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Cox Treads Carefully Into Usage-Based Pricing Plans

5/18/2015 8:00 AM Eastern

Cox Communications added its name to the growing list of operators testing usage-based pricing, unveiling a plan that will charge customers extra for exceeding a pre-set limit on their data service.

 

Cox’s plan, which the MSO estimates would affect just 5% of its customer base, comes at a curious time. Title II regulations, which reclassify broadband as a common- carrier service, are about to take effect June 12, and the Federal Communications Commission has said it would look closely at any usage-based pricing plans to determine if they discriminate against online video providers (see Viewpoint). That could force some Internet service providers to move to implement their version of usage-based pricing before the deadline.

 

“If you’re a cable operator, you might want to strike while the iron is hot,” said MoffettNathanson principal and senior analyst Craig Moffett.

 

But operators must tread carefully in how they deliver the usage-based message.

 

Time Warner Cable learned the hard way in 2009, when the MSO caused an uproar by introducing usage caps in some of its markets. The furor led the cable giant to rethink its pricing strategy, keeping prices the same for heavy users of bandwidth but offering discounts to customers whose usage was lighter.

 

While customers are getting accustomed to overage charges — some wireless industry data plans charge as much as $15 for each additional 1 GB of mobile usage — Cox is softening the blow. The plan calls for an additional $10 charge for each extra 50 GB of usage, and recently the company significantly increased its usage caps — in some cases doubling them — to ensure the impact is minimal.

 

Other cable operators have adopted similar plans, including Suddenlink Communications, Mediacom Communications, Cable One and Comcast (in select markets).

 

Cox is limiting the test to its Cleveland market (it could expand to other areas in 2016), where customers will receive email notices of the changes beginning May 19. Customers will be notified of their data usage and any potential overages beginning in mid- June but won’t have to pay for overages until the October billing cycle, a Cox spokesman said. That gives customers the chance either to alter their usage or step up to a more data-intensive plan.

 

The additional charges serve as a temporary step-up plan for certain consumers, the spokesman said — they can keep their current level of service and pay the additional fee during months when usage spikes, like when their kids come home from college.

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