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Even Ike Couldn't Thwart Time Warner Cable's Dumb Idea
Hurricane briefly delayed metered billing trial, though company not deterred...
by Karl Bode 12:02PM Friday Oct 24 2008
Back in January we were the very first to report that Time Warner Cable was conducting a trial in their Beaumont, Texas market that imposed caps ranging from 5GB to 40GB on the company's existing tiers of service. More controversial perhaps was the news that trial participants would be charged $1 per every additional gigabyte consumed, a delicious markup for Time Warner Cable of between 1,000 and 1,500% over cost, and a first for a major US ISP. That's not only a nice revenue boost for Time Warner Cable's already profitable broadband business, but a great way to protect cable TV revenues from the rise of HD Internet video.

While only new customers in the trial market are put on metered plans automatically, Time Warner Cable has been luring existing Beaumont customers into the metered fold via some fine print trickery. Customers are promised twelve month price-lock guarantees, provided they sign a new contract. But the contract fine print holds some surprises: customers previously on unlimited plans are promised "guaranteed savings," only to find out they're now facing a shiny new $150 early termination fee, low caps, and $1/GB overage penalties. Savings, indeed.

Unlike Comcast's 250GB cap, which in reality impacts very few users, such low caps and steep penalties would be a serious market game changer. I've asked repeatedly for an update on the trials, but the company has had nothing new to announce for some time. Apparently a big reason for the quiet on progress was mother nature. Light Reading quotes analyst Craig "network upgrades are for sissies" Moffett as saying Time Warner Cable's metered trial was delayed by Hurricane Ike, but is now back on again:
quote:
Although TWC's trial is underway again, the temporary interruption could delay the initial results and slow down the MSO's next steps involving metered usage models. While the test in Beaumont is proving that such a system works, Time Warner Cable is still gathering customer feedback and will next try to see if the concept can scale to a larger system. "But we're not there yet," Time Warner Cable spokesman Alex Dudley says.
Industry stock jocks positively drool over adopting such a system, because they know it's both a revenue booster and a fantastic anti-competitive weapon. Implementing low caps just as Internet HD takes off would protect Time Warner Cable's cable TV revenue by either monetizing or deterring the use of alternative video delivery systems (like the Xbox 360, PS3 or Apple TV). Bean counters and PR flacks will swear on their mother's grave that this is about capacity and fairness, but when you set caps so low, it's a pre-emptive strike on a serious future revenue threat.

While Time Warner Cable is interested in testing the billing and back office technology necessary for such a system, they're also using the Beaumont trial to refine their marketing of the idea to consumers. Should company marketing be able to glean a positive or even neutral response from the fine folks in Beaumont (which shouldn't be too hard, given most people don't know what a gigabyte is), the company may move forward. However, it's hard to think they'd bring these caps to bear in any market where they face competition from uncapped Verizon FiOS.

That leaves a few options for Time Warner if they don't want to be laughed out of the industry and seen as cheapskates by customers. They could follow Comcast's lead for now and impose a single, high cap -- waiting to pursue overages at a later date (probably the most likely). They could also simply use the caps as a cash cow in uncompetitive markets, where customers can't vote with their wallets. Or, they could scrap the idea altogether, which would leave those investors and execs eager to see you pay more for less crying over their abacuses.


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Mark Z
Premium
join:2002-10-14

5 recommendations

It is about Control

So much for just providing the pipe, when we take these initiatives in confluence with the financial crisis a clear picture starts to emerge of what is really happening.

The common thread is a power grab to control ever more aspects of our daily life. Our internet has freed us from corporate hegemony and they are fighting like mad to regain what they have already lost. They may yet wrestle control of our means of free information, but they sadly underestimate our emerging wisdom and don't seem to realize our naivete is shattered.

These "limits" are absurd, and please people don't think this is about bandwidth. This is about the control of information, the single most powerful weapon any intelligent human can wield. Stay aware, and CARE! They are counting on us to be looking the other way...
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Fractional Reserve Banking, the method Private Banks have used to control 98% of the money supply since 1913. How to change that? Start with the Monetary reform Act and take OUR money back.