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Here’s what’s behind Time Warner Cable’s new pricing plan

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Few people will likely take Time Warner Cable up on its new Internet Essentials plan, which offers customers a $5 discount in exchange for staying below 5 GB of data consumption each month. But the real benefit to the plan is the roll out of the broadband meters at Time Warner Cable. The plan is to use that to get a better sense of how much, where and when broadband consumption occurs.

Alex Dudley, a spokesperson at Time Warner Cable, explained the thought process to me this morning. “With these meters we will be able to count [data consumption] at a census level for the first time,” Dudley said. “Our hope is for using that data to manage the network.” A cable network is composed of a plant where all the gear a satellites are that pull down the TV content lives, which connects to various nodes that serve between 1,000 and 250 homes. Currently Time Warner Cable can see when nodes are overloaded, but it can’t see any deeper.

This could have benefits for customers since cable networks are shared among subscribers. For example, one way to relieve network congestion is for a cable company to split the node, which then reduces the number of homes on a node. With household data the cable company might be better able to divvy up homes on the node to include both heavy and light users. As an end user on the network it means your service might improve because the capital dollars will be allocated to the areas that need it most.

We do not like low caps and tiers

The data will also help Time Warner Cable price its service, although Dudley was clear that it has no plans to do so at this time. But when asked about uses for the data he did say, “The other thing we’ll do is work on packages that make sense with the way that customers break out naturally rather than make assumptions for them.”

It was clear that Time Warner’s last experience with tiered pricing antagonized its customers, and Time Warner has learned a lesson. The lesson may not be that tiered pricing is bad, but rather that a punitive plan that charges people when they use too much isn’t likely to win fans. Hence the discount offered in this plan. “It’s opt in, so it takes some of the sting out of it,” said Dudley. “We honestly tried to make it about, ‘If you want to save $5, great.'”

If not, it’s not something TWC will penalize you for. The plan also has a grace period, and is flexible so customers can switch off the plan if they see they are going to go over that month, so they can avoid overages. The plan charges $1 for every gigabyte over the plan up to $25 more. However, Dudley explained that TWC’s median user is roughly in the 10 GB per month range, so this plan isn’t going to net a lot of users — something he admits.

Would you, could you pay for speed?

If Time Warner does take this data to heart when thinking about pricing, I’d rather it focus less on the data we use and more on the quality of broadband. As someone who consumes 125 gigabytes per month, according to the TWC meter (which is audited by a third-party), I’m clearly a huge user of broadband. Penalizing me for that will make me search for a new provider (not that there are many) or turn me into someone who writes letters to the FCC, my local politicians and complains on my blog. Yes, I’ve done all of that.

However, if Time Warner Cable were to offer me better service and asked me to pay more for that, it’s likely I’d bite. Right now I pay for a 30Mbps down service, but I might be enticed to pay for a faster tier if it meant my Netflix (s nflx) streams wouldn’t freeze as often or I wouldn’t have to share a node with 100 other people who stream content between the hours of 8 p.m. and 10 p.m.

Of course, the truth is that these methods are all about ISPs capturing as much revenue as possible, especially as video and voice become more and more accessible via a single broadband connection. Where I used to pay Time Warner roughly $150 a month for cable and Internet, I now only pay about $50. If it can entice me to pay more that’s in its best interest — although it’s nice to see that the company is realizing that the key here is enticing me to pay more rather than forcing me to pay more because I hit some arbitrary cap.

“They way [the previous tiering plan] played out was a big tell that those types of punitive systems don’t sit very well with users,” said Dudley. Hence the carrot of the Essentials plan, which Dudley said Time Warner will gradually roll out to the rest of the cable provider’s footprint over the next 12 months or so. At that time it will have more data and maybe will start thinking about new ways to price broadband. We’ll be watching.

16 Responses to “Here’s what’s behind Time Warner Cable’s new pricing plan”

  1. I tried to leave a comment on this post, but when I tried to log in using my Twitter account, I was told you required permission to

    Read Tweets from my timeline.
    See who you follow, and follow new people.
    Update your profile.
    Post Tweets for you.

    I understand that you want to increase ad revenue from the first two, but do you really plan to change my profile and post tweets on my behalf?

  2. I am a TWC customer and was curious to see my usage meter. I could not find it after logging into my account, so opened a chat with “Renee.” As you see, no luck:

    Renee>I have checked and I am also unable to find the Internet usage tracker. Just to confirm, are you interested in checking the usage through the Connection Manager?

