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bicker

join:2007-05-10
Burlington, MA

1 edit

The right way to offer metered Internet service

I think the mistake TWC made was replacing unlimited service. What they should be doing is creating a new, metered offering. Instead of $XX per month, make it 85% of $XX per month with a YY GB cap. Folks who normally stay under the cap will switch to the metered service. As time goes on, the prices for the two services will diverge according to the comparative value proposition each offers. As average consumption among un-metered customers climbs, then obviously the average value derived from the offering by those customers climbs, and so the price should climb (beyond inflation) commensurately. Meanwhile, the average value derived from the metered offering is effectively capped, so its price will not climb (beyond inflation).



jadebangle
Premium
join:2007-05-22
00000
kudos:1

said by bicker:

I think the mistake TWC made was replacing unlimited service. What they should be doing is creating a new, metered offering. Instead of $XX per month, make it 85% of $XX per month with a YY GB cap. Folks who normally stay under the cap will switch to the metered service. As time goes on, the prices for the two services will diverge according to the comparative value proposition each offers. As average consumption among un-metered customers climbs, then obviously the average value derived from the offering by those customers climbs, and so the price should climb (beyond inflation) commensurately. Meanwhile, the average value derived from the metered offering is effectively capped, so its price will not climb (beyond inflation).
You can't have both way, its confusing and unnecessary
wolves and sheeps don't dine together do they?
There are metered billing in 3rd world country and many ppl are not happy because: 1. the price for the service is pretty steep as is and 2. you have to pay more for bandwidth
Why would it be any different here in America where unlimited is what we have become accustom to?

Lazlow

join:2006-08-07
Saint Louis, MO
reply to bicker

Bicker

The problem with that idea is that the basics premise is off. Isp do not pay by the GB, they pay by peak Mbps. This applies both to transit costs and hardware costs. The only time that GBs actually cost something is during peak hours. During off peak hours whatever GBs are downloaded costs the ISP absolutely nothing (0) extra.

The other problem is that if they did this (on a cost based rate) all those people that do only download 2-3GB a month would find out how badly they have been ripped off for years. When Gigaom did a survey last year (Q2 2008) the the average of major US city ISPs were paying $10-$12 per Mbps per month for backbone transit. 1Mbps is over 300GB per month. That works out to under $.04/GB for transit costs. On top of this the technology is rapidly getting cheaper almost by the day, there are some vendors who are now selling bandwidth at under $4/Mbps (under $.01/GB). Cablevision stated last week that the upgrade to Docsis 3 was costing them between $70-$120 per customer. I think it is pretty safe that the D3 upgrade will safely carry them for the next three years (36months), which would mean a cost per customer of less than $3.34/month.


bicker

join:2007-05-10
Burlington, MA
reply to jadebangle

said by jadebangle:

You can't have both way, its confusing and unnecessary
Why can't they offer both services? It isn't confusing at all. And it is clearly necessary, given TWC's recent experience.

bicker

join:2007-05-10
Burlington, MA
reply to Lazlow

said by Lazlow:

The problem with that idea is that the basics premise is off. Isp do not pay by the GB, they pay by peak Mbps.
Only suckers price offerings based on cost. Great companies price offerings based on value. Customers don't perceive value in "peak Mbps" -- they do perceive value based on GB.

said by Lazlow:

The other problem is that if they did this (on a cost based rate) all those people that do only download 2-3GB a month would find out how badly they have been ripped off for years.
See above.

Lazlow

join:2006-08-07
Saint Louis, MO

We obviously have a difference of opinion on the definition of great.

Yes, customers certainly do perceive value by peak Mbps. Every time a customer complains that the internet is slow (almost always during peak hours) they are seeing their connection speed (Mbps) limited by the ISP having insufficient capacity(not enough total Mbps available in the system to share between online users).

Before people start calling me socialist, look at Henry Ford. He was probably one of the greatest capitalist in history. Yet he paid his workers 2-3X the going rate (which infuriated other employers) and was the first large company to switch to 8hr days/40 hr weeks. You can take an honest profit without resorting to abusive prices. Charging $1/GB when it costs you closer to $.04/GB is not an honest profit.


bicker

join:2007-05-10
Burlington, MA

said by Lazlow:

We obviously have a difference of opinion on the definition of great.
We shouldn't. We live in the United States, and the law requires that corporations operate in the best financial interests of their owners. Great companies are those that do that.

said by Lazlow:

Yes, customers certainly do perceive value by peak Mbps.
Also. Yes, I'll grant that. They pricing should factor in both.

said by Lazlow:

You can take an honest profit without resorting to abusive prices.
I bet that the company disagrees with you about at what level prices become "abusive". The best indicator of whether prices are reasonable or not is whether customers are canceling their service in large numbers.

