Following criticism of a plan to bill Internet customers by usage, Time Warner Cable CEO Landel Hobbs released an expanded version Thursday that includes a top price of $150 a month for "virtually unlimited usage."
Hobbs said "some recent press reports" were "premature and did not tell the full story." But, he added, "bandwidth consumption is growing exponentially," about 40 percent annually among Time Warner Cable's subscribers, and the company must address the costs.
In fact, Hobbs said, industry analysts project that the Internet's infrastructure may not be able to handle this explosion by 2012, and the company believes the "fairest approach" is not to raise all prices but to use a tiered model.
That approach has been meeting with significant opposition, including from Congress, newspaper editorials, and such consumer groups as Stop the Cap.
The revised cable plan has a 100GB monthly tier at the top end for $75 monthly, plus $1 per gigabyte above that. But the over-the-limit charge is capped at $75, so a user could pay $150 and get what the company described as "virtually unlimited" bandwidth.
The tiers now begin at 1GB per month at 768KB/128KB for $15, with an overage charge of $2 per gigabyte. Time Warner said about a third of its customers use less than 1GB.
Other packages are available at 10GB, 20GB, 40GB and 60GB with overages at $1 per gigabyte. There will also be an initial ramp-up period of two months while the company collects usage data, and then a one-month period of noting overages on bills but not charging. The trial is being rolled out in Rochester, N.Y.; Greensboro, N.C.; and, in October, in San Antonio and Austin, Texas.
'$150 a Month Is High'
Bruce McGregor, an analyst with industry research firm Current Analysis, said that "$150 a month is high for a broadband service."
On the one hand, he said, mainstream consumers are starting to watch more online-delivered videos, but generally they don't think about how much bandwidth is involved. On the other hand, McGregor said, "consumers won't appreciate moving from an all-you-can-eat model."
He pointed out that the proportion of Internet users who consume the higher bandwidth levels is relatively small, but, "over time, that's going to be a problem for the providers."
Experiments by Internet service providers with tiered usage has not yet trickled down to consumers, but McGregor said that, when it does, there could be greater backlash once users realize that they're paying for faster speeds to more quickly reach a limit in downloads.
Consumption-based Internet pricing is also being tried by AT&T, Cox Communications, and Comcast, among others. Eventually, McGregor said, consumers are going to rethink their growing information and entertainment services bills, and this could pose a major problem for the cable industry's business model.
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