Time Warner's bandwidth quota scheme

[Uraniun235]

First, the Business Week article:

Time Warner Cable Expands Internet Usage Pricing

Web users, the meter is running. In a strategy that's likely to rankle consumers but be copied by competitors, Time Warner Cable (TWC) is pressing ahead with a plan to charge Internet customers based on how much Web data they consume. Starting next month, the company will introduce tiered pricing in several markets.

In April, Time Warner Cable will begin collecting information on its customers' Internet use in the Texas cities of Austin and San Antonio and in Rochester, N.Y. Consumption billing will begin in those cities later this summer. In Greensboro, N.C., the billing changes will begin sooner. Spun off from Time Warner (TWX) this month, Time Warner Cable had been testing a plan to meter Internet usage in Beaumont, Tex., since last year.

By charging a premium to the heaviest broadband users, much the same way cell-phone providers collect fees from subscribers who exceed their allotted minutes, Time Warner would upend a longstanding pricing strategy among Internet service providers. Typically, phone and cable companies charge flat fees for unlimited access to the Web. "We need a viable model to be able to support the infrastructure of the broadband business," Time Warner Cable CEO Glenn Britt says in an interview. "We made a mistake early on by not defining our business based on the consumption dimension." Time Warner Cable has 8.4 million broadband customers.


Four Proposed Broadband Tiers

Consumer advocates and Web site owners say tiered Web-use pricing limits customer choice and could stifle innovation by crimping demand for high-bandwidth services such as online video and music. Cable and phone companies say they need flexibility in setting prices for use of large, expensive, heavily used broadband networks.

In the case of Time Warner Cable, customers will be charged from $29.95 to $54.90 a month, based on data consumption and desired connection speed. Customers will be charged $1 for each gigabyte (GB) over their plan's cap. Time Warner Cable offers four cap levels of 5, 10, 20, and 40 GB. A download of a high-definition movie typically eats up about 8 GB. A recent report from Sanford C. Bernstein suggests that a family on the 40 GB plan that streams 7.25 hours of online video a week (a fraction of the 60 hours Americans spend watching TV in a week) could end up spending $200 per month on broadband usage fees. And that's just for video viewing, before factoring in such Internet activities as music downloads and photo sharing. "To put it mildly," says Bernstein analyst Craig Moffett, "the decision to limit data consumption can be expected to have profound implications for [consumer] behavior."

But Time Warner says most people are not using that much data. The company's trial in Beaumont, Tex., lasted several months. Of the 10,000 broadband customers enrolled—about 25% of the company's total for Beaumont—about 14% exceeded their cap and had to pay additional fees that averaged about $19 a month. Time Warner Cable also discovered that the top 25% of users consumed 100 times more data than the bottom 25% of users, suggesting an enormous gap in usage patterns.


Comcast: A Warning, Then No Service

As more and more people download TV shows and movies, particularly those in high-definition, broadband networks are facing enormous strain, providers say. Time Warner Cable has said its strategy is intended to alleviate some of that strain. But critics worry that the pricing will discourage broadband use and impede new online media businesses before they even have a chance to flourish.

AT&T (T) is currently conducting its own broadband pricing trial, also in Beaumont. Comcast (CMCSA), the nation's largest cable operator, has taken a different approach, capping residential bandwidth usage at 250 GB a month. Customers who exceed it get a warning phone call from Comcast. A further problem can get a subscription canceled.

For Time Warner Cable's Britt, instituting broadband pricing is a bold move just as he takes the helm of a newly independent company. Fully spun off from Time Warner, the cable company's shares started trading on Mar. 30. Britt's first big challenge may be to sell the upsides of aggressive broadband pricing to his investors. "It's an intriguing idea if you didn't have such a competitive landscape out there," says Rich Greenfield, an analyst at Pali Research. "There are so many other alternatives for consumers when it comes to broadband."

Next, DSL Reports presents its take:

Time Warner Cable Expands Metered Billing

Back in January of 2008 we were the very first to report that Time Warner Cable was conducting a trial in their Beaumont, Texas market that imposed caps ranging from 5GB to 40GB on the company's existing tiers of service. More controversial perhaps was the news that trial participants would be charged $1 per every additional gigabyte consumed, a huge markup for Time Warner Cable over cost, and a first for a major US ISP.

Back in February, Time Warner Cable told us they'd be expanding this project into four additional markets, and that they'd be raising the limits on some of the trial caps in response to user complaints. This morning Time Warner Cable gave Business Week an exclusive scoop, informing them that the four markets will be Rochester, NY, Austin and San Antonio, Texas, and Greensboro, North Carolina. Business Week even gets exclusive face time with CEO Glenn Britt, so the cable boss can frame the decision to overbill you just the way he'd like it:

"We need a viable model to be able to support the infrastructure of the broadband business," Time Warner Cable CEO Glenn Britt says in an interview. "We made a mistake early on by not defining our business based on the consumption dimension."

