Will Cable Follow AT&T's Lead on Usage Fees?
"We expect cable operators to follow AT&T's move by introducing pricing plans that include caps for lower end packages," stated Sanford C. Bernstein & Co. Inc. analyst Craig Moffett in a research note issued Monday morning.
He cited Charter Communications Inc. , Cox Communications Inc. and Time Warner Cable Inc. (NYSE: TWC) as the "likely first movers," with Comcast Corp. (Nasdaq: CMCSA, CMCSK) considered the least likely to enlist a similar policy in the short-term.
"AT&T's move provides air cover that makes it easier for all of them to follow," Moffett added.
The "move" in this case, is AT&T's decision to impose a monthly 150Gbyte cap on all DSL customers and a 250Gbyte cap on all U-verse subscribers starting May 2. AT&T also confirmed to Light Reading Cable that it will charge $10 for every 50 Gbytes consumed beyond the usage ceiling, but won't introduce those charges unless a customer exceeds the cap three times.
Some U.S. cable operators have already introduced usage caps, but don't charge those who exceed their limits. Instead, they suggest an upgrade or, for repeat offenders, threaten disconnection. But they have been reluctant to introduce usage-based billing on broadband services following the firestorm of criticism TW Cable endured when it tested a metered policy in Beaumont, Texas, and tried to expand trials in other markets. (See TWC Mothballs New Metering Trials , Comcast Draws the Line at 250GB and Charter's Internet Cap to Bare Its Fangs .)
However, the overage charging model is still attractive to some. There are signs that some MSOs, though still very cautious, may still be looking at ways to introduce such models. TW Cable Chairman and CEO Glenn Britt recently told investors that a usage-based model may be unavoidable, particularly among lighter Internet users. "I think there will always be an unlimited tier, but I think you'll see the element of consumption introduced over time," he said.
Charter CEO Mike Lovett shared similar thinking during the company's recent fourth-quarter earnings call, noting that usage-based cable modem tiers may be helpful in attracting dial-up Internet customers.
AT&T: New plan is 'fair'
AT&T, meanwhile, says its new policy is set to affect only 2 percent of its broadband customers. Spokesman Mark Siegel tells Light Reading Cable that the average AT&T DSL user consumes 18 Gbytes per month. He didn't have a figure for U-verse.
"We felt this was the appropriate step to ensure that all of our customers have access to our service and continue to get what they need," Siegel said, noting that the new consumption policy won't factor it bits and bytes used for AT&T's managed IPTV service. "It's very straightforward, very transparent and, we think, very fair."
AT&T, he said, will issue warnings via e-mail when customers are coming close to or have hit their monthly consumption ceiling. The company will also use Web-based meters and other tools to help customers track and estimate their broadband usage.
But is this a step toward metered billing policies for broadband services?
"I can't speculate on what we're going to do in the future," Siegel said. "This [new policy] seems like the sensible and fair thing to do now so we can meet the needs of all of our broadband customers."
Sanford C. Bernstein's Moffett doesn't think service providers will turn to more stringent broadband pricing plans to help preserve the economics of their physical infrastructure until "patterns change such that Web video begins to substitute for linear video."
He said today's relatively big caps welcome significant doses of complementary over-the-top video, but aren't large enough for an outright substitution of traditional subscription TV services.
— Jeff Baumgartner, Site Editor, Light Reading Cable