$15 For 1 Gig From Time Warner Cable: $6/movie After 1 Gig
Bravo to Time Warner Cable for a new low-end offering for people who don't use the Internet very much. The marginal cost of each broadband customer is somewhere between $5 & $8/month at a large carrier like TWC, so even a $15 price makes a significant contribution to the company. Verizon and AT&T have often used $15 prices to win customers away from dialup, and it makes sense to have a low end in a recession.

But Time Warner still faces a thunderstorm from those who believe that their price increases/caps are unjustified. Congressman Massa is talking antitrust, they are ducking questions from the N.Y. Times, and I believethey are deciding whether to correct the statement from Hobbs or try to justify something very difficult to justify. I'm watching closely to see what details come out.

Statement from Landel Hobbs, Chief Operating Officer, Time Warner Cable

RE: Consumption based billing trials

Some recent press reports about our four consumption based billing trials planned for later this year were premature and did not tell the full story. With that said, we realize our communication to customers about these trials has been inadequate and we apologize for any frustration we caused. We’ve heard the passionate feedback and we’ve taken action to address our customers’ concerns.

With the ever-increasing flood of content on the Internet, bandwidth consumption is growing exponentially. That’s a good thing; however, there are costs associated with this increased Internet usage. Here at Time Warner Cable, consumption among our high-speed Internet subscribers is increasing by about 40% a year. As a facilities based provider, we’ve built a network that must be maintained and upgraded. We have increasing variable costs and we have to continue to invest in the network itself.

This is a common problem that all network providers are experiencing and must address. Several other providers have instituted consumption based billing, including all major network providers in Canada and others in the U.K., New Zealand and elsewhere. In the U.S., AT&T has begun two consumption based billing trials and other providers including Comcast, Charter and Cox are using varying methods of monitoring and managing bandwidth consumption.

For good reason. Internet demand is rising at a rate that could outpace capacity within a few years. According to industry analysts, the infrastructure may not be able to accommodate the explosion of online content by 2012. This could result in Internet brownouts. It will take a lot of money to fix the problem. Rather than raising prices on all customers or limiting usage, we think the fairest approach is to move to a tiered model in which users pay more if they use more.

If we don’t act, consumers’ Internet experience will suffer. Sitting still is not an option. That’s why we’re beginning the consumption based billing trials. It’s important to stress that they are trials. The feedback we’ve received from our customers has been very helpful. We’ve made changes to the terms in our current and upcoming trial markets as follows:

  • To accommodate lighter Internet users and those who need a lower priced option, we are introducing a 1 GB per month tier offering speeds of 768 KB/128 KB for $15 per month. Overage charges will be $2 per GB per month. Our usage data show that about 30% of our customers use less than 1 GB per month.
  • We are increasing the bandwidth tier sizes included in all existing packages in the trial markets to 10, 20, 40 and 60 GB for Road Runner Lite, Basic, Standard and Turbo packages, respectively. Package prices will remain the same. Overage charges will be $1 per GB per month.
  • We will introduce a 100 GB Road Runner Turbo package for $75 per month (offering speeds of 10 MB/1 MB). Overage charges will be $1 per GB per month.
  • Overage charges will be capped at $75 per month. That means that for $150 per month customers could have virtually unlimited usage at Turbo speeds.
  • Once we implement this trial, we will not immediately start billing customers for overage. Rather, we will first provide two months of usage data. Then we will provide a one-month grace period in which overages will be noted on customers’ bills, but they will not be charged. So, customers will have an opportunity to assess their usage and right-size their service packages before usage charges are applied.
  • Trials will begin in Rochester, N.Y., and Greensboro, N.C., in August. We will apply what we learn from these two markets when we launch trials in San Antonio and Austin, Texas, in October, but we will guarantee at least the same level of usage capacity in these trials.
  • As we launch DOCSIS 3.0 in the trial markets, we plan to offer a 50/5 MB speed tier for $99 per month.

Again, the Internet is dynamic and continually evolves, so our plans will evolve as well and aren’t set in stone. We appreciate the feedback we’ve received. We’ll look forward to more dialogue as we progress in these trials. You can send us your comments at realideas@twcable.com.