As usual, Britt tries to suggest that Time Warner Cable's existing flat-rate pricing model isn't "viable" enough to fund essential infrastructure upgrades. That's simply not the case. The company has been very profitable under the flat-rate model, and they've consistently found creative new ways to generate additional income, such as with DNS redirection advertising, which creates a revenue stream out of your URL typing mistakes.

In reality, Britt is pursuing metered billing because it gives him a way to monetize and/or control Internet video, which poses a very serious long term threat to his cable television revenues. The pressure to shift to metered billing also comes from investors, who obviously love the idea of charging consumers more money for the same (or less) service in an age where the cost of bandwidth and network hardware continues to drop. Keep in mind that Time Warner Cable has yet to officially announce DOCSIS 3.0 upgrades in a single market.

Where the trials go from here isn't exactly clear. Judging from the Business Week report, Time Warner has yet to increase the highest 40GB cap in these trial markets; a ridiculous decision for any carrier in the age of HD video delivery -- much less one that's facing growing competition from TelcoTV alternatives. "Rest assured that there will be a super-tier at approximately 100GB," a company spokesman tells me.


The question remains: will metered billing only be something Time Warner Cable imposes on less competitive markets, where limited choices mean consumers can't vote with their wallets? Or do company executives really think they can bring 40GB (or even 100GB) caps to bear in markets where they compete with uncapped (so far) and speedier Verizon FiOS?

So far they're avoiding "big red" markets like the plague.

All five of these trial markets have limited or no FiOS availability. Rochester is home to financially-troubled Frontier, who (judging from posts to our forums) can barely offer consumers more than 3Mbps, and has been exploring 5GB caps. The other Time Warner Cable trial markets are in AT&T territory. AT&T is also testing metered billing, imposing caps from 20 to 150GB in two trial markets, charging customers $1 per gigabyte in overage fees.

And there's the rub: a national migration from flat rate to metered billing will only succeed if carriers work together to institute obnoxiously low caps and painfully expensive overage fees. Otherwise, the un-metered competitor in a metered market can highlight how Time Warner Cable, Frontier or AT&T is being a cheapskate, charging users an insanely high markup on bandwidth over cost. Of course, if you don't have many other viable competitors (and change the laws to keep it that way), you can do, well, whatever the hell you'd like.

In markets where competitors aren't playing along with the idea, or the carrier faces pressure from municipal fiber builds, Time Warner Cable's decision could border on seppuku.

Faced with a hostile consumer reaction, Time Warner's Landel Hobbs responded:

Statement from Landel Hobbs, Chief Operating Officer, Time Warner Cable RE: Consumption based billing trials
4-9-09

Some recent press reports about our four consumption based billing trials planned for later this year were premature and did not tell the full story. With that said, we realize our 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.

With the ever-increasing flood of content on the Internet, bandwidth consumption is growing exponentially. That’s a good thing; however, there are costs associated with this increased Internet usage. Here at Time Warner Cable, consumption among our high-speed Internet subscribers is increasing by about 40% a year. 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.

This is a common problem that all network providers are experiencing and must address. Several other providers have instituted consumption based billing, including all major network providers in Canada and others in the U.K., New Zealand and elsewhere. In the U.S., AT&T has begun two consumption based billing trials and other providers including Comcast, Charter and Cox are using varying methods of monitoring and managing bandwidth consumption.

For good reason. Internet demand is rising at a rate that could outpace capacity within a few years. 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. It will take a lot of money to fix the problem. 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.

If we don’t act, consumers’ Internet experience will suffer. Sitting still is not an option. That’s why we’re beginning the consumption based billing trials. It’s important to stress that they are trials. The feedback we’ve received from our customers has been very helpful. We’ve made changes to the terms in our current and upcoming trial markets as follows:

• To accommodate lighter Internet users and those who need a lower priced option, we are introducing a 1 GB per month tier offering speeds of 768 KB/128 KB for $15 per month. Overage charges will be $2 per GB per month. Our usage data show that about 30% of our customers use less than 1 GB per month.

• We are increasing the bandwidth tier sizes included in all existing packages in the trial markets to 10, 20, 40 and 60 GB for Road Runner Lite, Basic, Standard and Turbo packages, respectively. Package prices will remain the same. Overage charges will be $1 per GB per month.

• We will introduce a 100 GB Road Runner Turbo package for $75 per month (offering speeds of 10 MB/1 MB). Overage charges will be $1 per GB per month.

• Overage charges will be capped at $75 per month. That means that for $150 per month customers could have virtually unlimited usage at Turbo speeds.

