When asked this week by an analyst whether over the top video services would ultimately drive Time Warner Cable toward usage-based broadband models, company CEO Rod Marcus stated the company has no plans to abandon offering an unlimited broadband options. You'll recall Time Warner Cable took a public relations beating for pushing mandatory low caps (as low as 5 GB) and high per byte overages (as high as $5 per additional gigabyte) on consumers back in 2009.
Since then, Time Warner Cable has rather meekly been pushing a voluntary (for now) option named "Essentials." Under Essentials, the company originally promised users a $5 discount off their bill if they sign up for the plan, which features a 5 GB cap and $1 per gigabyte overages. Later, they introduced a $8 discount of users agree to the 5 GB cap, or a $5 discount if you agree to a 30 GB cap. That's still not much of a savings when you factor in Time Warner Cable's various fee increases, including their recently imposed Broadcast TV fee.
Speaking to the press and analysts on the company's earnings call, Marcus stated that the company will continue to offer an unlimited option as long as users are willing to pay for it:
quote:
We have no intention of abandoning an unlimited product we think that something that customers value and are willing to pay for. The way we've approached usage-based pricing is to offer it as an option for customers who prefer to pay less because they tend to use less. And we've made those available at 5 gigabytes per month and 30 gigabytes per month levels.
Granted if you actually use your connection for anything more than checking the weather a few times a week, that very slight "discount" evaporates immediately and you potentially pay more than you did previously. Consumers have repeatedly illustrated that they fail to see the value in this proposal. Yet Marcus continues to insist that having your usage rationed for a fairly meager discount provides value and is a "compelling offering":
quote:
And given that our median usage of broadband is in the 35 gigabytes per month zone, the 30 gigabyte tier is actually, if you are purely acting on economic rationality, a pretty compelling offering for a certain segment of our population. It's true that not many customers have taken it. I think that's a testament to the value they place on unlimited. But I'm not sure what we -- what it really means to be more definitive in the rollout of usage-based pricing. We've got it, and if customers want it, we're happy to sell it to them.
At least for the few months Time Warner Cable has left as a corporation before being acquired by Comcast, who is
trialing a variety of usage caps in mostly uncompetitive, southern markets. Some time ago the cable industry finally admitted that usage caps
weren't necessary due to congestion. As many people have long noted they're effectively a glorified rate hike aimed at countering TV (and soon digital voice) revenue losses. When asked by an analyst if the company eyed usage caps as a nice way to counter video subscriber losses (Time Warner Cable lost 184,000 TV users last quarter), Marcus offered up this rather convoluted explanation:
quote:
Our view is, has always been, usage-based pricing is not necessarily a source of revenue but -- direct source of revenue, but rather a vehicle by which we can better match price with the value that an individual customer attributes to our service.
Granted with Marcus potentially making up to
$80 million personally off of the Comcast deal, his gauge of what constitutes value may not be calibrated to the same frequency as yours or mine.
