Time Warner's bandwidth quota scheme

[CmdrWilkens]

Mike the problem is always with how "Profit" is defined within any given timeframe in paticular with regards to everything from value of assets to actual cashflow. The later is THE biggest item worth looking at, and its why GM is so structurally unsound they moved assets around to make it look like they were making "profit" but their actual cashflow was crappy. Anyway the point is when one applies this to TMC in the fiscal reporting quarter from which the numbers were grabbed they had revenue, that is positive cashflow, of $4.4 billion. Given that the other numbers quoted their operating costs (including captial expenses) were roughly $4.1 billion, if I worked the numbers right the difference between their expenses and their earnings was $346million dollars.

The problme is that their capital assets, declined in value. Now I don't know how they exactly acounted for the original purchase of those assets nor how they accounted for the appreciation/depreciation (until this quater when they account for $15.6billion in depreciation) but here is why that doesn't "really" matter:

Lets say I buy a house for, say $100k, and then last year the house appraises 500k. Now over this time I have a job that pays me a decent salary, lets say $40k per year. Now lets assume that this house got rocked by the current market and is appraised this year for $150k or hell lets say its a truly shitty market and it gets appraised at $90k, were I to disclose my personal finances I would have lost $410k worth of net worth....but I STILL would have earned at least $40k. So per the accounting above I lost $370,000 dollars. In reality I didn't lose a damn thing because I don't want, need, or desire to sell my house. So long as I haven't leveraged the differene between the high ($500k) and current ($90k) asset value I'm still only stuck with my running costs.

In other words while my net worth took a $370k hit my actual cashflow and thus my, and this number is never disclosed that I'm aware of, operating funds are untouched.

This is the situation TWC finds themselves in, they have to writedown their networth even though their operating funds are still in excellent shape. The layoffs are likely as not the sort designed to allow them to trim costs even when they don't need to and to appear to be "doing something" so they don't have to face a shareholder's revolet over "losing billions" while they make millions at the senior executive level. So yes I absolutely get WHY they are doing it that doesnt' change that their fundamental economic standing isexcellent its only their net worth, and thus credit worthiness, that has taken a hit. Now if they have debt financed themselves out the ying yang then a devaluation of assets may in fact hurt them in terms of having sufficient collateral to continue operations when they do not have sufficient liquidity but those are much mroe technical questions which the limited information of the one time write off and the layoffs takes no accounting of.

[Starglider]

The Broadband situation in the UK is reasonable (e.g. I get 8 megabits uncapped, low-contention-ratio ADSL for ~$80 USD/month) solely because the government implemented local loop unbundling in a reasonably competent fashion, with a regulator that forces reasonable wholesale prices. Thus we have something like a hundred DSL providers all available nationally. That in turn drives down the cost of cable, wireless and fibre.

It's been a while since I've heard anything about the LLU situation in the US, but I got the impression that it was pursued half-heartedly (Bush administration didn't want to cut into big telco profits maybe?), not regulated properly and as a result there is little competition.

[Terralthra]

I don't see this move as a move to make up quarterly profit levels or recoup capital asset devaluing, nor is it to really pay for new infrastructure. I see this as a pure fear response from TW Cable over the impending doom it sees for its TV cable business. Everyone I know is watching TV on the internet, due to it being clearly and obviously better. There are fewer commercials. You can watch whatever you want, whenever you want. Paying for individual channels is a thing of the past. Paying for bundles of channels to get the one channel with the one program you want is a thing of the past. Massive revenue streams in advertising and cable subscriptions....gone. Customers are increasingly switching from a managed-channel system (TV, Cable, Satellite) to "give us a dumb pipe and we'll do what we want with it."

Wouldn't you be running scared, if you ran a company that did both internet service and cable TV? This move seems like an attempt to cover for their anticipated loss of revenue from customers ditching cable and going to internet-only. "You want to watch TV on the net? Well, pay us the ad revenue we're not making off of selling your eyes to the highest bidder." In any reasonably competitive market, this is just going to lose them their dumb-pipe customers too, making this an utterly losing proposition, but the motives are still clear.