• Once we implement this trial, we will not immediately start billing customers for overage. Rather, we will first provide two months of usage data. Then we will provide 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.

• Trials will begin in Rochester, N.Y., and Greensboro, N.C., in August. We will apply what we learn from these two markets when we launch trials in San Antonio and Austin, Texas, in October, but we will guarantee at least the same level of usage capacity in these trials.

• As we launch DOCSIS 3.0 in the trial markets, we plan to offer a 50/5 MB speed tier for $99 per month.

Again, the Internet is dynamic and continually evolves, so our plans will evolve as well and aren’t set in stone. We appreciate the feedback we’ve received. We’ll look forward to more dialogue as we progress in these trials. You can send your comments and feedback to us at realideas@twcable.com.

Landel Hobbs
COO
Time Warner Cable

For questions, etc:

Jeff Simmermon
Director, Digital Communications
Time Warner Cable

So, basically, they're saying that Peak Internet is looming ahead, and by golly we gotta clamp down on our usage so that we don't run into *gasp* internet brownouts.


DSL Reports calls bullshit:

Almost as if on cue, Time Warner Cable has issued a new statement on their metered billing trial that provides a few concessions to the complaints consumers have raised. Unfortunately, for every concession there's an equal amount of distortion, as the carrier clings tightly to the idea of metered billing despite unprecedented public backlash. According to COO Landel Hobbs, the carrier will be instituting a number of changes to their metered billing trial on the fly, including:

A new 768kbps/128kbps tier for $15 per month, with a 1GB per month cap. This would almost seem in direct response to our criticism that their plan really wouldn't benefit ultra-light users. Still, the carrier shoots themselves in the foot by offering such a low cap with $2 per gigabyte overages on the tier, an even larger markup over cost (a lovely 2000% or more) than their previous overage structure.

Overages will be capped at $75 per month, which isn't much of a concession, considering many users who currently enjoy unlimited access could easily find themselves with $120-$150 broadband bills simply by engaging in heavy consumption of Netflix HD delivery.

A new, 100 GB Road Runner Turbo package for $75 per month, with $1 per gigabyte overages. This isn't much of a concession either, since they told us about plans to increase the highest cap to 100GB back in February. 100GB isn't enough to appease many of today's heaviest users, much less the heavy users of 2012. You can pay $150 per month for the same unlimited service you enjoy now, which isn't a good deal on any planet.

In addition to fairly weak concessions, Hobbs felt it necessary to insult his audience by trotting out the "Exaflood" argument, or the industry-propagated concept that the Internet is going to grind to a halt unless you give carriers whatever they'd like (be it deregulation, fewer price controls, or hazelnut ice cream). Says Hobbs:

For good reason. Internet demand is rising at a rate that could outpace capacity within a few years. 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. . If we don't act, consumers' Internet experience will suffer. Sitting still is not an option.

Of course data from real scientists counters the exaflood argument, which was crafted by a corporate-funded think tank, the investment community, incumbent policy groups, lobbyists and executives -- who are best served by the public believing that bandwidth is not just rare -- but an extremely endangered resource requiring new pricing models, greater restrictions on usage, anti-consumer legislation and higher prices. Hobbs seems fairly insistent that ripping off his customer base isn't enough, as he goes the extra mile to insult their collective intelligence as well.

What would make users happy? A real concession would be if the carrier announced they were eliminating overages completely, and affixing caps that were more reasonable as the age of HD video and next-gen broadband approaches. This is a trial, and if Time Warner Cable is willing to show that these terms are negotiable, annoyed customers should still have hope. Still, it's unlikely that Time Warner Cable's going to step back from the metered billing ledge -- since this push is focused on protecting future TV revenues from Internet video.

Based on the level of dishonest discourse Time Warner Cable's employing -- it's a future they're absolutely terrified of.

And to dispel any notion that the po' lil ISPs are being bludgeoned by ever-swelling bandwidth consumption, and can only afford to continue to provide quality service to users by charging more money for less service, someone went and looked up Time Warner's SEC filings:

The bandwidth crisis Hobbs is talking about is their own problem because they won't upgrade to DOCSIS 3. TW could upgrade to DOCSIS 3 at the rock bottom price of $20-50 per subscriber, that cost would be immediately recouped by the profit they make off their RR service. The real problem is that TW doesn't want to spend a dime of the $4 billion in profit they are already making each year on RR customers... they want to create a new profit stream that will support their upgrades to DOCSIS 3, so it doesn't hurt their current financial profit margins. For a little more on that, continue reading...

So I looked at TW's 10-K form and noticed something interesting... their cost to provide broadband service has decreased about 11% since the year before. Yes, you heard that right.

