- By SHALINI RAMACHANDRAN
- Time Warner Cable Inc. is stepping again into the highly charged topic of consumption-based pricing for broadband service, giving its customers the option of paying less each month in exchange for a cap on their Internet use.
- The cable operator so far has rolled out the pricing option only in south Texas markets but says it will offer a similar tiered-billing option in other markets in the future. Under the new pricing plan, consumers will get a $5 reduction in their monthly bill if they accept a cap of five gigabytes monthly.
- While that amount of broadband would be plenty for a casual email user, it wouldn't work for a voracious consumer of online video. Streaming just three high-definition movies over Netflix could push a consumer over the five gigabyte cap, according to Novarum, a wireless broadband consulting firm.
- [BRITT0229jpg] Bloomberg News
- A 'consumption dimension to billing' was 'inevitable,' Time Warner Cable CEO Glenn Britt, above, said in June.
- The offer will be available to customers on three lower-speed tiers, which cost between $34.99 and $54.99 a month. Customers who go over the cap will be charged $1 per gigabyte up to a maximum of $25 extra.
- In a company blog post, Time Warner Cable assured customers that they will always provide an option of unlimited broadband. The new cheaper offer is "a choice for those facing tough economic decisions, but we're not suggesting it's for everyone," said Alex Dudley, spokesman for Time Warner Cable. Those who buy higher-speed tiers of Internet from the company aren't eligible for the plan, and no subscriber will be forced to take that plan.
- The move is a small but potentially significant step toward a sensitive subject in the U.S.: charging consumers for the amount of broadband they use.
- While cellular phone companies have started charging for wireless broadband based on usage, it is less common in fixed-lined broadband available from cable operators and phone companies. Some of those have broadband usage caps but at such high levels—such as 250 GB a month—that most households wouldn't be affected.
- According to a study last year by Cisco Systems Inc., the average Internet household used 17.1 GB of data per month in 2010.
- Charging consumers for broadband based on their usage could have notable repercussions, particularly given the growing use of online video, which hogs bandwidth. Cisco's study projected that by 2015 each household would use more than 60 GB a month.
- Time Warner Cable has stumbled before trying to introduce consumption-based pricing. In 2009 it required every new broadband customer in upstate New York and parts of Texas to accept a cap on usage, at varying levels. But after protests from customers and advocacy groups, the cable operator backtracked. The company acknowledged later that it was a "debacle."
- Time Warner Cable Chief Executive Glenn Britt said last June that introduction of a "consumption dimension to billing" was "inevitable."
- "If people want to watch video eight hours a day online, fine with me, but they should pay more than somebody who reads email once a week. I think that's just fair," he said.
- Sanford C. Bernstein analyst Craig Moffett noted on Tuesday that Time Warner Cable's new optional offer "appears to be crafted in order to minimize negative public reaction."
- Mr. Moffett added that the "most important aspect of the plan is that it familiarizes all users" with the usage-based pricing concept.
- Other operators remain cautious about consumption-based pricing. Citing success with Comcast Corp.'s broadband service at an investor conference Tuesday, the company's chief financial officer, Michael Angelakis, said, "We don't really want to rock the boat on that."
- "Someday, consumption-based billing may be more of a norm, but I think today we're really focused…on our product," Mr. Angelakis added. "We'll explore, we don't really know how that will work."
- Cablevision Systems Corp. has said it has no plans to offer usage-based billing in the near future.
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