News

TWC Tweaks Bandwidth Plan

4/11/2009 2:00 AM Eastern

Time Warner Cable last week responded to the backlash touched off by its plans to expand usage-based billing for broadband services — revising some terms and expanding options for the trials — while continuing to defend the basic idea that subscribers should pay for what they use.

“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,” Time Warner Cable chief operating officer Landel Hobbs said in a statement last Thursday.

Time Warner said it will initiate the usage-based billing trials in Rochester, N.Y., and Greensboro, N.C., in August, followed by San Antonio and Austin, Texas, in October.

The MSO announced several new terms and plans for the trials, including a $75 cap on monthly overage charges and a $15-per-month tier for subscribers who use less than 1 Gigabyte per month.

The changes came after local politicians and the company's customers in the trial markets responded angrily to the prospect of usage-based billing.

Rep. Eric Massa (D.-N.Y.), who represents a district in upstate New York, had denounced Time Warner's plan as “monopolistic” and an “outrageous, job-killing initiative.”

Hobbs acknowledged that the MSO's “communication to customers about these trials has been inadequate and we apologize for any frustration we caused.”

The $15-per-month plan will “accommodate lighter Internet users and those who need a lower-priced option,” according to Hobbs. The tier will be capped at 1 Gigabyte per month with speeds of 768 Kbps down and 128 Kbps up, and overage charges for this plan will be $2 per GB.

Time Warner's usage data shows that about 30% of customers use less than 1 GB per month, Hobbs said.

In addition, the MSO is increasing bandwidth-cap sizes included in all existing packages in the trial markets to 10, 20, 40 and 60 GBs for Road Runner Lite, Basic, Standard and Turbo packages, respectively. Overage charges will be $1 per GB per month.

Furthermore, Time Warner will introduce a Road Runner Turbo package with a 100-GB cap, priced at $75 per month with overage charges at $1 per GB, offering speeds of 10 Megabits per second downstream/1 Mbps upstream.

And as DOCSIS 3.0-based services are deployed in the trial markets, Time Warner plans to offer a 50 Mbps downstream/5 Mbps upstream tier for $99 per month.

Time Warner will not immediately start billing customers for overage when it initiates the market trials. After providing customers two months of usage data, the operator will offer a one-month grace period in which overages will be noted on customers' bills, but they will not be charged.

The MSO also will offer a “gas gauge” tool to show subscribers how much bandwidth they've used up in a given monthly period.

Still, some analysts believe that consumption-based billing will be an unpopular move no matter how it's designed.

Changing from “an all-you-can-eat 'buffet line' for bandwidth usage via broadband to an a la carte system of paying for every Gigabyte you eat is subscriber-unfriendly and will be confusing to the average broadband user,” Pali Capital analyst Rich Greenfield wrote in a note to investors last week.

But Hobbs reiterated that bandwidth consumption among Time Warner's high-speed Internet subscribers is rising by about 40% a year, and asserted that pricing models must be adjusted accordingly.

“We have increasing variable costs and we have to continue to invest in the network itself,” he said.

Consumption-based billing has been instituted by major providers in Canada, including Rogers Communications and Cogeco Cable. In the U.S., AT&T has been conducting usage-based billing trials.

October