In 2007, TW made $3,730 Million, on high speed data alone, and then had to turn around and spend $164 Million to support the cost of the network. 2007 total profit on high speed data: $3.566 Billion

In 2008, TW made $4,159 Million, on high speed data alone, and then had to turn around and spend $146 Million to support the cost of the network. 2008 total profit on high speed data: $4.013 Billion

It cost TW 11% less money in 2008, to keep their network running, than in 2007. Their cost to deliver network connectivity to each user has dropped as they highlight here:

"High-speed data costs consist of the direct costs associated with the delivery of high-speed data services, including network connectivity costs. High-speed data costs decreased primarily due to a decrease in per-subscriber connectivity costs, partially offset by growth in subscribers and usage per subscriber."

TW had 7.620 Million customers in 2007, and now 8.444 Million customers in 2008. An 11% growth with an 11% decrease in network and support operating expenses. Not too shabby TW! Anyone with half a brain can easily tell from those numbers that TW is not only doing well, but they are doing better than ever.

So... tell me TW, how is flat rate (unmetered) service no longer financially viable if you're making more profit now than ever before, as your cost to provide service continues to decline?

TW can't deliver hard numbers because there aren't any that support their BS plan to meter and bill overages. Simple as that.

Think of all those users out there that have been downloading files and streaming movies off netflix in 2008 and using "more bandwidth than ever before" according to TW. Yet all the while TW's bottom line cost to support the network has dropped 11% while profits are up 11%. They should be overjoyed, not crying poverty. Why not use some of that healthy profit and actually upgrade the network for your subscribers needs, instead of forcing us to take 10 steps back and live in the virtual stone age.

Even bankrupt Charter has an upgrade plan in place for DOCSIS 3... and they aren't in anywhere near the financial standing that TW is.

The most vicious part is that Time-Warner has been looking to implement this in areas specifically where the competition is either unable or unwilling to respond by promoting superior service.

So, in conclusion:

Time-Warner is a bunch of greedy liars who are out to bilk a lot of people for substandard internet service. They easily have the money to expand infrastructure to cope with increasing demands, but instead prefer to gouge as much money as they can out of the public.

[General Zod]

Shit, even with Comcast's 250gb "cap" I'm still paying about $50 less than Time Warner's "unlimited" plan for my 8mb line. These douchebags should try actually upgrading their infrastructure; then maybe they can justify gouging customers a bit more easily.

[JointStrikeFighter]

Welcome to Australia.

[Bounty]

Welcome to the rest of the world. Excuse me if my sympathy for you finally getting capped internet is not quite below freezing. A "virtual stone age"? 60GB cap with unlimited if you pay a bit extra? Please. That's grade-A drama queen bullshit right there. It sucks that you need to pay more, of course, and I suppose there's something to be said for network upgrades, but this sort of cap has been a long time coming and frankly, if for some reason you must have unlimited internet (how do you get to 175GB in one month?), $150 is still a pretty good deal.

[General Zod]

Welcome to the rest of the world. Excuse me if my sympathy for you finally getting capped internet is not quite below freezing. A "virtual stone age"? 60GB cap with unlimited if you pay a bit extra? Please. That's grade-A drama queen bullshit right there. It sucks that you need to pay more, of course, and I suppose there's something to be said for network upgrades, but this sort of cap has been a long time coming and frankly, if for some reason you must have unlimited internet (how do you get to 175GB in one month?), $150 is still a pretty good deal.

Because clearly taking a step backwards in our technology because the companies are greedy douchebags that refuse to upgrade their infrastructure so they can squeeze out a little bit more bonus money for their executives is a good thing.

[Bounty]

Welcome to the rest of the world. Excuse me if my sympathy for you finally getting capped internet is not quite below freezing. A "virtual stone age"? 60GB cap with unlimited if you pay a bit extra? Please. That's grade-A drama queen bullshit right there. It sucks that you need to pay more, of course, and I suppose there's something to be said for network upgrades, but this sort of cap has been a long time coming and frankly, if for some reason you must have unlimited internet (how do you get to 175GB in one month?), $150 is still a pretty good deal.

Because clearly taking a step backwards in our technology because the companies are greedy douchebags that refuse to upgrade their infrastructure so they can squeeze out a little bit more bonus money for their executives is a good thing.

Please point out where I said it was a good thing and where I said there should be no infrastructure upgrades or shut the fuck up.

[General Zod]

Please point out where I said it was a good thing and where I said there should be no infrastructure upgrades or shut the fuck up.

Then maybe you could justify your statement about this sort of cap being overdue, because frankly I don't see how else to interpret that. There's absolutely no reason this sort of thing should be "a long time coming" except for the companies in question to not give a flying fuck about upgrading its infrastructure.

[Darth Wong]

Time-Warner is a bunch of greedy liars who are out to bilk a lot of people for substandard internet service.

