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Time Warner Cable Eyeing Overage Charges?
Memo says trial will determine national deployment...
by Karl Bode 03:27PM Wednesday Jan 16 2008 Tipped by tiger72 See Profile
Time Warner Cable may be exploring the possibility of implementing overage charges for its RoadRunner cable broadband service. According to excerpts from a leaked internal memo obtained by Broadband Reports, the company will be testing a usage-based system in the Beaumont, Texas market. The system is aimed at gaining additional revenue from "5% of subscribers who utilize over half of the total network bandwidth." The trial will determine whether it's practical to deploy such a system nationally.

The memo claims new customers in the Beaumont market will be placed on metered billing plans where overage charges will apply. Those customers will be given a special website allowing users to track their bandwidth consumption and upgrade to faster tiers if they consistently use more bandwidth than allowed for their tier. Existing customers will be able to track consumption, but will remain on flat-rate billing. An excerpt from the memo:
The introduction of Consumption Based Billing will enable TWC to charge customer based upon usage, impacting only 5% of subscribers who utilize over half of the total network bandwidth.

The trial in the Beaumont, TX division will apply to new HSD customer only, will provide a destination for customer to track usage for each month and will enable customers to upgrade from one tier to the next to avoid payment of overage charges. Existing and new subscribers will have tracking capability, however only new subscribers will be charged incrementally for bandwidth usage above the cap.

Following the trial, a determination will be made as to whether or not existing subscribers should be charged. Only residential subscribers will be impacted. Trial in Beaumont, TX will begin by Q1. We will be testing technical backend as well as Marketing and Messaging to customers. We will use the results of the trial to evaluate results for possible future nationwide rollouts.
It is rumored that Comcast has also conducted such tests, but never implemented the system because they were afraid of consumer backlash. We recently spoke to several ISPs and an industry analyst, all of whom shared those same concerns. ISPs are under pressure from investors to gain more revenue from higher-consumption users, but have had great success marketing the "all you can eat" business model to consumers.

Since many ISPs don't want the marketing disadvantage of being seen as bandwidth curmudgeons, the alternative has been to embrace mystery caps and application throttling, in many cases terminating very high-consumption users. This while maintaining the illusion that the bandwidth buffet is open all night long. That's probably not going to last, and while true per-byte billing may never come to the U.S. market, overage charges are a very real possibility.

The problem has been that such systems haven't proven particularly reliable. Canadian provider Rogers has some very low caps in comparison to U.S. providers, ranging from 10GB to 75GB per month. They've been trying to charge customers cap overage fees, but haven't been able to implement reliable tracking mechanisms. U.S. satellite ISP-based bandwidth monitoring has proven equal measure unreliable and unpopular.

Time Warner Cable is known to have caps they track internally, but they currently are not enforced. The company historically has had varying policies on bandwidth from market to market based on congestion. They've been known to offer faster tiers or capped service in one market, while leaving service alone in another. Last summer, a public relations screw up led to one market accidentally publicizing plans to employ p2p traffic throttling. Insiders believe the public attention subsequently put those plans temporarily on hold, but Time Warner Cable officially denied any such plan existed.

We spoke to several Time Warner Cable employees, none of whom had heard of the trial. Calls to Time Warner Cable public relations for comment so far have not been returned, but we'll post any statement from the company when we have it. Update: Time Warner Cable confirms that the memo is legitimate, and the caps they'll be testing will range from 5GB-40GB monthly.


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West Tenness

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reply to Dogfather

Re: Doesn't look like 'real' pay per byte billing

said by Dogfather:

Looks like they're looking to cap and then charge overage fees.

Depending on what the pricing is, seems logical to me so long as the terms are VERY clear and provided up front.

If it's too bad, they'll lose customers to competitors, especially in their larger markets like SoCal where they're competing head-to-head with Verizon's FiOS.
The cusotmers they'll lose are the one costing them money so why would they care?

I think most people here that are getting upset really don't have a clue how much bandwidth they are using and probably use MUCH less than any potential caps.

This could actually lead to lower price for the majority since ISPs would not have to charge the bottom 95% extra for the bandwidth the top 5% use. 300-400 GB is plenty for most people for those that need more, well they can pay for it.

The main problem for ISPs is that they need to let customers know what the cap is and have reliable monitoring so the customer can tell how much he's using. Until an ISP can do that they need to hold off on the caps.