    Laurence>I am logged into my TWC account and am trying to find out how much Internet data I have up and downloaded.

    Renee>I am sorry, but that information would not be available on MyServices account.

    Laurence>Here is the FAQ:

    How do I access the Internet Usage Tracker?

    All Internet customers can log in to MyServices with their user name and password to see the Usage Tracker. Here’s how:
    Log on to MyServices.
    Click on the My Internet tab.
    Select View Usage Details.

    Renee>Thank you for sharing this information.

    Renee>Just to confirm, were you able to follow the above steps and check your Internet usage?

    Laurence>No — that is why I am talking with you. There is no “view usage details” link.

    Renee>We had this option, but now it has been removed from MyServices account. I am sorry, but there is no other way to check the Internet usage and since there is no cap on the data usage, you would not need to worry about the usage.

  3. Chris

    “We do not like low caps and tiers”

    So, you think everyone should be forced everyone into a greatest common denominator price point, so the single widow on a fixed income that uses the internet casually to email with family and friends should be forced to subsidize the house of 4 next door so they can sit in the basement all day streaming Netflix reruns of Laverne and Shirley while blogging venomously about how much they hate ISPs?

    That is, of course, anti choice, anti consumer, anti businesx, and anti broadband adoption, but based on your stated high broadband usage, it makes sense why it is personally appealing to you.

  4. Trespass

    I for one will be watching. I still have a bad taste in my mouth over the ridiculously low cap proposed a few years ago. I stuck by TW even with poor service and expensive prices solely because of the lack of caps. I will switch to U-Verse if TW cannot at least match their cap.

  5. Jonatha

    If the median user uses 10 Gig a month, then theoretically, half of their customers should use it. They will pay at most the same ($5 less for the first 5 GB, plus $1 per GB from 5 to 10) and many will pay less.

  6. Brett Glass

    Oh, those horrible ISPs — they’re evil, EVIL I tell you, for trying to break even. Article shows, again, Stacey’s bias toward GigaOm advertising supplier Google.

    • chaostheory6682

      Break even? What universe do you live in. These companies make huge profits off of their services. Note that it costs an ISP less than 1 cent per gigabyte to deliver data to your home, so even if you were using 250 gigs a month it is still only costing them $2.50 for the actual network delivery on a service that they are probably charging you 50 or more dollars for.

      • Brett Glass

        You obviously know nothing about an ISP’s cost structure. ISPs pay for bandwidth by capacity, not by the byte. Constraints on the number of gigabytes downloaded are imposed to limit the duty cycle, so that the ISP is able to limit the total amount of expensive capacity it must buy.

      • Brett, having read the actual balance sheets for an ISP and working in the industry I’d say cost of peering/transit is one of the smallest costs to ISP’s. I think I saw someone quote $2 as the cost per month, and reading the balance sheets it looks like its a cost thats going down on a per user basis every quarter. Now I understand last mile limitations, but its really not that hard to use a form of QoS that preserves minimum SLA’s for everyone (and 3Mbps per node on the ring SHOULDN’T”T be that hard to deliver, allowing Stacy to watch Netflix uninterrupted unless you’ve done greed levels of over subscription).
        ISP’s pay for 95th percentile, and 250GB is ~1Mbps averaged over a month. Given that bulk peering can drop below a $1 per Mbps I’d say chaostheory’s about on par with what users cost their ISP’s in terms of bandwidth. You have some industry number’s you’d care to share that say otherwise?

  7. How many simultaneous streams of Neflix are you doing? Your 30 Mbps down must not be very continuous. I only pay Time Warner for 3 Mbps and almost never have freezes with Netflix or Amazon Instant Video.

      • Devin McBride

        Cable is a shared service in that an entire neighborhood will be sharing a single cable node of which has a maximum possible bandwidth it can provide the individual customers. Unfortunately, what you are paying for is a maximum possible speed, not the guaranteed speed in practice.

        In reality, your actual cable speed in practice will depends on a lot of variables including the maximum speed possible from your neighborhood node, how many people you share the node with, and the usage characteristics of these people.

        I may be using some of the wrong lingo (I’m no cable expert), but this is the basic idea.

        It’s very possible that the ops node is shared by 2-300 people while your node is only shared by a few dozen – then in this case it easy to imagine how service could potentially be slow for him/her and not you.