[Darth Wong]

Lets say I buy a house for, say $100k, and then last year the house appraises 500k. Now over this time I have a job that pays me a decent salary, lets say $40k per year. Now lets assume that this house got rocked by the current market and is appraised this year for $150k or hell lets say its a truly shitty market and it gets appraised at $90k, were I to disclose my personal finances I would have lost $410k worth of net worth....but I STILL would have earned at least $40k. So per the accounting above I lost $370,000 dollars. In reality I didn't lose a damn thing because I don't want, need, or desire to sell my house. So long as I haven't leveraged the differene between the high ($500k) and current ($90k) asset value I'm still only stuck with my running costs.[

Yeah, but in this scenario you're not a publicly owned corporation which needs to explain this massive asset crash to your investors. Even leaving that aside, you're in a highly precarious situation where you've lost operational freedom because you can't sell your house even if your situation changes in such a manner that you need or want to.

[Darth Wong]

I don't know anyone who's seriously replacing their TV with computer-based watching. Who the fuck gathers their family around the computer to watch something?

[Surlethe]

Adding some detail to what Mike said: if you're a publicly owned corporation, then shareholders' equity is what takes the major hit on the liabilities side, which will really piss off your investors, since that loss comes entirely out of their wealth.

[Edi]

I don't see this move as a move to make up quarterly profit levels or recoup capital asset devaluing, nor is it to really pay for new infrastructure. I see this as a pure fear response from TW Cable over the impending doom it sees for its TV cable business. Everyone I know is watching TV on the internet, due to it being clearly and obviously better. There are fewer commercials. You can watch whatever you want, whenever you want. Paying for individual channels is a thing of the past. Paying for bundles of channels to get the one channel with the one program you want is a thing of the past. Massive revenue streams in advertising and cable subscriptions....gone. Customers are increasingly switching from a managed-channel system (TV, Cable, Satellite) to "give us a dumb pipe and we'll do what we want with it."

Give us the numbers to back this shit up, because most of it is utterly divorced from the reality of the telecoms market. Most people watch TV on the TV precisely because they want something that works without needing complex setups. The average person is dumb as a fucking brick with anything related to computers and the people who ae most frothing at the mouth over internet TV are the geek set anyway.

Besides, when it comes to companies like Time-Warner that are actually pretty big content producers themselves, where the fuck do you get off with this "give us pipe so we can do whatever" shit, when somebody has to fork over money for the content too. The content producers are going to find ways to get paid for it and if they also happen to be your ISP, there's no way you won't pay for it somehow or other.

Wouldn't you be running scared, if you ran a company that did both internet service and cable TV? This move seems like an attempt to cover for their anticipated loss of revenue from customers ditching cable and going to internet-only. "You want to watch TV on the net? Well, pay us the ad revenue we're not making off of selling your eyes to the highest bidder." In any reasonably competitive market, this is just going to lose them their dumb-pipe customers too, making this an utterly losing proposition, but the motives are still clear.

Would you care to back this drivel up? You mix and match whatever you best like, but this is not nearly close to the truth. It's a pricing model that will either work if everyone does it. or work if they are the only (or one of only few) providers, but otherwise somebody will outsell them with dumb pipe. But you fail to take into account that people are fucking lazy about changing service providers (not just internet, but any service providers). Even when they take a loss by not doing so, because often they don't think about it.

I work in the telecom industry here in Finland and it pisses me the fuck off when some asshat who hasn't done anything but cursory googling (if that) presumes to lecture me on this when it's clear he doesn't know what the fuck he's talking about.

[Uraniun235]

If the argument is "they have to answer to their shareholders" I don't get why the "asset devaluation" aspect is relevant; aren't they obligated to maximize profits regardless of whether or not their assets took a hit?

[phongn]

It's been a while since I've heard anything about the LLU situation in the US, but I got the impression that it was pursued half-heartedly (Bush administration didn't want to cut into big telco profits maybe?), not regulated properly and as a result there is little competition.

The Telecom Act mandated loop unbundling and for a time there were signs of real competition but (IIRC, my memory on this is hazy) some FCC or court rulings weakened the provisions. There are still plenty of local (and even a few national) non-ILEC ISPs for DSL service but they tend to be about as pricey as the ILEC's service due to a weaker regulatory regime.

If the argument is "they have to answer to their shareholders" I don't get why the "asset devaluation" aspect is relevant; aren't they obligated to maximize profits regardless of whether or not their assets took a hit?

