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There's No Data To Prove Metered Billing Is Necessary
Journalists start crunching numbers, call Time Warner plan 'obscene'
by Karl Bode 11:00AM Thursday Apr 09 2009
This week has seen Time Warner Cable CEO Landel Hobbs do a rather poor job as the company's primary spokesman on the issue of metered billing, after the company announced last week they'd be expanding metered trials into four new cities later this year. Time Warner Cable's PR people probably wish this story would just die, but it would appear the public, politicians and the media are only just getting warmed up.

Journalists are only just starting to crunch the numbers and seriously ask why an already very profitable company (see their 2008 10-K) needs to start charging consumers $1 per gigabyte. Especially when hardware and bandwidth costs are dropping, many costs are fixed, revenues from VoIP/TV/Ads/broadband are growing, and the cost of upgrading to DOCSIS 3.0 technology is relatively (particularly when compared to FTTH upgrades) inexpensive. Saul Hansell of the NY Times tries to pick Mr. Hobbs' brain on the matter, and doesn't have much luck:
I tried to explore the marginal costs with Mr. Hobbs. When someone decides to spend a day doing nothing but downloading every Jerry Lewis movie from BitTorrent, Time Warner doesn't have to write a bigger check to anyone. Rather, as best as I can figure it, the costs are all about building the network equipment and buying long-haul bandwidth for peak capacity...Mr. Hobbs declined to react to my hypothesis about how costs are almost all fixed costs.
Time Warner Cable is repeatedly incapable and unwilling to offer up hard data that supports their claim that flat-rate billing is not "viable." The company last week told us they will not release hard numbers, only their analysis of internal numbers. Except Hobbes' analysis this week has been inconsistent and at times incoherent.

Earlier this week he insisted consumers wanted metered billing, despite obvious indicators to the contrary. In the Times he's lost in sort of a public relations purgatory, trying to soothe investor worries by saying finances are fine, yet at the same time trying to tell consumers that they have to pay by the byte because the entire billing model the company's currently built on is utterly unsound. At no time is supporting data (network or fiscal) introduced.

Meanwhile, Ars Technica crunches the numbers as well and finds Time Warner Cable's new plan borders on "obscene." Nate Anderson of Ars chimes in:
As TWC expands its test markets for the data caps, it offers plans with 5GB of monthly data transfer for $30. Plans with 40GB of data go for $55. The thinking here is that most customers currently use only 4GB per month or so, and offering those customers a cheaper rate is actually doing them a favor. . .But the only favors being done here are to TWC's bottom line. That base rate works out to a truly jaw-dropping $6 per GB per month, and it's so far out of line with competitors' plans as to shock even the most cynical heart.
Granted these trials aren't just about testing the back-end systems that make metered billing possible, they're about perfecting the marketing message and collecting data that supports it. Rest assured that when Time Warner Cable actually gets around to releasing hard data of any kind it will be of the 21st century think tank variety, scrubbed and polished to only support the position that metered billing is an essential (d)evolution.

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RR User

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reply to AtlGuy

Re: Gonna loose customers?

Actually, what TW doesn't want you to know is that even a heavy user that consumes 50-100GB a month is highly profitable. Even a 500GB+ a month user is profitable. The real problem is that the last mile doesn't support very heavy users well. 40Mbps of shared bandwidth between 100-200 people doesn't cut it very well anymore in the age of HD video and 10+ megapixel images. TW is just too cheap to upgrade to DOCSIS 3 right away, and therefore came up with this genius plan to hold them over a while longer, all the while collecting a huge profit in the process.

It costs TW (and most other broadband ISPs) roughly $5-$8 a month to physically provide you with broadband service. That's the cost per user which goes back into the system to pay the tech support, tech visits and network maintenance and keeping the physical plant running. The rest of the $40-50 you pay is nearly pure profit. And for those who ask... I got this data from a technical write up on broadband service published a good few years back. If I still had the URL I'd surely post it here.

If "little ol me" can buy bandwidth in 1TB chunks at a rate of 2-3 cents per gigabyte from the host who manages my servers, what kind of rates do you think TW gets? I keep running the numbers though my head only to come up with the fact that bandwidth is most likely a reasonably fixed cost for TW, which basically brings the problem down to the shared 40Mbps last mile.

All I can say is "Spend the $20-50 per customer and upgrade to DOCSIS 3 already, TW" because this is ridiculous. Comcast is doing it, Cox is doing it, hell even bankrupt Charter is doing it! There is no reason TW can't be upgrading as well... They are raking in more profits than most cable companies.

There is no reason to meter residential bandwidth use. Digital phone isn't metered, nor is how many hours of TV you watch. TW makes the claim that it's unfair for those who use less... Well what about the people who spend an hour a week watching tv, or using the phone, while the guy next door watches TV 12 hours a day and is on the phone 24/7, yet pays the same rate as you. It doesn't float. You sell a service at a price people are willing to pay and let them use it how they want and feel is worth while... Or we could go back to the days of metering phone usage, and why not start charging $1 an hour to watch TV as well.

Stop crying poverty TW, don't you realize how much money you're already milking out of us? A lot of us really don't have anymore to give! If I could pay my bill with my own blood, I'd be dead.

fifty nine

Sussex, NJ

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reply to rudnicke
said by rudnicke:

Think they will loose a lot of customers over this?
Got any loose customers? I need some for the vending machine.

har de har har har