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More Cable Industry Caps, Overages Coming
At Least According to an Analyst Who'll Profit From Them
by Karl Bode 09:23AM Thursday Dec 01 2011
As he has done for years, Sanford Bernstein analyst Craig Moffett is once again cheerleading the charge for cable operators to begin charging consumers overage fees -- in addition to usage caps. Moffett, who once called usage caps and overages the "next generation of communications" (though more accurately the next generation in consumer wallet milking) is the only source used by Bloomberg in a piece claiming that Charter, Time Warner Cable or Cox could soon be imposing overage fees. The entire article rests on this one paragraph by a man's whose firm's cable stock holdings would benefit immensely from such a shift:
At least one major cable operator will institute so-called usage-based billing next year, predicts Craig Moffett, an analyst with Sanford C. Bernstein & Co. in New York. He said Cox Communications Inc., Charter Communications Inc. (CHTR) or Time Warner Cable may be first to charge Web-access customers for the amount of data they consume, not just transmission speed.
As Bloomberg only briefly touches on, a previous attempt by Time Warner Cable to meter usage was scrapped due to unprecedented consumer complaints -- and we noted at the time it wouldn't be the company's last effort. If the company tries again, they're going to have a similarly ferocious battle. Time Warner Cable does talk to the outlet, again insisting that usage-based billing is really about helping light users out:
“Some form of usage-based billing might have some utility for customers who use the Internet very little, or only use low- bandwidth applications like e-mail,” said Alex Dudley, a Time Warner Cable spokesman.
Except as we've noted for years, carriers aren't really interested in truly cost-conscious, usage-based options, because a carrier loses money. Were a "light" customer who currently pays $50-$60 a month for service suddenly be offered an option where they only paid for what they use, they'd wind up paying $5-$10 a month. What carriers really want isn't usage-based billing, it's to simply take the existing, already very expensive and profitable flat-rate model -- and tack overages on top to help counter TV revenues losses.

However, instead of being honest about this, carriers have to resort to selling the idea as somehow altruistic (we're only interested in helping light users wallets!), which makes the ISP's case worse by assuming their customers are idiots. So by "utility," Dudley really simply means "rate hike." That's not to say there isn't the possibility of a carrier introducing a truly value-based usage option, but since losing money really isn't what they're interested in -- those options never materialize.

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