The Meter Is Running

[b]"We need a viable model to be able to support the infrastructure of the broadband business. We made a mistake early on by not defining our business based on the consumption dimension."
--Time Warner CEO Glenn Britt, to Business Week
[/b]

Ready to pay for your internet by the banner ad? Time Warner thinks you are.

Last week, Time Warner Cable announced Phase 2 of its new broadband pricing model, a tiered billing system that would charge internet users based on their monthly consumption. The company will soon begin metered pricing in four cities: Greensboro, NC; Austin and San Antonio, TX; and my current hometown, Rochester, NY.

Understandably, the news has sent the internet into a tizzy, which is why I thought it might be a good idea to break down the facts and put things into perspective.

But make no mistake: As gamers—many of us with families—we're the ones most affected by Time Warner's new pricing structure. This is a direct warning shot across our controllers and keyboards: a sign to wake up and smell the profiteering.

Crunching the Numbers

Here's how Time Warner's new pricing model works. Each household chooses one of five cap levels, ranging from 5 GB/month to 100 GB/month. Pricing resembles that of cell phone plans: Those who use the most broadband pay the highest amount and those who exceed their allotment are charged a fee—in this case, $1 for every excess GB.

The prices break down as follows:

5 GB: $29.99/month
10 GB: $39.99/month
20 GB: $49.99/month
40 GB: $54.90/ month
100 GB: No information yet
Source: Democrat & Chronicle

Of course, most customers have little context with which to judge this new pricing structure, since many of us have no idea how much bandwidth we use in a month. So let's crunch some numbers. I'll use my husband and I as an example.

Although we are young, childless and live in a two-gamer household, neither my husband nor I are overwhelmingly extravagant with our Internet usage. We're not even what you might consider "hardcore" gamers. Between the two of us, we buy on average one new game a month, and maybe one or two classic or casual games as well. Occasionally, we also download a few demos. But our Xbox gets most of its use on Friday nights, when I kick back with a beer and instantly stream an HD movie from Netflix.

Let's say we spring for the 40 GB plan (I choose this one because neither pricing nor availability for the 100 GB plan has yet been announced for Rochester). Would this be enough to satisfy our monthly Internet habits?

Last month, my husband bought The Witcher: Enhanced Edition off of Stardock, which was about a 13 GB download. Since I'm a sucker for Psychonauts, I bought it (again) from GameTap, at 3.78 GB. I also couldn't resist the siren call of competitive Peggle, so I picked that up too for the Xbox (0.1 GB). Together, we downloaded demos for World in Conflict, Empire: Total War (1.2 GB and 2.2 GB from Steam, respectively), and the Xbox demo for Resident Evil 5 (0.47 GB). Finally, since streaming an HD movie eats up an average of 8 GB a pop (Source: Business Week), altogether my Friday movie nights on the Xbox add another 32 GB.

So in just one month, we've downloaded about 52.75 GB on our various gaming devices. If we were on the 40 GB/month plan, we'd be paying about $67 for our broadband service. (Currently, we pay $39.99.) [Edit 4/9/09: Turns out these numbers may be off-base. See comments below for the correction.]

And that rough calculation ignores all the other multitudes of ways the two of us use the Internet: I work from home; he buys digital tunes off Amazon; I watch Battlestar Galactica episodes on Hulu; and so on. Perhaps one of us might be able to get our gaming fix on the 40 GB plan—but only if the other rarely used the Internet at all.

"To put it mildly," Sanford C. Bernstein analyst Craig Moffett told Business Week, "the decision to limit data consumption can be expected to have profound implications for [consumer] behavior."

Justifying the Cap

Perhaps that's the point. Time Warner justifies its new pricing model by directing blame at its heaviest users, claiming that a few terabyte-hogging party poopers with an unquenchable thirst for LOLCat clips have slowed down the network for the rest of us. Tiered billing would speed up the network, says Time Warner, by forcing these heavy users to cut back, or at least pay a premium that the company claims it would re-invest in network upgrades.

But by painting upgrades as so expensive and Herculean a task that the only way to manage them is through steep caps and punitive fees, it's obvious Time Warner is counting on consumer ignorance.

