TWC to Test Broadband Toll Booth
DSL Reports got its hands on an internal memo outlining plans by Time Warner Cable Inc. (NYSE: TWC) to try out a usage-based billing model for its Road Runner service in Beaumont, Texas, in the first half of the year.
A Time Warner spokesman confirmed that such a project is underway but passed Cable Digital News along to another official who did not return a call prior to publication of this story.
Between peer-to-peer downloads and the increased quantity and quality of streaming TV shows and movies, cable broadband networks can be taxed. Today, a small fraction of customers are the source of this "problem," but that pool of heavy users will certainly grow as more customers tap the Web as source for short- and long-form video, including massive files in bandwidth-gobbling hi-def format.
According to the memo cited by DSL Reports, the consumption-based model will attempt to generate additional revenue from "5 percent of subscribers who utilize over half of the total network bandwidth."
The trial, which apparently will put some new customers on the metered billing plan, could turn into a national offering if successful. The memo further indicates that customers who are part of the trial will be able to track consumption via the Web and, if needed, upgrade to a higher tier.
That some MSOs are considering consumption-based services is not a surprise. Rogers Communications Inc. (NYSE: RG; Toronto: RCI) of Canada is already applying a cap of about 90 gigabytes to its 18-Mbit/s speed tier.
Others have already argued that the current, flat-rate HSD model is not sustainable as Internet traffic grows 50 percent a year and the consumption of video over the Internet goes through the roof. That effect will become even more pronounced should services such as Hulu, Joost , the reshaped Apple Inc. (Nasdaq: AAPL) TV, and the new "unlimited" movie offering from Netflix Inc. (Nasdaq: NFLX) gain in popularity. (See Apple TV: A New Channel for Movies.)
"Eventually, we will go to a usage-based solution," predicted Marwan Fawaz, CTO of Charter Communications Inc. , last month at the CableNEXT conference in Santa Clara.
But cable must also be wary of the consequences that could be wrought by customers, regulators, and consumer interest groups.
Comcast Corp. (Nasdaq: CMCSA, CMCSK) has faced heavy criticism over "invisible" byte caps and the throttling of P2P applications. The latter has resulted in a Federal Communications Commission (FCC) probe into the matter. (See FCC Probes Comcast, FCC Eyes Comcast's P2P Policies, and A Tip of the Broadband Cap.)
And even Time Warner Cable's coming trial has gained the attention of pressure groups.
In a statement issued Thursday afternoon, Ben Scott, policy director of Free Press, called TWC's metered approach "better" than impacting apps such as BitTorrent. "At least customers will know what they're getting into," he said.
"But," Scott warns, "metered prices may chill innovation in cutting-edge applications because consumers will have a disincentive to use them."
Scott suggests that a move toward metered pricing for broadband represents a "symptom of the deeper problems in our communications infrastructure."
Most MSOs have not outlined their deployment plans for Docsis 3.0, a new platform that promises shared speeds in excess of 100 Mbit/s, but Comcast has said it plans to have a Docsis 3.0 infrastructure in place in 20 percent of its footprint by year's end. Its PowerBoost system aims to provide faster bursts when there's latent capacity on the network. (See Comcast Closes In on 100 Mbit/s.)
— Jeff Baumgartner, Site Editor, Cable Digital News