Yes, but asset devaluation can greatly increase shareholder pressure and the expense can seriously harm a company. Look at AMD and its continued write-down of ATI.

[Terralthra]

Everyone I know is watching TV on the TV box, due to it being clearly and obviously better. You don't need to gather around a tiny screen that you can't see on off angles. (And you don't need to fork over kilobucks to fix that.)There are more chances to get snacks. You can watch whatever is on, whenever it is on without needing to pick what you want (good for background noise). You can watch it whereever you want; you needn't be constrained to the computer room. You don't need to wait on the slow as sin load times.

Don't conflate the display device with the processing device. Computer graphics cards have had TV-out ports standard for over a decade, and newer plasma and HD-capable TVs frequently accept VGA input. All your other arguments are irrelevant at best. Many sites offer a continuous-play option so you don't have to pick what you want regularly, load times (on Cable/DSL) for streaming video are negligible, and "chances to get snacks"? Really? On something you can pause at will?

I don't know anyone who's seriously replacing their TV with computer-based watching. Who the fuck gathers their family around the computer to watch something?

No one that I know "gathers their family around the computer." The people I know that do this put a computer in their family room and connect it to their TV, just like I did for my parents' house.

The content producers are going to find ways to get paid for it and if they also happen to be your ISP, there's no way you won't pay for it somehow or other.

That was pretty much my point?

I do not have any data that indicates people (besides geeks, who comprise most of my friends) are abandoning cable for internet-based watching, yet. I only have data that shows the number of people watching things on the internet is growing, fast. Hulu.com claims to serve shows to 24 million registered users every month. Fancast claimed 1.9 million users within a month of launch, though I can't find updated numbers for them. If someone like Boxee can make it easy for the average person to watch movies and TV over the internet, and package a media center PC cheaply and modularly enough (the one I built for my parents is in a MiniATX case and cost <$400), then who knows what could happen?

All I am saying is that as a company that makes a significant chunk of revenue off of selling cable TV and another chunk off of selling commercials on that cable TV, seeing the rapidly-expanding userbase for internet TV sites should be frightening.

[Darth Wong]

I do not have any data that indicates people (besides geeks, who comprise most of my friends) are abandoning cable for internet-based watching, yet. I only have data that shows the number of people watching things on the internet is growing, fast. Hulu.com claims to serve shows to 24 million registered users every month.

Oh, it's definitely a growth industry. But if "everyone [you] know" is watching TV over the Internet and ditching their cable connections, you are definitely in a very unusual demographic. And 24 million users per MONTH is not anywhere close to what TV serves.

All I am saying is that as a company that makes a significant chunk of revenue off of selling cable TV and another chunk off of selling commercials on that cable TV, seeing the rapidly-expanding userbase for internet TV sites should be frightening.

In terms of long-term planning, I'd agree. I just have trouble believing that literally everyone you know has ditched their cable.

[Terralthra]

I do not have any data that indicates people (besides geeks, who comprise most of my friends) are abandoning cable for internet-based watching, yet. I only have data that shows the number of people watching things on the internet is growing, fast. Hulu.com claims to serve shows to 24 million registered users every month.

Oh, it's definitely a growth industry. But if "everyone [you] know" is watching TV over the Internet and ditching their cable connections, you are definitely in a very unusual demographic. And 24 million users per MONTH is not anywhere close to what TV serves.

All I am saying is that as a company that makes a significant chunk of revenue off of selling cable TV and another chunk off of selling commercials on that cable TV, seeing the rapidly-expanding userbase for internet TV sites should be frightening.

In terms of long-term planning, I'd agree. I just have trouble believing that literally everyone you know has ditched their cable.

I don't think I said that everyone I know is actually ditching their cable/satellite. I said that everyone I know is watching TV on the internet. I can't even get my parents to ditch their satellite, despite having basically had this conversation:

"So, doesn't this [the home theatre PC] basically do everything you do on your satellite?"
"Yeah, pretty much."
"So, why pay for the satellite? Why not just use this?"
"Well, I don't know......"

If I was ambiguous and implied that everyone I know is only watching TV on the internet, I apologize, as that was not my intent.