Relatively speaking, cable networks are downright cheap to upgrade; in many cases, improving speed is just a matter of upgrading the existing DOCSIS delivery platform. Consider that J:Com, Japan's largest cable company, managed to install the world's fastest consumer broadband service—160 MB/second—for less than $100 per home (Source: NY Times). Compare that to Verizon, which must spend an average of $1,500 per home to wire neighborhoods for its FIOS network (Source: NY Times). On price alone, maintaining a cable network beats the alternative every time.

So why is Time Warner so reluctant to upgrade? Well, it hasn't had any reason to. Unlike Japan or European countries, ISP competition is woefully lacking in most U.S. markets. In some areas like Rochester, Time Warner is the only reasonable choice in town.

Rochester is the only city in all of Upstate and Western New York without access to Verizon's FIOS network. Instead, we're left with Frontier Communications, an independent telephone company whose DSL line can't even come close to matching the speeds Time Warner's Road Runner service can offer.

What's more, last summer Frontier already tried its own all-inclusive 5 GB cap (yes, you read that right). Although that venture failed, it surely factored into Time Warner's decision to choose Rochester as a test city.

Likewise with the other three cities in the pilot program. Basically, Time Warner only selected test markets where it possesses a captive customer base, where the competition offers much slower service and may have even already implemented their own broadband caps.

Internet Killed the TV Star?

The whole premise of Time Warner's argument is that most subscribers don't use much bandwidth; indeed, in a previous trial in Beaumont, Texas, only 14% of subscribers exceeded their caps. But as Nate Anderson at Ars Technica asks, if most people use little bandwidth, doesn't that suggest that caps are unnecessary to keep traffic within "reasonable" limits—because the bulk of traffic is so low to start with?

After all, there will always be pirates, people running illegal file-sharing servers, and morons who can't bother to secure their Wi-Fi. But under the existing terms of service, ISPs like Time Warner already have the right to warn, discipline and ban these bandwidth hogs as they see fit. Isn't that enough?

I understand that it costs money to manage and maintain a digital infrastructure, and I certainly don't feel entitled to Internet access, much less the unlimited kind. But I can't help feeling that this new pricing scheme isn't about broadband networks at all.

Time Warner is first and foremost a cable TV company, and over the past few years, it has spent millions of marketing dollars to promote its various TV services, from HD programming to video-on-demand to DVR.

But if Time Warner's customers start streaming their TV and movies from Netflix, Hulu, iTunes and other online services, then they're not using the cable company's own offerings. Perhaps Time Warner hopes an Internet cap may change that, and push customers back to TV where no caps or fees exist.

If that's the case, then their efforts are doomed to fail. If there's one thing the last decade of technological advance has proven, it's that the revolution will be downloaded, blogged, streamed, even Twittered. Trying to prevent consumers from accessing the Internet makes them want it all the more. Savvy broadband providers will recognize this, and capitalize on the rabid customer loyalty uncapped service would undoubtedly unleash.

And when the time comes for me to choose, I plan to vote not with my computer, but with my wallet.

If you'd like more information about Time Warner's tiered billing system, or you'd just like to share your thoughts with the powers that be, email [email protected]. Or send a Twitter message to Jeff Simmermon, Time Warner's Director of Digital Communications, at @JeffTWC, or Alex Dudley, the VP of Public Relations, at @AlexTWC. Rochester residents can also call Time Warner Rochester Customer Service at (585) 756-5000, or snail-mail the local Time Warner Cable office at 71 Mt. Hope Avenue, Rochester, NY 14620. (Thanks to Stop The Cap for collating this contact info!)

Comments

Switchbreak wrote:

...Also, what's with the 5, 10 and 20 GB bandwidth cap prices? They charge $1/GB for every GB you go over, yet the 10 GB cap is $10 more than the 5 GB cap? It would be cheaper to go with the lower one and pay the fee! The only plan level that is cheaper than going with the 5GB and paying the overage fees is the 40 GB one. I'd like to meet the geniuses at Time Warner that put this one together.

This was my first thought. I know people have trouble with math, but

5 GB: $29.99/month
10 GB: $39.99/month ($34.99 with 5 GB plan + overage)
20 GB: $49.99/month ($44.99 with 5 GB plan + overage)
40 GB: $54.90/month ($64.99 with 5 GB plan + overage)

I currently pay exactly $34 for ATT 3.0 Mb/s Dry Loop DSL.

Going with the lower priced plan and paying the overage as you go sounds good, until you realize that the speed of the connection is also dependent on the plan. These numbers are from the Greensboro, NC market where I am, so they may vary somewhat elsewhere: the low tier speed is 768k down/128k up. The other tiers are 1.5M/256k, 7M/384k, and 10M/512k in order of increasing price. (Source)

And yes, I'm not happy about my options.

