine). Time Warner can provide all those TV channels for a flat rate but wants to ration our Internet bandwidth to keep us from using it as an alternate source for the same entertainment. It’s really that obvious.

  8. P. Lee

    I don’t know about Mr. Hobbs but when I go to eat with my friends, I get to choose what I want to eat. If my cable ISP is going to have scalable throttling tiers, then I want to cherry pick what I am going to watch and pay on your video servies. You start tiering, I want a la carte.

  9. The all-you-can-eat buffet is actually a pretty good metaphor. There are lots of limits on how much you can consume at a buffet. You can’t go into an all-you-can-eat buffet and eat all the food in the place, keeping others from getting a fair share. You have to wait your turn in line, you can only fill one plate per trip, the cafeteria decides how big a plate you can use, and you have to stop at closing time.

    Also, the all-you-can-eat buffet is likely priced so that some people are paying too much and some are paying way too little. For those of us who are not grossly obese, changing the pricing model to a la carte (or single-plate/single trip) might not only better match the needs of many, but could (and should) reduce the price charged to those with smaller appetites. That would make tiered pricing much more attractive than all-you-can-eat!

    In any event, we’ve had tiered pricing for a long time, but it’s been tiered in terms of advertised speed, not consumption. DSL costs much less for the <1 Mbps package than for the 3 Mbps package or the 10 or 20 or 50 Mbps packages.

    Now we have bandwidth consumption tiering, instead (or, presumably, in addition). I would hope that the user who subscribes to a more expensive speed tier also gets a higher monthly cap on consumed bandwidth. If not, you can expect a surge in FiOS and DSL switchovers!

  10. Better metaphor: Time Warner is putting a steak dinner on everyone’s table… but you’re only allowed to eat a little bit of it, more or less depending on how much you paid in advance. It costs Time Warner no more or less to serve everyone, and it costs them practically nothing to do so in the first place. They’re maintaining a masquerade that there is a shortage so that they can justify the high prices and rationing to a public who doesn’t understand what fair really is.