[CmdrWilkens]

Lets say I buy a house for, say $100k, and then last year the house appraises 500k. Now over this time I have a job that pays me a decent salary, lets say $40k per year. Now lets assume that this house got rocked by the current market and is appraised this year for $150k or hell lets say its a truly shitty market and it gets appraised at $90k, were I to disclose my personal finances I would have lost $410k worth of net worth....but I STILL would have earned at least $40k. So per the accounting above I lost $370,000 dollars. In reality I didn't lose a damn thing because I don't want, need, or desire to sell my house. So long as I haven't leveraged the differene between the high ($500k) and current ($90k) asset value I'm still only stuck with my running costs.[

Yeah, but in this scenario you're not a publicly owned corporation which needs to explain this massive asset crash to your investors. Even leaving that aside, you're in a highly precarious situation where you've lost operational freedom because you can't sell your house even if your situation changes in such a manner that you need or want to.

Yes and no, the informaiton we don't have handy is how they have accoutned for the value of those assets in the past. In other words if they never took capital appreciation as a running profit line item then this charge is one that is liteally an entirely cosmetic one because their balance sheet has never reflected anything other than the original cost of purchasing the assets (which was immediately offset by the value of the assets themselves). If they HAVE taken the capital appreciation over the years as profit, and I don't know if they have or havent', then this is something which they woudl need to explain.

The other side is that, and this is again a slight stretch from the above, we don't know the original value before all of the above calculaitons come in to play. If TWC only paid say 30bn for these assets then even devaluing them down to 45bn still means they have net unrealized capital gain. Likewise if the house in the above scenario only devalued to 150k without any other changes to the financing structure then the owner would still have 50k in unrealized capital gain. In turn that equity could be leveraged for any unanticipated expenses. So the question mark for this whole scenario does come back to how they were accounting for the assets AND whether they had leveraged their equity or not. If they still have equity available (and its entirely possible they do) then the 1200 person layoff is likely a cosmetic move designed to appease stockholders by "doing something." Moreover its likely as not, and this is also quite common, simpy the elimination of a large number of "jobs" which are actually currently vacant. Since you no longer would have to budget for filling those jobs it makes your forecasting look better even if your actual performance was going to match that performance level anyway since nobody was in those jobs. (Something similair is currently happening with the DC area metro system they are eliminating something on the order of "700" jobs of which only about fifty or so people are actually going to be let go).

So anyway yes they have to "do something" as they answer to the major stockholders, though most of those folks are going to be institutional players who understand the numbers game, which a homeowner doesn't have to do but I rather suspect that there is no real pressure to alter the business model from the shareholder end since they've been riding consistent annual billion dollar profits and earnings of a dollar or two per share which is damn good.

[lance]

I don't know anyone who's seriously replacing their TV with computer-based watching. Who the fuck gathers their family around the computer to watch something?

I do a good chunk of my tv watching on a computer, but I try to watch shows on tv when possible.

[neoolong]

The proportion for some shows is significant. Gossip Girl had its final episodes of the first or second season pulled from being online for a while because there was a signficant impact on broadcast viewership.

Furthermore, you don't have to watch Internet-based TV on a computer. You can connect it to a TV now too.

[Losonti Tokash]

The proportion for some shows is significant. Gossip Girl had its final episodes of the first or second season pulled from being online for a while because there was a signficant impact on broadcast viewership.

Furthermore, you don't have to watch Internet-based TV on a computer. You can connect it to a TV now too.

In some cases, you don't even need that. Since Netflix streams Heroes over the internet, I can watch it in hi-def whenever I want just by booting up my xbox, even though the dvd I'm supposedly "renting" hasn't been made yet.

[Terralthra]

Threat averted, for now.

We Won! (For Now) Time Warner Killing Usage Caps “In All Markets” - But TW Press Statements Suggest They Are Still Out Of Touch

April 16, 2009 in Editorial & Site News, Public Policy/Legislation by Phillip Dampier | 34 comments

5:48pm: John Passaniti, our tech guru, has made a change to help improve performance. I am turning comments back on now to see how we handle the load.

Sen. Chuck Schumer (D-NY) and I stood side by side this afternoon in front of Time Warner headquarters in Rochester to announce that Time Warner has shelved its broadband tiering nightmare.

