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Wednesday, April 1, 2009

More expensive Internet access, coming soon to a city near you

Posted by on Wed, Apr 1, 2009 at 12:11 PM

How many gigabytes of bandwidth do you consume each month? No idea? Well, if you're a Time Warner Cable customer, you may need to start keeping track.

Business Week reports that the company has launched a "tiered pricing" structure in four U.S. markets, including Greensboro, N.C. The idea is to charge customers for Internet access according to how much data they consume, in the same way cell phone plans charge according to the number of minutes you use.

The impact will likely be to reduce consumers' use of online audio and video, because YouTube videos will start to feel like pay-per-view movies.

Customers will be charged $1 for each gigabyte (GB) over their plan's cap. Time Warner Cable offers four cap levels of 5, 10, 20, and 40 GB [per month]. A download of a high-definition movie typically eats up about 8 GB.

The report quotes an analyst who says the average family could end up spending $200 per month on broadband usage fees just watching video.

It's unfortunate that the industry would launch a business plan that will significantly increase consumer costs and likely reduce use of and demand for their service, while sending their lobbyists to whine to state lawmakers that they need taxpayer funds to subsidize their business because not enough people sign up for their service.

The industry line is that rural communities don't have Internet access because there's not enough demand; well, this will reduce demand.

So why are they doing it? Karl Bode of DSLReports.com picks apart Time Warner Cable CEO Glenn Britt's statement that "We need a viable model to be able to support the infrastructure of the broadband business."

In reality, Britt is pursuing metered billing because it gives him a way to monetize and/or control Internet video, which poses a very serious long term threat to his cable television revenues. The pressure to shift to metered billing comes from investors, who love the idea because it allows carriers to charge consumers more money for the same (or less) service in an age where the cost of bandwidth and network hardware continues to drop.

Bode notes that this strategy is likely to backfire in markets where Time Warner Cable faces actual competition from service providers who don't jump on the bandwagon. Competition from municipal providers, for instance.

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