Indignant wrote:

I just looked up Sat internet speeds. It's not a viable option for most of us, I'd think.

I've always been under the impression that satellite internet was for people who live in the middle of nowhere, whose only options are dial-up or satellite.

For now, I guess I should be thankful that my area was sold by TWC to Comcast a few years ago. Comcast better NOT get any bright ideas about trying the same thing.

Wah, Wah, Wah, poor americans, joining the rest of the world in the internet slums. I'm paying about $150 a month for 100GB, and that's the best deal I could find shopping around with all the ISPs in Australia. I remember hearing people kick up about comcast's 250 gb cap and I just thought, Wow, 250GB a month for less than I pay for 100gb on a slow 1.5 connection.

Dang they're going to force me to get social with the local folks and get my gaming face to face. This will be a boon to single player games I tell you!

MeatMan wrote:

I've always been under the impression that satellite internet was for people who live in the middle of nowhere, whose only options are dial-up or satellite.

Indeed. On satellite you can expect at best a 500ms latency, ranging to even well over a second. You can get a decently fat hose but rather than having a two-way radio to communicate with the guy at the valve you've gotta send a gimped runner back to tell him to turn the faucet on.

Thanks for some hard data on this situation. I've been watching it develop, hoping none of our local carriers get a wild hair.

I don't really download or torrent, but we watch some streamed TV and the girls watch a LOT of YouTube. Between that, work, the kids online gaming and the rest there's no way any of those plans would go.

Being stuck with only one broadband option really sucks though. I guess it surprises me that someplace as developed as New York would be in that boat. I would expect stuff like that back in Alaska. Yet another reason I'm glad to be here in the Soggy Sound. We've got three main phone companies, two cable companies, and a bunch of littler services. Verizon ran fiber in my neighbhorhood and stubbed into my apartment this last winter and I'm looking at going to it rather than my DSL once this whole home office thing settles down if my work will apply my reimbursement for connectivity to the price.

Prozac wrote:

Wah, Wah, Wah, poor americans, joining the rest of the world in the internet slums.

Wah wah wah, poor Aussie!

http://www.minister.dbcde.gov.au/med...

I just want to pop in to this thread and express my love for Verizon FIOS.

I am what the cable companies fear. I dropped cable months ago because I was tired of paying for a bunch of crap I never watched. Now I stream the heck out of Netflix Instant Watch, Hulu, iTunes, Amazon.com, and buy my games through Steam. I just upgraded my broadband connection to 7.0M down through Verizon for about ten bucks *less* than I was paying before (some package discount thingy).

The cable companies need to figure out what business they're in: providing a big fat data pipe or deliverying video-based entertainment. They can have it both ways.

It'll be interesting to see how this all shakes out. Once the content provider pull their heads out of their collective asses and realize that consumers want access to entertainment when and how they want it, not when it is broadcast, and realize they can make a good buck out of streaming, they'll gang up on the cable providers. Both businesses will have to change.

Unfortunately, technology has altered cable's business model to the point they're scared now and the technology is too new for the content providers to feel comfortable that they can make money out of it. Interesting times.

Holy sh*t you're in Rochester? GTFO! Save yourself!

<- Born and raised in the ROC, and glad to have moved onto greener pastures.

Prozac wrote:

Wah, Wah, Wah, poor americans, joining the rest of the world in the internet slums. I'm paying about $150 a month for 100GB, and that's the best deal I could find shopping around with all the ISPs in Australia. I remember hearing people kick up about comcast's 250 gb cap and I just thought, Wow, 250GB a month for less than I pay for 100gb on a slow 1.5 connection.

The difference here is that Australia started with bandwidth that was more expensive than the rest of the world because they had to run lines under the ocean to get out there, and as the cost of data transmission drops and technology gets better, presumably, so do your prices. Here, we seem to be going in the wrong direction - as bandwidth gets cheaper to providers, the price to consumers is suddenly rising because some company decided to exercise their monopoly control. It's regression.

Dysplastic wrote:

Switch to Teksavvy. I'm rolling a 200GB cap for 40$ a month. Great connection, great company. I know PA feels the same way.