“In the face of enormous community opposition and at Schumer’s urging, Time Warner will shelve the plan for all of their test markets,” Schumer wrote in a prepared statement.

StoptheCap! confirmed with the senator’s press secretary that this was supposed to end tiered pricing in EVERY Time Warner market. However, I have just heard from one reporter that Time Warner is retaining the cap in Beaumont, Texas.

Here is the statement from Senator Schumer:

U.S. Senator Charles E. Schumer today announced that Time Warner Cable will be shelving its plan to implement a tiered broadband plan in the Rochester area. Time Warner’s decision came in response to Schumer’s and others’ call, shortly after Schumer announced his opposition to the plan. Schumer spoke to Time Warner CEO, Glenn Britt, to discuss overwhelming opposition. Schumer will be working with Time Warner Cable going forward to make sure that any future changes in internet pricing are in line with what the community wants and needs. If the pricing scheme was implemented, it would have raised rates for many users. Schumer’s office has been in contact with TWC, expressing to them the Rochester community’s outrage over the proposed change.

“By responding to public outrage and opposition from community and elected officials, Time Warner Cable made the right decision today,” said Schumer. “I will make sure that any changes going forward are in line with what Rochester’s families and small businesses need.”

Time Warner Cable (TWC) recently announced its plan to switch its 8.4 million cable broadband customers to metered internet billing. The plan would essentially cap internet usage and charge users by the gigabyte. Local leaders and politicians have opposed the plan saying usage caps will cost users more and hurt innovation on the net as subscribers begin to scale back on their internet usage to save money.

TWC’s new tiered pricing structure for its internet service would have started at $15 for a plan that allows 1 gigabyte (GB) a month with an overage charge of $2 per GB. A gigabyte is approximately 1,000 megabytes (MB) and equals about three hours of online video, about half of a rented online movie and approximately 250 songs (at 4MB a song).

In the face of enormous community opposition and at Schumer’s urging, TWC will shelve the plan for ALL of their test markets.

Now originally I spent the earlier part of the afternoon thanking everybody for fighting the battle and hoping this nonsense would now be behind us. But Time Warner has released a statement which hardly makes me as optimistic as I was earlier today:

Time Warner Cable Charts a New Course on Consumption Based Billing

Measurement Tools to be Made Available

(New York, NY) — Time Warner Cable (NYSE:TWC) today announced it would alter plans to test Consumption Based Billing, shelving the trials while the customer education process continues.

Time Warner Cable Chief Executive Officer Glenn Britt said, “It is clear from the public response over the last two weeks that there is a great deal of misunderstanding about our plans to roll out additional tests on consumption based billing. As a result, we will not proceed with implementation of additional tests until further consultation with our customers and other interested parties, ensuring that community needs are being met. While we continue to believe that consumption based billing may be the best pricing plan for consumers, we want to do everything we can to inform our customers of our plans and have the benefit of their views as part of our testing process.”

Time Warner Cable also announced that it is working to make measurement tools available as quickly as possible. These tools will help customers understand how much bandwidth they consume and aid in the dialog going forward.

Britt added, “We look forward to continuing to work with Senator Schumer, our customers and all of the other interested parties as the process moves forward, to ensure that informed decisions are made about the best way to continue to provide our customers with the level of service that they expect and deserve from Time Warner Cable.”

Time Warner has been piloting the S.S. Titanic of consumption billing plans when they announced this mess on April 1st, and here comes the official press release which says they are “charting a new course.” That doesn’t mean this is dead and buried.

Indeed, it now turns out that this out of touch company still thinks their consumption billing was the right idea all along, but they didn’t explain it right! With “customer education,” they seem to believe consumers will suddenly sign on to this plan and embrace it. If that is what they honestly think, they are as out of touch with consumers now as they were two weeks ago. The hated “gas gauge” that nobody wants is still on the way, and from the tone of this statement, they’ve already made up their minds that their plan is still the best, but they’ll “consult” with customers first. If that’s been anything like the Twittering Tweets from Time Warner for the past two weeks, consultation equals “you tell us what you want and we give you what we want.”

Senator Schumer may need to get back on the phone.

