Britt: Usage-Based Pricing Inevitable

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Just days after announcing a potentially controversial plan to introduce usage-based pricing to its broadband product, Time Warner Cable chairman and CEO Glenn Britt said that the response from customers so far as been favorable, adding that he sees the day coming soon when broadband marketing is no longer centered on promotional pricing.
Time Warner launched a usage-based tier in sourthern Texas earlier this week that allowed lighter broadband users to shave as much as $5 per month off their bills if they agree to certain usage limits. The offering differs from the cable giant's attempts in the spring of 2009 to impose consumption-based billing, which was met with a huge outcry from consumer groups and politicians. Time Warner Cable scuttled those plans in April that year.
At the Morgan Stanley Technology, Media & Telecom conference in San Francisco Thursday, Britt said that usage-based pricing is inevitable, and if he could turn back the clock to the initial launch of broadband service several years ago, he would include some kind of consumption component. But he added the cable giant's current approach is easier to swallow.
"Nobody has to do this, it's not coercive, they can keep what they have," Britt said. "This is just if they want to save money. I think that's the right way to do it. If you watch Netflix all day, this is not for you; keep the unlimited [tier]. But there are people that don't do that and we should offer them the opportunity to save."
The Time Warner Cable chief added that the company has taken the same approach with its TV Essentials lower-cost video package, aimed at bringing affordable entertainment to consumers that simply don't have as much money as they used to.
"The response I've gotten from it is unbelievable," Britt said. "I get E-mails from strangers and people who don't even live in our footprint. Entertainment is very important to people; TV is very important, and our whole eco-system here should try to create affordability."
While the way cable companies price and package products is changing, so will the way they are marketed, he added, especially broadband.
"As this [broadband] evolves I think you're going to see people moving away from what has essentially been offer competition," Britt said. "You see all sorts of aggressive beacon offers in the markets and then the phone rings and people try to upsell. I think you're going to see more differentiation over time, both in terms of the quality of the infrastructure, in terms of branding. These are techniques that are a little bit new to these industries, but you find them in packaged goods like P&G and Colgate, where people create a brand with an image and perception is reality whether it's reality or not. I think you're going to see more of that kind of marketing in this space."

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