The correct term is "businessmen", or "capitalist". That is the objective of all businesses: to charge as much as possible while providing as little as possible. How the fuck do you think your entire economic system works? Did you honestly not notice this foundational characteristic of your entire society until it affected your ability to download Internet videos?

[Bounty]

Please point out where I said it was a good thing and where I said there should be no infrastructure upgrades or shut the fuck up.

Then maybe you could justify your statement about this sort of cap being overdue, because frankly I don't see how else to interpret that. There's absolutely no reason this sort of thing should be "a long time coming" except for the companies in question to not give a flying fuck about upgrading its infrastructure.

Volcanic eruptions can be "overdue" without me wanting a volcanic eruption to happen, too.

You now have unlimited access to a limited resource for an ever expanding pool of clients, and you expected this to last to infinity? Sure, you can upgrade the network, but that'll only go so far. Redesigning the pricing tiers to discourage excessive use (I'd be surprised if the bulk of users would even get close to the cap) seems a perfectly reasonable way to stop runaway growth.

Now, what the companies are going to do with that lull in demand increase, that's another matter. I hope they use it to maintain the network that's currently in place and make sure it's capable of dealing with future demand; if they don't, they're just being dicks. But I'm not going to jump to the defence of Americans' god-given right to piss-cheap luxuries when the rest of the world gets by just fine with perfectly reasonable caps.

[Mr Bean]

Please note, that's welcome to the rest of the world minus Japan and South Korea, who of course have been down with the Fiber for years now.

I wondering if we are seeing a new style utility conglomeration monopoly. Hey lets make the utilities private! Whats that? The private company's don't spend dick on maintain what they have but just coast for as long as possible until the system runs into the ground? Who would have thought it!

[Uraniun235]

Time-Warner is a bunch of greedy liars who are out to bilk a lot of people for substandard internet service.

The correct term is "businessmen", or "capitalist". That is the objective of all businesses: to charge as much as possible while providing as little as possible. How the fuck do you think your entire economic system works? Did you honestly not notice this foundational characteristic of your entire society until it affected your ability to download Internet videos?

Greed is certainly inherent to capitalism, that isn't new. But one of the roles of government is to regulate monopolistic behavior, including anti-competitive behavior, which Time-Warner appears to be engaging in. Engaging in deceptive practices, while disgustingly common, is also detrimental to the functioning of capitalist economies, and also appears to be part of the behavior of Time-Warner.

P.S. - I am not a Time-Warner subscriber, and I have no transfer cap on my downloading or uploading habits, so it's not as if this issue personally affects me.

Welcome to the rest of the world. Excuse me if my sympathy for you finally getting capped internet is not quite below freezing. A "virtual stone age"? 60GB cap with unlimited if you pay a bit extra? Please. That's grade-A drama queen bullshit right there. It sucks that you need to pay more, of course, and I suppose there's something to be said for network upgrades, but this sort of cap has been a long time coming and frankly, if for some reason you must have unlimited internet (how do you get to 175GB in one month?), $150 is still a pretty good deal.

There are other places in the world where such caps aren't in place - the promised lands of South Korea, Japan, and much of Scandinavia are places where people have affordable access to 50+Mbps speeds and zero download/upload caps - and there are ISPs in the US which don't cap and have been offering increasingly faster speeds (such as Verizon) so it's not as if it's completely unreasonable to expect that internet service would tend to get better over time, not worse. It's not as if Time-Warner is forced to do this to stay profitable - they make billions of dollars a year in profit off of their internet subscription service.

I'm so sorry that other Western countries (basically the entire fucking British Commonwealth, it seems, as well as Belgium) suck at providing internet connectivity to their citizens but I think you rather missed the main thrusts of the articles: Time-Warner isn't doing this out of concerns for their ability to provide quality internet connectivity, they're doing it to squeeze out the internet-based competition to their cable television services, and to gouge their customers. $150 isn't reasonable, even though your own available selection of services sucks, because it's an arbitrarily higher price for the same service as before.

Where do you think the internet should go? Do you really think that just because people don't typically use 100+GB a month, today, means they shouldn't ever use that much, or that the same gigabyte of transfer should always cost the same amount? Video streaming is taking off and is only going to consume more bandwidth - Netflix allows whole movies to be streamed over the internet, and someday they or a similar service will probably start offering high-definition content.

When's the last time your download cap was increased? The time before that? How much was it increased? Do you think that internet usage should ultimately be encouraged or discouraged?


Yes, this is ultimately about what amounts to luxury service, but I wasn't aware that there was a taboo against calling out corporate dishonesty and desiring technological advance.

You now have unlimited access to a limited resource for an ever expanding pool of clients, and you expected this to last to infinity? Sure, you can upgrade the network, but that'll only go so far. Redesigning the pricing tiers to discourage excessive use (I'd be surprised if the bulk of users would even get close to the cap) seems a perfectly reasonable way to stop runaway growth.