Like I said in another thread, my company does have a referral deal with TekSavvy but I don't recommend them for that reason (we only get the commission [which is tiny] if we sign you up and I don't pimp that here.) Not only does TekSavvy offer phenomenal customer service and high caps for low rates (which will change if Bell Canada gets its way but that's another story) but they are currently leading the Canadian fight for Net Neutrality. They're the ones who broke the news over a year ago that Bell was throttling everyone's torrent traffic (including 3rd parties like them) and they've been lobbying the CRTC (thus far unsuccessfully) to stop Bell from their anti-competitive practices, the next step of which is imposing 60GB caps on everyone in addition to the throttling they're already doing. And all this in spite of the fact that Bell's own reports to the CRTC show that their network is nowhere near capacity, even with the demands BitTorrent is current putting on it. And oh yeah, companies like TekSavvy don't actually buy bandwidth from Bell either.

TekSavvy has Canadian phone support staffed by actual technicians, no phone menu when you call them and their CEO and CTO regularly post in their forums. They also offer 200GB and unlimited 5mbit service for $29 and $39 a month. The big guys offer nothing even close to that and yet TekSavvy is able to do it and make money with less than 40,000 customers. Curious that, no?

Not everyone in Canada can get DSL service but if you can, I strongly urge people to switch to TekSavvy, not just because they are a great company but because by giving them your money, you are supporting the Net Neutrality battle. And once again I'll state that I don't get a dime from making this recommendation, I just like to trumpet the few companies left in the world that treat people right.

40Gb a month is ludicrious. Stylez and I are both gamers and we can't even get Hulu and streaming Netflix up here and we run almost 120GB a month with almost no torrenting going on in our house. As Kat discussed in the article, the reasons for these caps are 100% to eliminate customers' ability to get their TV elsewhere. The only companies trying to push these restrictions are the ones who offer both Internet and TV service. It is anti-competitive and they don't even really try to hide that fact. Bandwidth has never been as cheap as it is now and to claim that 1-2% of users who hog bandwidth are the reason they need these caps is an outright lie. Those people can easily and legally be kicked off their system and in addition to that, these companies are already extremely profitable. Much like the record industry, they are clinging to a business model (charging people for packages that include 5 channels they don't want for every 1 they do want) that is rapidly becoming obsolete and rather than find a way to change, they're just trying to impose artificial and unnecessary limits to try to force consistency. That will never work in the long term and all they're doing now is pushing more people away.

LiquidMantis wrote:
MeatMan wrote:

I've always been under the impression that satellite internet was for people who live in the middle of nowhere, whose only options are dial-up or satellite.

Indeed. On satellite you can expect at best a 500ms latency, ranging to even well over a second. You can get a decently fat hose but rather than having a two-way radio to communicate with the guy at the valve you've gotta send a gimped runner back to tell him to turn the faucet on.

It's also capped at 200MB a day- They call it fair use, I call it useless. You DO NOT want satellite internet.

When we switched to my neighbors Wi-Max 1.5 connection, it felt like lightspeed! Then he started shaping traffic and now I'm back where I started. No cap though.

Wow!

It's really interesting to see peoples reactions considering this is standard in Australia.

I can't even concieve internet without some kind of data cap...

Must be nice for those who don't have one...

EDIT: I have 17gb per month peak time (7am to 12am) and 17gb off-peak... and I have a very good deal =/

Spaz wrote:
Prozac wrote:

Wah, Wah, Wah, poor americans, joining the rest of the world in the internet slums.

Wah wah wah, poor Aussie!

http://www.minister.dbcde.gov.au/med...

Of course, that's just to bring us up to US standards.

I was going to to jump on the 'poor you' pile, but I suppose it feels much worse to have something taken away/restricted than to not have it to begin with. I don't miss not being able to stream HD movies since it's not even an option here to begin with. That said, if I couldn't get games from steam, there'd be hell to pay...

I'm sure that the GWJers from South Africa and so on will now tell us how spoiled we are in Oz...

Great article, Thank you.

Submitted to StumbleUpon.

Sonicator wrote:
Spaz wrote:
Prozac wrote:

Wah, Wah, Wah, poor americans, joining the rest of the world in the internet slums.

Wah wah wah, poor Aussie!

http://www.minister.dbcde.gov.au/med...

Of course, that's just to bring us up to US standards.

