Time-Warner Considers Per-Gigabyte Service Fee, After iTunes

destinyland writes "Time-Warner is now mulling a plan to charge a per-gigabyte fee for internet service. A leaked memo reveals they're now watching how many gigabytes customers use in a 'consumption-based' pricing experiment in Texas, which we discussed early last month. The announced plan was that they were considering a tier-based approach, as opposed to per-gigabyte fees. 'As few as 5 percent of our customers use 50 percent of the network,' Time-Warner complains, with plans to cap usage at 5-gigabytes, and more expensive pricing plans granting 10-, 20-, and 40-gigabyte quotas. Steven Levy at the Washington post suggests Time-Warner's real aim is to hobble iTunes, raising the cost of a movie download by $10 (or $30 for a high-definition movie). Eyeing Time-Warner's experiment, Comcast cable also says they're evaluating a pay-per-gigabyte model."

Comments

Not only is it a step in the wrong direction...

[hbean]

...but its an absolute shot in the foot for their business.

Right now, I could call up Verizon and get FiOS. In about 6 months I'll be able to call up Verizon and get FiOS TV. Hell, theyre currently installing FiOS in my parents tiny village of about 5000.

These cable companies are facing the first real competition they've ever had and instead of reacting by making their service better, they're planning out ways to make their service worse.

And no, this isn't some sort of viral FiOS ad. I'm just a dumbfounded consumer.

Good luck with that guys

[beavis88]

I, beavis88, hereby pledge I will immediately terminate my Time Warner Cable "service" in the event they implement this new scheme without SUBSTANTIALLY reducing the price of the "low tier". I don't even run BT or pirate movies/music, and I probably came close to 5GB downloaded *yesterday* - Vista and Windows 2008 .isos from MSDN, plus watched a movie online from Netflix. Now if they want to make it worth my while to reduce my usage, I might be amenable - but if they want to cap my usage, and keep charging the same insanely high prices, then fuck it, I'll put up with shitty, slow DSL.

Time Warner and Comcast need a reality check

[dj42]

Keep this shit up. Those "50% who use 5%" of the network will stop advising your idiot clients. When that happens, you'll see the same demise as "AOL" did. How many idiotic AOL dial-up users still exist?

Get ready for the apocalypse privacy-invading broadband douches.

I wish I had another choice

[techpawn]

But I really don't when it comes to internet service in my area. DSL just doesn't have what I need and Time Warner is the only solution and I'll be damned if they weren't down this whole weekend with not so much as an explanation or apology. Of course I'm going to be charged for the whole month even after sitting on hold for 20 minutes to be told there's nothing I can do but wait.

This just frosts me even more, I don't WANT to switch to DSL, but I may have to.

MOD PARENT UP

[hey!]

It's not so bad that an ISP charges by bandwidth. It's bad that the pricing decision is tied up with other kinds of products they want to sell, in effect giving them the power to raise the price of other companies' products relative to their own in places where they have a broadband monopoly.

In this situation, the regulators ought to look at any competitive advantage this gives their content products and require them to price those products high enough that the bandwidth pricing is competition neutral.

Re:MOD PARENT UP

[mrxak]

It's not just that these companies create content, or that they need somebody else to pay for high-bandwidth users, it's that there's no competition in their markets. You have one cable company (usually) that has a cable franchise in the area. You might have one DSL company too (if you can really call that broadband). That's usually it for most people. So if you want speed x, you're forced to use company y, and they have no incentive to lower their prices. A company comes along that wants to lay down their own coax or fiber cables, and the established company can lobby against them getting their own franchise. There's nothing natural about these "natural monopolies", they are monopolies enforced by local government under the influence of the monopolies. There are very few market forces at work, so your cable company can charge whatever they want and then pull moves like this to get even more out of you.

Re:MOD PARENT UP

[Monkeybaister]

I don't think many slashdotters are privy to the actual costs of internet connections. I work in the networking department at my work where we had a T3 (45 Mbps). We've moved to leased fiber to a co-loc and now have 250 Mbps for less. It's the same ISP, all we did was take the phone company out and costs went way down.

The cable and phone companies are able to charge so much because they are the only last mile connection in many places. Having a data connection (phone, TV, internet) that the government (controlled at the town/state level) treats like the roads would be great.

My model would have the government run single-mode fiber to every house and bring it all together in a building in each town (or maybe larger). It would then be the responsibility of a company to actually give service over the fiber to homes. This would allow people much more flexibility, so if a group of people want to just share 100 Mbps from a big ISP, they have the power to do so.

Re:Charge or don't charge but don't hide it

[TheRaven64]

Exactly. Cut the marketing bullshit and give me a plain-English SLA. For a consumer connection, with a cheap price, the SLA might not be that great, but it should be well specified. I want to know:

• The minimum speed that I am guaranteed to get.
• The maximum speed I will get under optimal conditions.
• The percentage of the time I can expect to be within n% of the maximum speed.
• The maximum amount of downtime allowed before I am compensated.
• The maximum transfer I am allowed per month and the cost per GB of going over.