Now, what the companies are going to do with that lull in demand increase, that's another matter. I hope they use it to maintain the network that's currently in place and make sure it's capable of dealing with future demand; if they don't, they're just being dicks. But I'm not going to jump to the defence of Americans' god-given right to piss-cheap luxuries when the rest of the world gets by just fine with perfectly reasonable caps.

But there's no data to show that this runaway growth is taking place, or that the network is being overwhelmed by traffic. There's nothing to suggest that the caps are necessary at this time or that more money needs to be charged now. It's not as if they need people to stop downloading so much so that they can catch up and install new infrastructure, it's not as if we're facing imminent Peak Internet.

Besides, it's a ridiculous notion. Yeah, bandwidth consumption might be going up, but so what? Hardware upgrades and capacity expansion are part of the cost of infrastructure maintenance - a cost which Time-Warner (and Comcast as well, although Comcast's 250GB/month cap is far far more reasonable) bears exceedingly well - and so far consumption has yet to outstrip technological development and implementation.

If you want to call me an asshole for thinking that Time-Warner is being a bunch of cocks for spreading lies as an excuse for jacking up prices, fine, I'm an asshole. But frankly it just sounds like you're bitter that the people who run your ISPs are even greedier and/or more incompetent than ours.

[dragon]

We also don't have a cap here in Germany and the deciding factor on how much you download is your download speed. The neighbors across the street have 32mbs while I only have 2mbs due to the way the lines run. And like the one article says theirs no hard evidence that the system is going to be overloaded.

[weemadando]

Welcome to Australia.

Fuck if only our excess data fees were that lenient. $1 a gig? Add a zero or two and we'll talk.

Fucking whiny sepposs.

But yeah, seriously. Welcome to the rest of the world.

[Xon]

Fuck if only our excess data fees were that lenient. $1 a gig? Add a zero or two and we'll talk.

A local ISP with a 3g wireless product charges 9c AUD per megabyte in excess data fees and they are easily one of the cheapest around. "Normal" are easily 10-15c per megabyte or more. Easily 2 extra zeros in there.

Fuck, at Curtin University I know someone who got slapped with a $180 AUD bill for ~3gb of traffic on thier wired network before it apparently got lost in the paper work. This is also a univercity which values 200mb of internet quota at ~$17 AUD as well.

[Pablo Sanchez]

But I'm not going to jump to the defence of Americans' god-given right to piss-cheap luxuries when the rest of the world gets by just fine with perfectly reasonable caps.

The articles above show that the conditions that led the "unlimited access" ISP plan to become standard in the American market--bandwidth supplies hugely in excess of demand, unlike other countries such as your own--have not actually changed, and the move by the ISPs is just a cash-grab cum ham-fisted effort to prevent new methods of media distribution from killing another old medium. Your reply is that we have no right to complain about this because internet service sucks where you're from. So who is really the whiner here?

Let's take something Belgium has a lot of, like... shit, public transit. Imagine that SNCB was extremely profitable, had plenty of capacity and was in no danger of running out any time soon as long as basic maintenance and upgrades were undertaken, and operating costs had actually gone down during the past couple years. But since they're a monopoly they jack up ticket prices according to how often you use the rails, so that people who commute by train have to pay significantly more than people who use the train only occasionally. And then when you get on SDN to complain about it, all the Americans come around to call you a whiner because we get by just fine with our godawful shitty public transit.

Obviously this is an imperfect metaphor, but this is the gist of our problem with this news.

[General Zod]

I think people saying "it's about time" need some hard numbers here.

If you get excited about the prospect of really, really fast broadband Internet service, here’s a statistic that will make heart race. Or your blood boil. Or both.

Pretty much the fastest consumer broadband in the world is the 160-megabit-per-second service offered by J:Com, the largest cable company in Japan. Here’s how much the company had to invest to upgrade its network to provide that speed: $20 per home passed.

The cable modem needed for that speed costs about $60, compared with about $30 for the current generation.

By contrast, Verizon is spending an average of $817 per home passed to wire neighborhoods for its FiOS fiber optic network and another $716 for equipment and labor in each home that subscribes, according to Sanford C. Bernstein & Company.

Those numbers from Japan came from Michael T. Fries, the chief executive of Liberty Global, the American company that operates J:Com.

His larger point: “To me, this just isn’t an expensive capital investment,” he said.

The experience in Japan suggests that the major cable systems in the United States might be able to increase the speed of their broadband service by five to 10 times right away. They might not need to charge much more for it than they do now and they’d still make as much money.

The cable industry here uses the same technology as J:Com. And several vendors said that while the prices Mr. Fries quoted were on the low side, most systems can be upgraded for no more than about $100 per home, including a new modem. Moreover, the monthly cost of bandwidth to connect a home to the Internet is minimal, executives say.

