Time Warner Cable on Thursday 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 broadband users 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," Landel Hobbs, Time Warner Cable chief operating officer, said in a statement Thursday.
Time Warner Cable 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 on Thursday announced several new terms and plans for the trials, including a cap on overage charges at $75 per month and a $15-per-month tier for subscribers who use less than 1 Gigabyte per month.
The changes come after local politicians and the MSO'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, this week denounced Time Warner Cable'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. We've heard the passionate feedback and we've taken action to address our customers' concerns."
The $15 monthly 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 Gigabyte.
Time Warner Cable's usage data shows that about 30% of customers use less than 1 Gigabyte 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 Gigabytes for Road Runner Lite, Basic, Standard and Turbo packages, respectively. Overage charges will be $1 per Gigabyte per month.
Furthermore, Time Warner Cable will introduce a Road Runner Turbo package with a 100-Gigabyte cap, priced at $75 per month, offering speeds of 10 Mbps down / 1 Mbps up. Overage charges will be $1 per GB per month.
And as DOCSIS 3.0-based services are deployed in the trial markets, Time Warner Cable plans to offer a 50 Mbps down / 5 Mbps up tier for $99 per month.
Time Warner Cable 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.
"So, customers will have an opportunity to assess their usage and right-size their service packages before usage charges are applied," Hobbs said.
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 Wednesday.
But Hobbs reiterated that bandwidth consumption among Time Warner Cable's high-speed Internet subscribers is increasing dramatically, rising by about 40% a year, and asserted that pricing models must be adjusted accordingly.
"As a facilities-based provider, we've built a network that must be maintained and upgraded. We have increasing variable costs and we have to continue to invest in the network itself," he said.
Hobbs warned that the Internet's infrastructure may not be able to accommodate the explosion of online content by 2012, which could "result in Internet brownouts."
"It will take a lot of money to fix the problem," Hobbs said. "If we don't act, consumers' Internet experience will suffer. Sitting still is not an option."
Consumption-based billing has been instituted by major providers in Canada, including Rogers Communications and Cogeco Cable. Hobbs noted that the practice is also used by ISPs in other countries, including the U.K. and New Zealand.
In the U.S., AT&T has been conducting usage-based billing trials. Comcast, Cox Communications and Charter Communications impose monthly maximum-usage limits but currently do not bill for additional bytes consumed.
Time Warner Cable is soliciting feedback from customers at firstname.lastname@example.org.
"Again, the Internet is dynamic and continually evolves, so our plans will evolve as well and aren't set in stone," Hobbs said.