However, and this point cannot be understated: This is a victory today for all of us, if only a temporary one. More than 35,000 of you have come to this site in the last 15 days, more than 11,000 in the greater Rochester region alone. You have just seen an example of what can happen when people use the Internet, a tool more vital than some might allow you to believe, to become informed, educated, organized, and effective in fighting back and winning a victory. This is the first battle, and we won it. But the war is by no means over. You are not allowed to withdraw, assuming all will now be fine. It will not.

But we have others to thank as well:

Rep. Eric Massa (D-NY), who remains my hero because he was the first one in Congress to step up, and if anyone knows how to fight, he does. And it’s becoming clear to me that we are going to need the congressman to stay engaged on this issue, because I don’t believe for a second we’ve heard the last of this nonsense from Time Warner (not with that press release anyway).

Sen. Charles Schumer (D-NY), who personally intervened and made it clear that what happens in some other test market somewhere will not stand in this state.

Sen. Schumer has a very long history of fighting for the little guy, and fiercely representing the interests of the people of this state. You saw a perfect example of that at work today right here in Rochester. And Sen. Schumer wasn’t content with simply securing a victory for Rochester. He successfully also got one for the people of Austin and San Antonio, Texas and the Triad of North Carolina. He deserves our support and thanks.

YOU, whether you fought this battle on StoptheCap!, Facebook, or one of the other protest sites launched to engage in this battle.

I am one person. I have lived and breathed this story for the last two weeks and it has been exhausting, to say the least.

Some have asked me why I do this. I think this comes from my late mom, who I watched fight many battles as I was growing up. She was among a small group of people that helped fight for and found the Brighton Volunteer Ambulance Corps here in my town of Brighton. She battled with a for-profit ambulance company that tried for years to keep a volunteer ambulance from establishing roots in this community, and threatening their revenue. She pounded doors all over this town to get signatures, attend hearings, and fight every step of the way for what she felt was right. I think that’s where my energy and tenaciousness comes from.

In this battle I, among others, am the spark, but you guys are the gasoline. Without the hundreds of calls, nobody would have noticed. Without people lining up to cancel service, nobody would have cared.

So this is our victory today.

But the war is not won. The good people in Beaumont are apparently still under the oppressive cap. And AT&T has their own little plan in store for innocent consumers. And our neighbors to the north are stuck with caps from British Columbia to Newfoundland. Unfounded, unreasonable, profit grabbing usage caps starve innovation, kill jobs, and retard the growth of the Internet. Until we can convince every provider that there are better alternatives to punitive caps and overpriced tiers, and competition from many providers is commonplace across the broadband industry, this fight cannot stop.

One last note to Time Warner employees, especially those on the ground in these communities. I don’t hate you. You are not the problem. Your record of delivering excellent service and a product I’ve remained loyal to for nearly a decade is a testament to the hard work you do for your customers. And I recognize local management must play the cards they are dealt from above, and because of that, none of this is personal. You should not have to bear the burden of corporate decisions, and I continue to urge every reader here to give the local Time Warner employees in your area the respect and courtesy they deserve.

But let this also serve as notice to those management teams who are simply out of touch with what consumers want and demand. We don’t want caps. We will not accept caps and tiers that require us to think twice about every thing we do online. Usage caps are not a solution to the problem of broadband growth. They are a Band-Aid. If you try to impose them on us, education campaign or not, we will cancel our service.

We stand ready to offer new thinking on ways to manage broadband traffic, through win-win solutions that provide the greater speeds that power users seek, and being more than willing to pay a reasonable extra price to obtain them. That’s a better approach than penalizing every user, and will bring new revenue and even more loyalty from your long-standing customers. We will explore these ideas in the days ahead.

And so, until this war is won, the battle will continue.

[Darth Wong]

So let me get this straight: people in America are unwilling to do anything about predatory health insurance schemes and violations of their civil rights, but their brave representatives immediately vault into action when their flat-rate broadband Internet access is threatened?

[Mr Bean]

So let me get this straight: people in America are unwilling to do anything about predatory health insurance schemes and violations of their civil rights, but their brave representatives immediately vault into action when their flat-rate broadband Internet access is threatened?

Because affordable Heath insurance is socialist just like bandwidth caps.

[Stark]

Ahem. I believe the article mentioned 'oppressive' bandwidth caps.