Ideally, each ISP would provide a grid with different levels / prices for each of these categories and I would be able to put together a plan that met my needs. They could even unify their consumer and business pricing structures, so businesses picked from the same grid but, if they were doing anything important with their connection, chose the higher level options.

As long as there's competition, and the customer is well-informed about the service they are buying, then a free market works. If either of these conditions fails then you might need some regulation.

Re:5GB?!

[matt4077]

You're assuming that these tiered prices are actually neccessary because of a high load on the network. I'd speculate that TW's network is fine and they're just seeing a nice opportunity to earn money. Note that this could be different in AU because of the rather expensive and long submarine cables.

1500 HD movies a month?

[ls -la]

From tfa:

one of these gluttons downloaded the equivalent of 1,500 high-definition movies in a month 18.5 Mbps 24/7? I call bullshit.

Re:Charge or don't charge but don't hide it

[Albanach]

Charge me for bandwidth usage or charge me true unlimited bandwidth usage.

You can have unlimited bandwidth. You just need to be prepared to pay for it.

Speakeasy will sell you a T1 with 1,5Mbps down, 384k upstream for about $360/month. That's the real cost of unlimited bandwidth.

A bunch of smoke being blown in your...

[WindowLicker916]

I work for Comcast in the bay area and by spec our nodes are not to exced 70% usage. Which we managed just fine. We have tons of fiber not even lit in order to meet demand.

So these companies complaining makes no sense. In fact they just shared our regional numbers with us and HSI was profitable by some comparable sum equal to video.

IMO these companies should just become common carriers like AT&T and provide you access. Other companies should provide IPTV which would either be free or subscription based. Thats where I see the industry hopefully going!

Did these guys...

[oahazmatt]

Did these guys take a business class taught by Darl McBride? Why would any company go so far out of it's way to intentionally anger it's customer base?

Does the Board of either company actually believe this $/GB model would have anything other than a short-term revenue burst? I refer of course, to the people who will receive their statement once this plan has been put into effect (I'm assuming it will be made retro-active for the billing period when the policy is put in place).

And leveraging the price of iTunes movie downloads? First of all, if Time Warner is already being paid per GB, then why would they need to do this? To offset profit? I purchased a movie from iTunes, (Wargames, if you must now) and it was not a small file.

Secondly, a $10 increase? $30 for High-Definition? Why not just send out billing statements that have a 10% Off coupon for any TW-Library title at Best Buy, because I certainly believe the desire here is to push the physical media rather than the digital.

Finally, does Time Warner actually believe that Apple will roll over and say "okay"? Apple had it's arm twisted once over the price of songs and didn't quit. So why would they suddenly agree to a $10/$30 increase and hamper their own sales just so Time Warner can force their On Demand service to their customers? Apple may just do the opposite and end all dealings with TW once the contractual obligation ends. Add to that, customers won't want to download from the On Demand service if it will cost them per Gig.

This is an excellent method for alienating an entire customer base in one simple step.

Re:U.S. falling behind

[muszek]

Yep. In Poland many smaller ISPs used to do the same, but they faced the law. The smaller you are, the easier it is to go below the radar.

My friend runs a local network in his neighborhood (few apartament blocks, ~200 computers) and they've set up both DC and an FTP server to aid everybody's piracy needs. One of the side effects (besides everybody being able to get pretty much whatever they want in minutes) is that they've been running on something like one 2Gbps/256kbps DSL line (for http, games, ssh and stuff like that) and one 2Gbps/2Gpbs line (something much more expensive, I don't know much about this stuff though) for a few years and owners of ~200 computers are happy with it (partly because it costs peanuts).

Now Wait A Minute!!!

[Anonymous Coward]

So far, the summary of all of the comments has been "I, Joe Customer, am outraged to pay another cent more for a service which I utilize - to the fullest."

I am not trying to defend cable telcos here, but let's look at it from their perspective for just a moment. One of the biggest things which telcos are fighting right now, is to not be treated like a "dumb pipe." Why? They have spent a significant amount of money to build complex networks (fiber and coax), data centers, and their goal is to recoup the cost of their investment. After all, they are a business as well.

Now, by setting the prices of access to this network, they are estimating that the average customer will stay with them for a period of, say, 5 to 7 years. This goes into the formula to figure out how much the monthly fees should be, based on equipment aging, breakdowns, etc... Usage and growth is factored in, as well.

Now, you have a service like iTunes, or NetFlix, which severely stresses your network infrastructure. This situation requires for them to start upgrading their network much sooner than expected, spending more on infrastructure than previously thought. Just another reminder: they are a business.

