Time Warner Cable has raised the ire of politicians in New York and North Carolina over plans to impose monthly usage limits on broadband subscribers -- and charge them $1 per Gigabyte if they exceed the caps.
Rep. Eric Massa (D.-N.Y.), who represents a district in upstate New York, called the operator's bandwidth-metering plan "monopolistic" and said one of the outcomes could be that "middle-income families will see outrageous Internet bills."
"With limited choices in broadband providers, and virtual monopolies in many market areas, I view this as nothing more than a large corporation making a move to force customers into paying more money," Massa (pictured, left) said in a statement Tuesday. "I firmly oppose capping Internet usage and I will be taking a leadership role in stopping this outrageous, job-killing initiative."
Meanwhile, city council members and the mayor of Greensboro, N.C., are also lining up to oppose the MSO's usage-based pricing plan.
"I don't like it at all," Greensboro Mayor Yvonne Johnson said, according to a report in the local News-Record. "I'm not a happy camper about it. I think it's bad for their customers and it's bad for the city."
The Greensboro city council doesn't have authority to regulate Time Warner Cable but Johnson said local officials will voice their concerns with the operator.
Time Warner Cable has defended the plan, likening it to usage-based pricing schemes used by wireless phone providers.
The MSO kicked off a bandwidth-metering test last summer in Beaumont, Texas, and is expanding the model to four markets: Austin, Texas; San Antonio, Texas; Greensboro, N.C.; and Rochester, N.Y.
Under the plans being tested, customers are offered four different tiers ranging in price from $29.95 to $54.90 per month with maximum usage capped at 5, 10, 20 and 40 Gigabytes per month. Users who go over their caps are billed at $1 per Gigabyte in overage fees.
In a statement Monday, Time Warner Cable chief operating officer Landel Hobbs said the consumption-based billing plans will allow the MSO to upgrade its infrastructure to DOCSIS 3.0, to offer "wideband" service with speeds up to 100 Mbps as well as higher speeds for existing customers.
"With regard to consumption-based billing, we have determined that as broadband usage and penetration grow, there are increasing differences in the amount of bandwidth our customers consume," Hobbs said. "Our current pricing plans require all users to pay the same amount, whether they check e-mail once a month or download six movies a day. As the amount of usage has dramatically diverged among users, this is becoming inherently unfair and not the way most consumers want to pay for goods they consume."
Added Hobbs: "When you go to lunch with a friend, do you split the bill in half if he gets the steak and you have a salad?"
Based on customer feedback, Time Warner Cable now is developing a "super-tier" that allows for up to 100 Gigabytes of broadband usage per month in all test markets and also is providing a "gas gauge" tool to customers so they can see how much bandwidth they're using in a given period, according to Hobbs.
Pali Capital analyst Rich Greenfield, in a note to investors Wednesday, said asking consumers to keep checking their consumption "sounds tedious."
"Let's start with a simple premise: moving 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," he wrote, referencing the opposition by Massa and the Greensboro city council.
"In an increasingly competitive world, the age-old saying of ‘keep it simple stupid' should not be overlooked," Greenfield continued. "If competition exists, we suspect a provider offering broadband without caps or a simplified strategy toward broadband will gain meaningful market share, assuming TWC continues to move forward with its bandwidth-cap strategy."
TWC is the only major U.S. cable operator trying out usage-based pricing, although other Internet providers, including AT&T, are also testing the concept.
Other MSOs, meanwhile, have implemented standard bandwidth caps but currently don't institute overage fees. Comcast limits subscribers to 250 Gigabytes per month, and both Charter Communications and Cox Communications impose maximum-usage as well.
At last week's Cable Show '09, Jim Blackley, Cablevision Systems senior vice president of corporate engineering and technology, said on a panel discussion that bandwidth-usage caps are not in the MSO's plans.
"We don't want customers to think about byte caps so that's not on our horizon," he said. "We literally don't want consumers to think about how they're consuming high-speed services. It's a pretty powerful drug and we want people to use more and more of it."