Advertisement

Tiered pricing seems like a plan to Net extra cash

Time Warner Cable is planning to test a consumption-based billing system in which customers 'pay more if they use more.' The plan is touted as a way to address the possibility of Internet brownouts.

April 15, 2009|DAVID LAZARUS

Time Warner Cable Inc. customers beware: If you're what the company considers a heavy Internet user, you could soon be charged as much as $150 a month for online access.

The sky-high charge is part of a new "consumption-based billing" system that Time Warner will test this summer to address what it says is the possibility of "brownouts" on the Net within three years because of soaring usage.

"Internet demand is rising at a rate that could outpace capacity within a few years," Time Warner Cable's chief operating officer, Landel Hobbs, said in a statement. "It will take a lot of money to fix the problem."

He said the company would introduce a "tiered model" in New York and North Carolina "in which users pay more if they use more." The new billing system would reach Texas in the fall, and other states could follow.

It's unclear what Time Warner, the dominant cable provider in Southern California, will do with the extra cash. Presumably it intends to invest at least a portion of it into improving the network, but Hobbs doesn't say.

AT&T Inc. and Comcast Corp. are exploring similar moves to address what Internet service providers see as the biggest challenge to their networks as video viewing becomes increasingly popular among Net users.

Never mind YouTube and its bite-size clips. The issue for telecom companies is services like Netflix, the online video rental company, which allows subscribers to instantly view entire movies and shows on their computer or TV via the Net.

"The cable companies argue that they can't handle this demand," said Karl Bode, editor of BroadBand Reports.com, a website devoted to high-speed Internet use. "But if you look more closely, the growth of the Internet is manageable through reasonable equipment upgrades."

He sees tiered pricing primarily as a money grab by the gatekeepers to the Net.

"They're just trying to monetize Internet video," Bode said. "They want people to accept the idea of metered billing so that when Internet video expands, it will be more profitable because families will be comfortable paying for each gigabyte used, rather than the current all-you-can-eat system."

That may be. But it seems to me that if I'm using the Net primarily to surf the Web and access e-mail, and my neighbor is using it to watch the director's cuts of "The Lord of the Rings," my neighbor should be paying more to keep the pipes flowing.

The issue isn't whether the heaviest Net users should pay more for access. The issue is how Time Warner and other telecom heavyweights should price Internet consumption.

In its tiered-pricing trials, Time Warner said, it will offer basic service of 1 gigabyte per month of Net access for $15, with an extra $2 tacked on for every additional gigabyte.

As a rule of thumb, downloading DVD-quality movies can account for as much as 5 gigabytes of Internet use. The lower the resolution, the less bandwidth required.

Time Warner will offer higher-capacity plans ranging from $29 to $75 monthly, allowing up to 100 gigabytes in access. Additional usage will be billed at $1 per gigabyte, with overage fees capped at $75 per month.

Still, up to $150 monthly for Internet access seems pretty steep, especially when you figure that network providers are routinely upgrading their systems as it is. How much of that fee reflects actual usage costs and how much is pure gravy?

A Time Warner spokeswoman declined to comment on these issues. Nor would she say when tiered pricing could come to California, or what percentage of Internet users account for heavy bandwidth consumption.

In his statement, Time Warner's Hobbs said only that "consumption among our high-speed Internet subscribers is increasing by about 40% a year.

"According to industry analysts, the infrastructure may not be able to accommodate the explosion of online content by 2012. This could result in Internet brownouts."

Bode disputed this forecast. He said there was no reason to think that the Net's infrastructure can't keep pace with the demands of a broadband world. And, he asked, aren't network improvements factored in to the millions of dollars in monthly access fees we're already paying?

Time Warner has more than 8 million broadband customers paying between $35 and $57 per month, depending on download speed. Basic cable TV service can cost an additional $50.

"I think this is ultimately about the cable companies being afraid that you'll cancel your cable subscription and watch everything online, giving you two services for the price of one," Bode said.

"By charging a ridiculous amount for Internet viewing, they hope you'll scale back online and go back to watching things on cable."

As it happens, an "under new management" sign is up at the Federal Communications Commission. And President Obama's pick to serve as the agency's chairman, Julius Genachowski, has a background in the online world and is said to be a strong believer that everyone deserves affordable broadband Internet access.

One of the FCC's next steps should be to determine how much the Net really costs on a per-gigabyte basis, and to ensure that access providers charge a fair price.

Heavy Net users should pay more. But not that much more.

--

David Lazarus' column runs Wednesdays and Sundays.

Send your tips or feedback to david.lazarus@latimes.com.

Advertisement
Los Angeles Times Articles
|
|
|