TWC Tees Up Metered Internet Trial

Some Time Warner Cable Inc. (NYSE: TWC) high-speed Internet customers will soon start to test drive a controversial usage-based service model that could signal an eventual shift away from all-you-can eat billing policies.

Time Warner Cable has confirmed that it will begin to trial a metered Internet platform in Beaumont, Texas, on Thursday. The test, which will apply only to new Internet customers there, will charge $1 for every gigabyte they consume above the threshold.

News that the MSO was working on such a system surfaced in January. (See TWC to Test Broadband Toll Booth .)

That threshold, or consumption cap, will vary depending on the customer's level of service. On the low end, the MSO will enlist a monthly consumption cap of 5 GBytes for its 768 kbit/s (downstream) tier. The cap will rise to 40 GBytes for the high-end 15 Mbit/s service.

Its mid-range, 7 Mbit/s service will be capped at 20 gigabytes per month.

Those initial levels are dwarfed when compared to what some other operators are considering or about to implement. Comcast Corp. (Nasdaq: CMCSA, CMCSK) is believed to be mulling a threshold in the neighborhood of 250 GBytes. (See Comcast Caps Coming? ) Meanwhile, BendBroadband of Oregon is elevating its cap to 100 gigabytes per month.

Time Warner Cable decided to focus the test on new customers and only one market to ensure that this first implementation goes smoothly, spokesman Alex Dudley says.

And keep in mind, it's only a test. As Time Warner Cable learns from the Beaumont trial and moves the model into more markets, the usage-based approach "may look very different than it does now," Dudley says.

The Beaumont subscribers will be able to see how much bandwidth they're using via a Web-based "gas gauge" developed by Time Warner Cable. By comparison, Rogers Communications Inc. (NYSE: RG; Toronto: RCI) of Canada is using an electronic bulletin system from PerfTech Inc. to notify customers when they are approaching or have exceeded the cap.

Dudley said Time Warner Cable wrestled with other notification processes, including those served by email or phone calls, "but we decided that the always-on gas gauge was the fairest approach."

MSOs are beginning to look at consumption caps as they find that a small fraction of customers tend to use the bulk of available bandwidth. They argue that metered billing will aid in network management and allocate capacity fairly across the subscriber base. "Optimizing the experience for all of our customers is the goal," Dudley says. "A vast majority of subscribers will notice no difference whatsoever."

The MSO expects that 5 percent of its subscriber base, assuming they are in the "right" tier of service, would be at risk of exceeding the thresholds being tested in Beaumont.

Although that's a small group, it's also a vocal group, and, as Contentinople points out, could affect how often consumers access Internet-sourced video content.

But beyond a small minority, will usage-based billing cause a significant resistance from consumers? One analyst doesn't believe so.

"I don’t expect to see any backlash, especially if it [the policy] is in writing and explains what the consequences are if you abuse [the network]," says Bruce Leichtman, president and principal analyst of Leichtman Research Group Inc. (LRG) .

And, he adds, operators may be better off without some of those bandwidth hogs.

"Ultimately, a company has to think, is that a customer I really want, and what's the benefit of that customer?" Leichtman says, recalling that Sprint Corp. (NYSE: S) severed ties with about 1,000 customers last year because they were abusing the company's customer service privileges. "To some degree, the bottom line is the bottom line."

— Jeff Baumgartner, Site Editor, Cable Digital News