Policy + charging

Will Cable Follow AT&T's Lead on Usage Fees?

AT&T Inc. (NYSE: T)'s decision to couple big broadband consumption caps with penalties for those who exceed their usage limits may clear the way for U.S. cable operators to introduce similar broadband charging models, according to a Wall Street analyst. (See AT&T to Fit Subs With Broadband Caps .)

"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

Jeff Baumgartner 12/5/2012 | 5:10:31 PM
re: Will Cable Follow AT&T's Lead on Usage Fees?

So far, AT&T's decision has not caused the kind of firestorm earlier trials of metered broadand did mostly because the ceilings AT&T is putting in are fairly high and likely won't impact very many customers. But it could start to condition customers to get ready for a metered, more consumption-based future and give Netflix something more to fear.

Also, if cable starts to do something similar on the low end and target very light users, that also would not affect very many customers. 

So, it seems that it's all being done by design to keep the backlash in check but does leave the door open for more policies of this type.  Given the direction we seem to be heading in , anyone else think that usage-based billing is indeed inevitable?  Or if MSOs and telcos try to do more than this do you think they'd come under so much pressure that they'd have to mothball this again? JB

paolo.franzoi 12/5/2012 | 5:10:29 PM
re: Will Cable Follow AT&T's Lead on Usage Fees? <div></div>
<div>I want to see how this goes. &nbsp;Comcast has not changed my bandwidth cap. &nbsp;I am a lot more worried about that than anything else at the moment. &nbsp;</div>
<div>So, for me we are at a slippery slope argument. &nbsp;Does the imposition of a cap imply that we are going anywhere else? &nbsp;Not yet. &nbsp;It seems to me that the ability to raise prices is going to be hard. &nbsp;If they do to any extent, you will see a rather large uproar and they will go away. &nbsp;If they use these tools to reign in the folks at the edge, then I am fine with it.</div>
Jeff Baumgartner 12/5/2012 | 5:10:29 PM
re: Will Cable Follow AT&T's Lead on Usage Fees?

Thanks, that's always been a tech-savvy group that reacts strongly to these sorts of moves by ISPs, but it still seems, overall, that there is less anger about this move than some of the earlier trials that would have imposed overage fees on a much greater number of subscribers.&nbsp; But reading through those responses there's definitely a fear now that this is just the beginning and the days of unlimited broadband tiers&nbsp;may indeed be over.&nbsp;

Also, no surprises to see that this group is also very upset about AT&amp;T's decision and thinks the company is being greedy.

Where do LR's readers come out on this debate?&nbsp; Is the kind of policy AT&amp;T's putting in starting in May fair, as they claim, or another greedy attempt to expand margins and revenues?



Starstuff 12/5/2012 | 5:10:29 PM
re: Will Cable Follow AT&T's Lead on Usage Fees?


Take a look at this thread. Those guys are not taking it lightly.


jepovic 12/5/2012 | 5:10:28 PM
re: Will Cable Follow AT&T's Lead on Usage Fees?

Unlimited usage might increase the network costs a bit, but most people tend to forget how easy it is to service. With metered services, the costs for IT systems and customer support increase a lot. Customers question their bills, systems go bananas and overcharge, kids overuse their parents broadband, etc etc. The scenarios are endless, and they all involve lots of time with the call center. And the only savings are in CAPEX for the backbone and aggregation network.

Basically, I doubt that it's worth it for cable and DSL. Wireless is quite different.

Starstuff 12/5/2012 | 5:10:28 PM
re: Will Cable Follow AT&T's Lead on Usage Fees?

I doub't it is for margins or revenue, my guess is that it is a preemtive strike against Netflix, Hulu, YouTube and the lastest threat in the form of RedBox/Amazon.

Many of us were side-blinded by AT&amp;T's news as we were not expecting it especially when their uverse product is much slower, more problematic (freezes, video drop outs etc), much less available, more expensive than cable and now capped.

Probably you are right that not everybody else will not notice it and StopTheCap and BBR are the exeption.

OldPOTS 12/5/2012 | 5:10:26 PM
re: Will Cable Follow AT&T's Lead on Usage Fees?

With the advertisements still saying "we offer more BW" just 15 minutes ago.

When they all cap it, will the next advertisements be "We got a higher Cap"????

PatrickBossert 12/5/2012 | 5:10:23 PM
re: Will Cable Follow AT&T's Lead on Usage Fees?

...well, not for the telecoms market in general. The European market has seen greater more sustained competition and the natural response has been to cap lower tier broadband services.

I get the comment about using it to kerb OTT services like Netflix and Hulu. To a reasonable degree it works as a deterrent. Some operators like BT in the UK have gone to the extend of allocating dedicated bandwidth for their own IPTV services which is excluded from any data cap.

Caps only work if you have a smart enough BSS that can handle real-time usage and alerting, so you can warn a customer they are approaching their usage limit and give them options for extending it or going onto a pay-as-you-consume basis until the next charging period. BT does this very well with its Infinity product (capped Infinity anyone?)

Many BSS vendors claim to be able to do this, but they're often good at handling only a single service type. I have a hunch AT&amp;T may struggle to do this well with its current platform; most cable providers who have really sorted out their converged service offers with real-time usage are now on a Convergys platform. BT is and has been for some time.

OldPOTS 12/5/2012 | 5:09:58 PM
re: Will Cable Follow AT&T's Lead on Usage Fees?

Sprint is already advertising they don't limit or slow your traffic. They specifically specify Caps. Now if you have low utilization I guess you can say that till its full.

Indrasena 12/5/2012 | 5:01:13 PM
re: Will Cable Follow AT&T's Lead on Usage Fees?

If Cable MSOs and ATT are talking about enforcing the broadband caps on 'very light broadband' users or users who have subscribed to their lowest broadband tier, there must be a reason for this.

Maybe their internal market research has revealed that&nbsp;it is the 'very light broadband' users that are most likely to 'cut the cord' and move onto OTT video subscriptions like Netflix and Hulu.

So by limiting their bandwidth usage, MSOs can either get them to move up to a higher broadband tier (and recover some of the lost revenue due to cord cutting) or prevent them from using Netflix etc and retain their video product revenues.

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