I was going to to jump on the 'poor you' pile, but I suppose it feels much worse to have something taken away/restricted than to not have it to begin with. I don't miss not being able to stream HD movies since it's not even an option here to begin with. That said, if I couldn't get games from steam, there'd be hell to pay...

Exactly -- us Aussies are conditioned to this sort of thing, and the services we have on offer match that. I'd love to have a Netflix-style service, but who's going to launch one in a country where most of your potential customers could only watch a handful of movies before hitting their bandwidth caps? At least we get a good selection of unmetered content on a lot of our ISPs (like Steam on Internode, and Xbox Live downloads on iiNet), and all of our ISPs give you tools to show you very clearly how much bandwidth you've used, which sounds a lot better than the Rogers situation in Canada.

pneuman wrote:

...which sounds a lot better than the Rogers situation in Canada.

Not sure if this is common knowledge or not, but Rogers was the first ISP in the world (to the best of my knowledge) that started overlaying their own content over the internet downloads. As in, they would give you your browsing in a frame, where they control the outer frame on their servers. They 'tested' it for a couple of days and so much crap hit the fan, including companies like Google jumping on them, that they stopped in a hurry. But I'm guessing they learned the lessons and are now using the technology for 'warning messages', waiting on the day that they can sneak some commercials through.

bnpederson wrote:

Verizon's cellular Internet is actually cheaper for the bandwidth cap [...] their overage fee is significantly less than a dollar per gig.

You might want to try that math again. $250/GB isn't a deal I want.

LiquidMantis wrote:
bnpederson wrote:

Verizon's cellular Internet is actually cheaper for the bandwidth cap [...] their overage fee is significantly less than a dollar per gig.

You might want to try that math again. $250/GB isn't a deal I want.

The 5GB plan is $59.99. About $12/GB.

...But you were talking about the overages. My bad.

I think you're going to find that ISPs will come to a "happy" medium between Time Warner's caps and Comcast's "high" 250GB cap. You'll find Comcast slowly lowering their cap while Time Warner realizes 40GB as a max is too low and begin to raise all tiers.

You'll also likely see a move to what you see here at the local university campus, where "on-network" traffic (i.e. university email, websites, etc.) doesn't count towards your caps while "off-network" traffic does. Comcast may partner with someone like Netflix so that their streaming movies don't count towards your cap, but other people on other ISPs like Time Warner will be out of luck, unless they're able to switch.

I'm not looking forward to any of this...

This is one of those times when it's important to note the units of measurement.

edit: Also, out of curiosity, does anyone know the rough bandwidth usage of watching videos on Hulu or Netflix streaming? ie, If I were to watch a 25 minute television episode, how much could I have possibly just pulled down?

karmaghost wrote:

You'll find Comcast slowly lowering their cap while Time Warner realizes 40GB as a max is too low and begin to raise all tiers.

Don't bank on it. Telco's and ISP's are usually quite happy to f*ck over their customers...

I live in Binghamton, NY which is also upstate. We don't have FiOS access yet either (but some 'high speed' DSL is available). I fear Time Warner is going to turn the harry eye to us next.

Fortunately I am moving down to NJ come July which is heavily saturated with FiOS.

I am glad to have FIOS. So far, I haven't heard about any bandwidth caps coming (which I would be surprised at, since they promoted FIOS as great for gaming and streaming video).

I have in the past based decisions on where to move at least in part on what kind of broadband is available. While I can't say that I would automatically move if faced with the kind of situation described in the article, it would be a good motivation to do so if it were an option that I was considering for other reasons.

High-falutin Aussies! Me -> 7/2Mb up/down, 20Gb limit, US$46, US$1.70/Gb over that. Only one telco that provides cable, that's the highest cap I can get. And I live about 2km from the parliament buildings in the capital city.

But as noted by Switchnote, it's expensive to lay a cable to this part of the world. At least we can share most of the cable with Aussie. Thanks guys!

Let me join the you-Americans-are-so-spoiled crowd. In Belgium, broadband access started at a 10Gb/month cap. And this is in one of the most densely cabled countries in the world!

Since then the caps have been gradually heightened. It's 25Gb now

boogle wrote:
Poor Old Lu wrote:

Ya'know, a little competition would probably present a very quick solution. I've never understood why people put up with cable [i]monopolies.[/i]

Monopoly. One option.

Despite being a bit dense, I do understand what a monopoly is. I was thinking more along the lines of torches and pitchforks because Charter wants me to pay $40 a month to watch the Tigers botch this season.