Time Warner Backs Off Metered Billing → The TW Tier/Cap Bailout

In response to some of the pro-cable people complaining that TW was treated unfairly, I'm sorry but I just don't buy it. Time Warner's trial was egregious and unwarranted, and please don't assume those of us involved in the fight aren't plugged into the industry enough to pay attention to their arguments and reasoning. I am watching industry people trying to increase profit margins for broadband to make up for diminished returns in other sectors, premium cable and digital basic in particular.

You have management whining that they need better returns on broadband and that they are tired of people upset that their original model, flat rate, needs to go away to make those increasing returns possible.

The arguments are remarkably not about bandwidth costs or increasing usage when they talk amongst themselves. That's because they all recognize those costs are declining, even as they add new customers.

What do they talk about? Broadband cannibalizing their video packages, how to reduce demand on their networks, how to forestall network upgrades that impact on shareholder value, and how broadband profits can help divisions hit their numbers at a time when the economy is causing people to drop elements of their package.

What do they tell the public? Exaflood nonsense, us vs. them arguments with claims that heavy users are causing light users to pay more than they should (on a product that has had stable rates in most places for a decade), and bandwidth and upgrade expenses (alluding to costs in the stratosphere that more realistically are closer to 10 feet off the ground.)

What has happened is the Internet. It has allowed people to research as many publicly available records as possible to discover what is rhetoric and what is fact, and expose it, educating customers along the way.

Additionally, these operators have been careful to avoid testing in areas with equal competitors across their footprint, out of fear they will cause a mass exodus to the other player in town. Tiered broadband doesn't work when your competitor exploits your rationing plan. The business model is already quite easy to discover: provide premium levels of speed and pricing in competitive regions, cut back on speeds and services in less competitive markets.

Frontier has never had a quarter like this in their entire history in the DSL business as customers rushed to dump Road Runner for Frontier as soon as the news broke. Earthlink, which seems to be MIA on the corporate level, is busily signing up new customers on TW's own network because customers presume it lets them escape punitive tiering.

Cable has a better option. Make your heavy users your big profit users by providing them with premium tiers of service that offer higher speeds at higher prices. Use that revenue to upgrade your networks, then add even more speedy tiers at incrementally higher prices to them. They'll pay. Before people learned the $99 tier TW was promoting that offered 50/5, was capped at 150GB (ludicrous at that price point), there were actually people feeling pretty good about that pricing. It's too rich for what I need, but for those who need super speeds, it's far better than $40 a month 10/384 service.

Then make sure your AUP has provisions to move the terabyte-busting bandwidth biggies to a business tier. Enforce bans on using residential service for servers, which could also be defined as people running Bit Torrent seeder sites 24/7, and deal with your 1% problem users privately. TW punished every customer, from the granny 1GB tier to the Turbo 100GB tier with insane overlimit fees. Comcast has, in reality, decided they'd sell 250GB of access for the pricing they've traditionally had. When big users near that level, Comcast will quietly sell them another account in several areas. There is not much an outcry about it because the allowed usage didn't also carry punitive price increases. A TW 100GB tier runs double the price of the current flat rate plan - no speed increase or service improvement, just a cap and pay double.

If you want an honest consumption billing system, then you really can't do tiers with allowances. You offer $15 to access the network, and then a far reduced and more reasonable consumption price. If it costs TW less than 10c a GB, you don't charge customers $1-2 per GB for that. Give customers the choice between a flat rate plan at a rational price ($150 is not) or a true metered system that lets people get billed for what they use. Let them pick what they want.

Wireless plans use minute allowances with steep overages to psychologically send the message that you need to conserve your consumption, out of fear you exceed your allowance. TW's plan does precisely the same thing. It makes people fear going over their allowance, making most ration their usage to avoid coming close to going over. And considering that, streaming video is going to be something a lot of customers avoid like the plague, which fits nicely with TW's thinking.

When looking at the level of profit this company makes on the current model, and the fact they have purposefully reduced spending on their infrastructure, I am unmoved by their tier/cap bailout plan.

you fellas are being to rough on TWC, their only looking out for your own interest. you just need to be educated about the tiered pricing plan. For example if your not a bandwidth hog (bandwidth hog = child porn down loader)then you will be able to get your bandwidth cheaper, well not exactly cheaper but we...ah..they will sell you less. For example you can purchase 5 gigs for 30 bucks if your not a hog, now I know some of you get unlimited data on mobile phones for a similar thirty bucks, but understand it must be cheaper to send the data up to a satellite in space and back down to earth than it is to send data on a cable across town from Queens to Brooklyn. You can just rest assure that when the promising new technology that will compress video files to a fraction of their current size and still maintain quality the caps wont drop any lower. Unless it interferes with our.... their CTV sales. Some of you may wonder why you can send a 5 gig data disc through the U.S.P.S for less than a dollar and Time Warner wants 30 bucks to send 5 gigs over a cable, well sending data VIA internal combustion engine is much more efficient therefore much cheaper for the post office than a modern network. If any of you conspiracy people are wondering why this story has not been on NY1 news channel it has nothing to do with the fact that TW owns NY1, its just not important despite the fact that a NY senator was upstate today speaking about the issue. Your all just interfering with free enterprise

I think this is actually the dumbest post ever on DSLR.

I agree. I liked especially the bandwidth hog = child porn downloader demonizing line.

How about those that like regular porn and download a lot of it, legally ?

I could be wrong, but I think he was being sarcastic.