Lazlow

join:2006-08-07
Saint Louis, MO

1 edit

The difference is if the company is looking at long term financial interests or near term. Companies like Fios, Cablevision, etc are looking after the long term. Which is why they have invested a significant % of profits back into infrastructure. This insures that they will continue to have long term profitability. How much longer can TW compete with a significant portion of it's infrastructure still at D1.1 levels?

Obviously cut throat companies will insist that they need triple digit percentage profits just to survive. But for companies that are thinking long term they will hold their profits down to more reasonable levels (low double digit?). Just take a look at TW's 2008 10K. After a one time write down (3 billion?) they still cleared 4 BILLION dollars. Their reinvestment in ISP infrastructure was well below 800 million.


bicker

join:2007-05-10
Burlington, MA

FiOS isn't a company. The company is Verizon. They're looking to gain market share with their new offering, so they're underselling the competition. Then, once they have enough of the market, they will likely raise their prices and lower their service levels to (literally) capitalize on the market share that they've gained through this introductory period. The reality is that TWC has more market share within its operating area than Verizon -- lots more. All that would happen if they went up against deep-pockets Verizon price-to-price and service-to-service is a price-war leading to one of the two offerings' demise, leaving only one terrestrial supplier in the market.

Companies have no personality. They are conglomerations of investors. So what you're really pointing out is that the American investor is "cut throat". Yes, we are. Do you look at your 401(k) statements and think, "Gosh, my investments are making too much money. I wish they'd stop focusing so much on profit and just provide better service, even though customers won't reward better service with greater loyalty or other revenue streams." If you do, then you're utterly unique.


Lazlow

join:2006-08-07
Saint Louis, MO

Despite that fact that I used Fios instead of Verizon you (and virtually everybody else) knew exactly what company I was speaking of. While the price of Fios service may climb in the future I doubt it will be the huge jumps you seem to be indicating. Their system has far more head room than cable does. Last I heard just 32 subscribers where splitting the 1.2Gbps (on the older systems).

As to market share: take a look at these 2008Q3 numbers.

»www.isp-planet.com/research/rank···usa.html

By subs Road Runner has 9% of the market share while Verizon has just 8.8%. AOL also has 7.7% of the market but it is my understanding that it is a separate company from TWC and that it is next in line to be separated from TimeWarner(to be a stand alone company).


bicker

join:2007-05-10
Burlington, MA

said by Lazlow:

Despite that fact that I used Fios instead of Verizon you (and virtually everybody else) knew exactly what company I was speaking of.
I'm not so sure, which is why I made a point of it. So often I see people write messages glorifying FiOS as if it is some new up-start, working to do battle for the consumer against the hordes of corporate America. FiOS is part of the epitome of corporate America. There is no reason to believe that they will not "do to you" exactly what the legacy providers are "doing to you" just as soon as they secure enough market share.

said by Lazlow:

Their system has far more head room than cable does.
True, but just think about what we're talking about in this thread... we're talking about people downloading a number of GB per night, to watch television programming. Most folks will be pulling down a lot more in one night than they currently pull down in a month! Even that will cause problems for FiOS.

Beyond that, in time, the cable companies will have to replace their 1980s-era and 1990s-era networks, and when they do they'll be replacing those networks with technology far beyond what FiOS has. That's the nature of things, when you're talking about services based on expensive infrastructures: You're often going to get technological leap-frogging.

Lazlow

join:2006-08-07
Saint Louis, MO

bicker

I do not think you really understand what 1.2Gbps split between 32 users means. If all 32 of those users are online at the same time(downloading) they will each have 37Mbps. Now remember each channel of Docsis only has 38Mbps to be split among all the users. 37Mbps is about 16GB/hour. A full blown uncompressed HD stream is 19Mbps. It is going to be a "few" years before everybody is downloading 16GB/hour. You also have to remember that 1.2Gbps is Fios's old technology (no longer being installed), if I remember correctly the stuff they are installing now is 2.6Gbps.


bicker

join:2007-05-10
Burlington, MA

I don't think you really understand the business of technology.


Lazlow

join:2006-08-07
Saint Louis, MO

I think it is pretty clear. One system has 37Mbps available to each user when all users are on line. The other system has 38Mbps split between all the users. Even if you go to 4 channel Docsis3 the users are still sharing only 152Mbps.


bicker

join:2007-05-10
Burlington, MA

I believe you misread the message you replied to.