So what’s wrong with this picture in the United States? The cable companies, like Comcast and Cablevision, that are moving quickly to install the fast broadband technology, called Docsis 3, are charging as much as $140 a month for 50 Mbps service. Meanwhile other companies, like Time Warner Cable, are moving much more slowly to upgrade.

Competition, or the lack of it, goes a long way to explaining why the fees are higher in the United States. There is less competition in the United States than in many other countries. Broadband already has the highest profit margins of any product cable companies offer. Like any profit-maximizing business would do, they set prices in relation to other providers and market demand rather than based on costs.

Pricing at Liberty varies widely by market. In Japan, its 160 Mbps service costs 6,000 yen ($60) per month. That’s only $5 a month more than the price of its basic 30 Mbps service. In the Netherlands, meanwhile, it charges 80 euros ($107) for 120 Mbps service and 60 euros ($81) for 60 Mbps. Mr. Fries said that he expected these prices would fall over time.

“Our margins go up,” he said. “But we are delivering more value.”

Cable executives have given several reasons for why many cable systems in the United States are going very slowly in upgrading to Docsis 3. There’s little competition in areas not served by Verizon’s FiOS system, which soon will offer 50 Mbps service. And some argue there isn’t that much demand for super-high speed.

Mr. Fries added another: Fear. Other cable operators, he said, are concerned that not only will prices fall, but that the super-fast service will encourage customers to watch video on the Web and drop their cable service.

The industry is worried that by offering 100 Mbps, they are opening Pandora’s box, he said. Everyone will be able to get video on the Internet, and then competition will bring the price for the broadband down from $80 to $60 to $40.

Aren’t you worried that the prices will fall too? I asked.

“Maybe,” he said very slowly. “We’ll see how it happens. We want to keep it up there for now. It is a premium service.”

Overdue bandwidth cap my ass.

[Anguirus]

So much for the anarcho-capitalist screed that unregulated, competing agencies will lead to advancement of standard of living and technology.

This is actually a quite clear example of corporate competition harming development.

[General Zod]

By contrast, Verizon is spending an average of $817 per home passed to wire neighborhoods for its FiOS fiber optic network and another $716 for equipment and labor in each home that subscribes, according to Sanford C. Bernstein & Company.

Am I reading that correctly? It averages over $1500 per home to upgrade the infrastructure in the US? For 7 million subscribers, that is over ten billion dollars.

So how the hell does this next line make any sense?

His larger point: “To me, this just isn’t an expensive capital investment,” he said.

Based on the Japanese, that might work, but the numbers in Japan can't be directly applied to the US simply due to the higher population density there. Wiring a much smaller area provides service to a much larger number of people, on average, than in the US. The connecting cables between cities needn't travel as far, either. The Verizon numbers back this up.

There's no reason they have to upgrade all at once, but the idea they should enforce bandwidth caps rather than upgrading their infrastructure at all is absolutely insane. Verizon's current most expensive FIOS plan is $145 a month for a 50mb line. That makes Time Warner's plan look like absolute highway robbery. I expect they they'll recoup the costs based on subscription fees considering how comparatively little maintenance you have to do once the infrastructure is actually in place.

[General Zod]

Don't like it? Simple: don't pay for the service. If reality forces them to lose money with this plan, they'll go back to the current system or maybe that investment will look more attractive.

That's only a viable solution if there are legitimate alternatives. Frankly the only reason Time Warner's able to get away with this is because there really aren't any. At my current apartment my only real alternatives for cable are either Comcast or. . . Comcast. If I want another service I have to either go with something even more absurdly expensive for more limited capability, do without, or move. Turns out no competition allows for massive price gouging?

[Bounty]

Your reply is that we have no right to complain about this because internet service sucks where you're from. So who is really the whiner here?

You misunderstand. I'm not complaining because my service sucks, I just find it funny that there is such a strong reaction against a system that I would consider reasonable. My stand is not that I'm happy your system has now started to "suck", my stand is that I am amused because people are complaining when their too-good-to-be-true system scales down to something I would consider a far more sensible one. I've seen comments about a "virtual Stone Age" and technological regression when this is in truth a fairly small adjustment (ie, I don't think Joe Q Public would even notice the new cap; it takes effort to download 30+GB).

I won't stop anyone complaining if they genuinely have to pay higher prices now, and I'd even back them 100% if those price increases don't come with infrastructure improvements. I just find it hard to sympathize with people who have now lost their privilege to download 75 movies a month for peanuts.