Why do I mention the business bit so often - it's pretty simple. You come to them as a customer, expecting a certain level of service. They have other customers who invest in them externally (stock market). As long as things are running smoothly, the company revenues grow, and everyone is happy: the home customer is getting good service, and the investor is getting good return. However, if the company starts to falter and provide shitty service to end-customers, customers leave. This reflects in the bottom line, which in turn, can be seen on the stock market. Investors see the company is not performing "well," so they don't invest.

What's the solution? I am sure that many telcos have toyed with the idea of charging an extra service fee to companies like iTunes and NetFlix. Call it a "network improvement fee." I think it makes sense - after all, these companies are relying on the telcos "dumb pipe" to deliver goods to customers, from which the telcos do not see any revenue. Should end-customers have to pay the same? Perhaps to a smaller degree. It should depend on a minimum guarantee which is established between a telco and an end-customer.

It is also worth noting here that the stress on the infrastructure is partly (a significant portion, actually) based on the amount of SPAM and "dark traffic" flowing across telco networks. Last year, SPAM topped 90% of all email delivered. Sure, maybe SMTP traffic accounts for only (say) 40% of all web traffic, but that is not an insignificant number. One way to combat this, is to filter traffic which enters and leaves a telcos "private" network. How would you feel about that? You can get more speed, but you won't be able to run a web or mail server on your cable modem. Would you be happy with such a compromise?

Sometimes, too many choices, or lack of direction, actually limits your ability to choose. I think as end-customers, we need to stop and think about the choices we are making, and become more self-critical. It's not possible to have everything all the time - we will end up paying for it sometime - sooner or later.

Nothing New, we do it already and people LOVE IT

[rezalas]

I work for Allegiance Communications in Oklahoma, and we already do this basically. The difference is that we have bandwidth / gig packages without caps, we just charge extra if you go over your limit and most people don't have a problem with that. for example, if you choose our top end package for home use (residential gamer package) you get 5 meg down 1.5 meg up, and usage rate of 50 gigabytes per month. If you go over the 50, you get charged. However most people (even people downloading movies) don't use that up. Those who do are likely hosting servers or doing something else and don't mind if they get charged the extra fee simply because they were told before hand that we do it. Now we are even looking at offering extra usage each month for small fees (an extra 50gigs for $7 more, ect). Usage fees without caps and monitoring can work, it just has to be done ethically. As for the low low bandwith of 1 gig... well, even our basic users occupy that. Anything less than 10gig a month (which is as low as we go) is just ripping off your customers.

Re:Nothing New, we do it already and people LOVE I

[rezalas]

Oh, for reference zero usage monitoring is key in this. We as ISPs should never care about what you are doing with your bandwidth. We aren't charging you to access your porn, we are charging you a toll to occupy our highway to get to it. Its none of our business what you keep in your packets!
People just need to realize that as an ISP the pipe doesn't magically get bigger, it costs alot of money to get that bandwidth to increase and believe it or not what you pay per month doesn't all go to us. The actual profit margin for an ISP that actually maintains equipment and lines is about 10% of what you pay. So, if you are a customer and you pay $50 a month for internet, only $5 of that is profit. It takes alot of $5 increments to make the millions it takes to upgrade a provider plant.

What won't change

[kilodelta]

In essence they're penalizing people for using the net. Sure they may charge you more but will they build out a better network, no they won't.

It's a money grab, plain and simple. I note that Cox has been noticeably silent on this issue.

Re:5GB?!

[IamTheRealMike]

Dude, this isn't net neutrality. It's cheap for an Australian ISP to have their users download from iTunes because iTunes content is distributed using Akamai, a caching CDN. Bandwidth inside Australia is plentiful and cheap. Bandwidth out of Australia is extremely expensive. Because they're caching the content inside Australia the ISP only has to pay for each separate file once. EG when they sell Lost, the first user that downloads it hits the trans-pacific links and from then on it stays within Australia.

If Amazon wanted to come to the same arrangement, I'm sure that'd be OK with those ISPs. It's basic HTTP caching. I suspect they could, in theory, not charge for any content which hits the ISP HTTP caches and it'd mean that everyone competes on a level playing field (if the caches are large enough), but that'd be a complete nightmare to track and explain to users. So it's sold as "iTunes is free, other stuff isn't" because that's easy for the punters to understand.

Re:What's so critical?

[illumin8]

I find it interesting that you identify these services as critical. Last I checked, none of these were necessary for sustaining life or maintaining a livable environment. I'd put water, sewer and heat down as critical services. Maybe you could stretch it to include telephone service if you considered it a lifeline for emergency situations. I can't really imagine a situation where the lack of television service or internet service would be life threatening or make a dwelling uninhabitable.

You could make that exact same argument about electricity several decades ago, or running water several centuries ago. They are all modern luxuries, but for most sane people, communication with the outside world and entertainment are pretty basic services that it's not unreasonable to have. Maybe we should just all go back to living in caves and mud huts and hauling our own water up from the river?