Lazlow

join:2006-08-07
Saint Louis, MO

No, I understood. It is right back to the situation of a business looking at short term profits or taking the long term view. Verizon, Cablevison, etc are taking the long term view. They are investing and reinvesting in their infrastructure so that they have sufficient capacity to support the speeds they are offering. Customers who do not experience slowed service due to the lack of capacity their provider has, are happy customers. Happy customers spread the word about a good product and are not looking to switch providers. Unhappy customers also spread the word about capacity issues and migrate to companies that do have such issues(when they can). If TWC continues in the direction they are headed, they will soon find themselves in the same situation as Qwest, disparately needing to upgrade but with insufficient income (due to failing to keep up) to do the upgrades.


bicker

join:2007-05-10
Burlington, MA

No, sorry, I don't think you understand. There isn't a choice between looking at the short term realities or taking the long term view. Companies must always do both. Furthermore, there is nothing here that differentiates between short term and long term view: Metered service may indeed be the BEST approach from the long term view. Remember, your personal preference doesn't determine what is best; the business realities do. Your comments about "happy customers" is nice wishful thinking on your part. It isn't the realities of mass-market business today. Customers are utterly unloyal.


Lazlow

join:2006-08-07
Saint Louis, MO

If happy customers are not a concern anymore why did TWC back off?

While it is true to some extent that companies need to look at both long term and short term interests, TWC's refusal to accept where the market is and where it is headed makes it clear that they are exclusively looking at the short term. Along with that a company that has kept its eye on long term interests generally does not have to worry about the short term (they already took care of that when they paid attention to the long term in the past). TWC's low caps with outrageous overage fees (well over 10X cost) was an attempt to keep people from seeing how badly they need to improve their capacity.

For the most part I have concentrated on Fios becuase I think it is the best long term solution (10 years or more). But Cablevision is taking a completely different path. Since they understood that even with D3 they were going to have to significantly split their nodes in order to have enough capacity 2-3 years down the line, they chose(till recently) to stick with D2 and split the nodes now instead of later. This allowed them to offer 30Mbps service (for over a year now) without significant congestion, while still using the cheaper D2 technology. When they come back and switch those nodes to D3 they should be able to easily offer 100Mbps speeds without significant congestion. Both the Fios and Cablevison paths allowed them to offer the higher speed tiers without congestion issues. TWC on the other hand has chosen not to upgrade to D3(still a lot of D1.1 systems) and not to split the nodes to ease congestion, instead they went with ultra low caps. So when they finally do upgrade they are going to be so far behind that they will have to split the nodes and switch to D3 at the same time just to remain competitive(again the same situation Qwest is in).


bicker

join:2007-05-10
Burlington, MA

said by Lazlow:

If happy customers are not a concern anymore why did TWC back off?
Because the media created a fire-storm, which could have led to political implications.

said by Lazlow:

While it is true to some extent that companies need to look at both long term and short term interests, TWC's refusal to accept where the market is and where it is headed makes it clear that they are exclusively looking at the short term.
Ridiculous. This has nothing to do with TWC's acknowledgment of lack thereof. That's a red herring.

TWC was unlucky. That's it.

said by Lazlow:

Along with that a company that has kept its eye on long term interests generally does not have to worry about the short term (they already took care of that when they paid attention to the long term in the past).
That's simply not the case. Companies have to work at the short term and the long term every single day. Taking a long term view in the past does nothing to absolve a company of concerning itself with short term considerations in the future. You're just plain wrong.

Lazlow

join:2006-08-07
Saint Louis, MO

Why did the media create a fire-storm? Because people were p^ssed off(not happy) about the issue.

The VAST majority (certainly not all) of short term issues only become short term issues becuase they were not addressed (in the past) when they were long term issues. The rate of bandwidth consumption has only been headed in one direction since the birth of the internet and it will continue to go in that direction for a lot longer. Everybody knows this. TWC has tried to ignore and prevent this.

If you think I am wrong, just look back at the article on stock jocks(front page). They thought that Verizon was throwing away their money and Qwest was the smartest kid on the block. Compare the two companies positions today. Verizon is a HUGE threat to its competitors in every market they have moved Fios into. Qwest is looking at having to sell its long distance lines just to stay in business(a move that would probably mean the end of Qwest). For the most part, if a company stays on top of its long term issues the short term issues do not offer any significant problems. Conversely if a company ignores long term issues(Qwest in the past, TWC past/now) they create short term issues that they may or may not be able to overcome.


bicker

join:2007-05-10
Burlington, MA

And people weren't unhappy about a billion other things? No, sorry Laz, but reality isn't anything like what you assert.


Lazlow

join:2006-08-07
Saint Louis, MO

2 edits

It is a matter of degree. If I get a $10 parking ticket that I do not think I deserve, I will probably just pay it. Not becuase the ticket was right, but becuase it is not worth my time to fight over a $10 ticket. Now move that ticket up to a $100 and I am FAR more likely to fight it. The $1GB was not going to be some minor annoyance. People could easily see how it was going to cost them $150/month for the same service that they were getting at $60/month(or less).