(also, very much off-topic: the SNCB does jack up prices all the time. It's a running joke in places. People just don't complain all that much because the trains still run and prices are expected to go up when there's inflation... even if there doesn't seem to be any correlation to how much they go up)

[Darth Mall]

By contrast, Verizon is spending an average of $817 per home passed to wire neighborhoods for its FiOS fiber optic network and another $716 for equipment and labor in each home that subscribes, according to Sanford C. Bernstein & Company.

Am I reading that correctly? It averages over $1500 per home to upgrade the infrastructure in the US? For 7 million subscribers, that is over ten billion dollars.

So how the hell does this next line make any sense?

His larger point: “To me, this just isn’t an expensive capital investment,” he said.

Based on the Japanese, that might work, but the numbers in Japan can't be directly applied to the US simply due to the higher population density there. Wiring a much smaller area provides service to a much larger number of people, on average, than in the US. The connecting cables between cities needn't travel as far, either. The Verizon numbers back this up.

I think he is trying to say that Verizon is spending large amounts of money on FiOS, whereas cable would be much cheaper to upgrade, at $20-50 per subscriber, according to the last article in the OP.

[General Zod]

You misunderstand. I'm not complaining because my service sucks, I just find it funny that there is such a strong reaction against a system that I would consider reasonable. My stand is not that I'm happy your system has now started to "suck", my stand is that I am amused because people are complaining when their too-good-to-be-true system scales down to something I would consider a far more sensible one. I've seen comments about a "virtual Stone Age" and technological regression when this is in truth a fairly small adjustment (ie, I don't think Joe Q Public would even notice the new cap; it takes effort to download 30+GB).

Why is it sensible? The fact that you're used to it or some non-arbitrary pricing scheme that the rest of us aren't seeing here?

[Covenant]

The absurd thing about this is how ham-fistedly it attacks online media distribution services like NetFlix, and though I do not know myself at the moment, I assume it will also hurt a lot of streaming video services and other kinds of dispersal media. That sounds as silly as charging me for my TV usage, rather than just charging me a monthly plan to provide me with X services.

So while this may be "welcome to the rest of the world," it is still an unreasonable step backwards. I have no idea what my monthly internet cost is (I'm being provided service by comcast along with a few others on the same plan, and no letter complaining of overages) but I also don't have an HD TV hooked to an XBox that I use to download NetFlix stuff like some people do, but I would have really liked to have. I think that's really the issue. Most people don't use much internet, but people are very much aggrivated with going back to the AOL charge-by-minutes pricing model, especially if it won't save anybody any money.

A cap wouldn't bother me, if that cap is more than my monthly usage, of course. But if they're going to slow down my internet, slap down a cap, and then charge me more? That's crazy talk. Not an issue for me at the moment, but it's discouraging to hear when I had wanted to enter the modern-day internet TV market, since I rarely use the TV anymore anyway.

[Uraniun235]

I expect they they'll recoup the costs based on subscription fees considering how comparatively little maintenance you have to do once the infrastructure is actually in place.

Don't expect, do the math.

Let's crunch some numbers from the OP:

In 2008, TW made $4,159 Million, on high speed data alone, and then had to turn around and spend $146 Million to support the cost of the network. 2008 total profit on high speed data: $4.013 Billion
[...]
Time Warner Cable has 8.4 million broadband customers.

Simple division tells us that the maintenance cost is about $18 / year / person. Cheap. Dividing total revenue by number of subscribers tells us they charge about $495 / year. That's about what I'm paying right now (~$40 / month), so it seems correct.

495 - 18 = $477 / year in massive profit. Good deal (for them).

Now, consider the numbers from the other post: ~$1500 to upgrade each person. That would take over three years to make back before they turn a profit from that customer again!

Woah, woah, woah. Hold on. Why are you assuming it would cost Time-Warner $1500 per customer to upgrade service? That's $1500 that Verizon has to spend. That includes the cost of ripping out the old copper infrastructure and replacing it with new fiber-optic infrastructure. When you get FIOS installed they take out the copper and run new fiber to your house, which sometimes (depending on your neighborhood) involves digging a trench through your yard. This is clearly a cost-intensive operation, but Verizon (IIRC) thinks it's worth it in order to replace the copper connection.

We're not talking about giving end-users faster connections, we're talking about Time-Warner having enough bandwidth to satiate the consumption of existing end-user connections. I don't think it's at all appropriate for you to use that $1500 figure without more supporting evidence.

[Darth Wong]

Oh for fuck's sake, this is getting ridiculous. Time-Warner posted a fucking SIXTEEN BILLION DOLLAR FOURTH QUARTER LOSS, you retards. Yes, some asshole on some single-issue editorial may rant that one particular product of Time Warner is profitable in isolation, but the company as a whole is not.

When you're hemorrhaging money to the tune of sixteen billion dollars in one quarter alone, you're going to look for ways to raise revenue unless you're a complete blithering idiot.