Light Reading
Proving that money isn't everything, a $5 monthly discount isn't enough to convince most TWC customers to choose a data-limited broadband plan over an unlimited one.

TWC Subs Say No to Data Caps

Mari Silbey
3/12/2014
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In a sign that money is still not everything, a $5 monthly discount is not enticing most Time Warner Cable customers to choose a data-limited broadband plan over an unlimited package.

Speaking at the Deutsche Bank Media, Internet and Telecom Conference in Palm Beach, Fla., Wednesday morning, Time Warner Cable Inc. (NYSE: TWC) Chairman and CEO Rob Marcus said very few broadband subscribers have opted for its Internet plan that caps data use at 30 gigabytes per month. In fact, the number of subscribers taking the use-based service tier is running only "in the thousands" -- a very tiny slice of the MSO's roughly 11 million US broadband customers.

Despite the roughly $5 monthly discount for the use-based plan, the vast majority of customers prefer to avoid broadband caps, even when they are unlikely to go over the data threshold. Marcus said TWC customers' median broadband use hovers in the "high twenties" every month, indicating that the bulk of customers would save money by choosing a data-capped service.

Time Warner Cable has a rocky history with use-based billing. When the company introduced bandwidth caps in 2009, there was a huge public outcry. The No. 2 US MSO backed down temporarily in the face of customer opposition, but it came back with a five-gigabyte plan two years ago. It then introduced the optional 30-gigabyte service tier six months ago, providing a financial incentive for users to accept a monthly data cap.

Despite the extremely low uptake rate, Marcus said he thinks there's an important principle for the company to establish: The more data customers use, the more money they should pay.

In the Q&A session with financial analysts Wednesday, he spent much of his time talking about Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s proposed purchase of TWC. But he was careful to highlight the operational steps his company is taking to improve business even without Comcast's muscle.

On the residential services front, TWC continued to make strides in the early part of 2014. It just enjoyed its best January and its best February in five years from a subscriber standpoint. Marcus credited the gains primarily to reduced customer churn -- a trend that he thinks will continue throughout the year.

As in previous years, Marcus said TWC is planning rate increases for 2014. But rather than rolling out the increases separately across individual voice, video, and data services, the company will simplify things by imposing a single increase on each customer. The rate hike will depend on the customer's particular cable packages.

He also outlined some of the service improvements that TWC has started carrying out for residential customers. The TWC Maxx initiative is increasing download speeds for the standard broadband tier in New York and Los Angeles from 15 Mbit/s to 50 Mbit/s. The MSO is also making a big all-digital push for video, which it plans to implement primarily with the help of digital transport adapters. (See TWC: Charter's Got Nothing on Us, TW Cable Hemorrhages Subs, and What's Next for TWC.)

In an update on the rollout of its new cloud-based program guide, Marcus said the new interface has landed on more than 4 million set-tops so far, versus 3 million at the end of last year. He expects that the rest of the 6 million set-tops capable of supporting the new guide will receive the upgrade relatively early this year.

TWC executives are also considering licensing the X1 and X2 IP video platforms developed by Comcast. The company has been interested in the idea for a while, but Marcus said the pending merger could make the concept even more attractive.

As for Marcus himself, he said he's trying to stay focused "as if we hadn't announced the deal." That's a noble goal, but it's likely to be increasingly difficult to achieve as the market digs further into the implications of the pending acquisition by Comcast over the rest of the year.

— Mari Silbey, special to Light Reading

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DHagar
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DHagar,
User Rank: Light Sabre
3/13/2014 | 4:45:59 PM
TWC Subs Say No to Data Caps
@KBode, good points.  There isn't enough value to the customer to accept these restrictions.  I think it proves that people do not want limits unless there is a significant cost value in savings, etc.

I agree with your assessment that they are not likely to move into more creative pricing for customers with the Comcast deal.  I think whoever can come up with a more appealing service/pricing structure could gain customers.

 
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
3/13/2014 | 3:05:27 PM
Re: Caps
Agreed, though I'm not a customer, nor do I think I'm near that data level, the last thing I or customers would want ot do is to take the discount, then a month later find the data consumption had changed drastically so that the caps become an issue. 

I pay my provider a little extra each month for "free" simple maintenance because I find it cheaper than paying for a service call each time. 

I think once you hit a cap, you'd never want to do so again, so it's not surprising that few want it. The only way it makes sense is if someone is far below the caps.
jayja
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jayja,
User Rank: Light Sabre
3/13/2014 | 2:45:02 PM
Yay, can't wait!
"As in previous years, Marcus said TWC is planning rate increases for 2014."
KBode
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KBode,
User Rank: Light Sabre
3/13/2014 | 8:24:03 AM
Caps
A measly $5-$8 discount off of your bill if you agree to go from an unlimited connection to a 5 GB cap (with $1 per GB overages if I recall) is kind of an insult. And the 30 GB offer is only recent, for a long time it was a $5 discount just for a 5 GB cap.

The thing that gets me is we're told time and time again that all ISPs are interested in when it comes to these capped plans is the freedom to experiment with creative pricing. Yet each and every time I see an actual pricing plan unveiled creativity is nowhere to be found. Neither is value, frankly. I think it took Time Warner Cable two years to bump the savings on  the 5 GB cap offer a measly $3 bucks (at the same time jacking up various fees including the Broadcast TV fee and modem rental fee).

I don't think a Comcast acquisition will change this push much. Comcast followed Time Warner Cable's lead and is tinkering with very similar pricing in trial areas.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/12/2014 | 11:19:02 PM
Re: Not a big enough incentive
What reassurance do customers have that they won't go over and get charged without their knowing it?
PaulS681
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PaulS681,
User Rank: Light Beer
3/12/2014 | 7:08:09 PM
Re: Not a big enough incentive
I agree Carol... $5 doesnt seem to be enough to move people away from unlimited. $20?  Now maybe we are talking.
albreznick
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albreznick,
User Rank: Blogger
3/12/2014 | 6:47:25 PM
Re: Not a big enough incentive
Could be, Carol. Matbe TWC needs to up the ante a bit. What do you think would be enough of a discount? $10 a month? $15 or $20?   
Carol Wilson
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Carol Wilson,
User Rank: Blogger
3/12/2014 | 5:11:07 PM
Not a big enough incentive
I don't think it's true that customers don't care about money, I suspect $5 isn't a big enough incentive for them to have to worry about how much data they are using. 
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