Metered pricing has been used for decades to charge consumers for utilities, and some Internet service providers would like to use that model. Earlier this year, Time Warner Cable began testing tiered pricing in several markets, but the company has changed its mind after objections from consumers and some legislators.
TWC had planned to change its unlimited Internet service to a capped service in specific markets in Texas, New York, and North Carolina. Reports pointed to $29.95 a month for up to five gigabytes of bandwidth; $54.90 for up to 40GB; and an undisclosed amount for up to 100GB.
The company said 86 percent of its customers would not be affected because they would not reach the cap, based on its test in Beaumont, Texas.
Landel Hobbs, TWC chief operations officer, defended the company's actions earlier this month in a blog post, saying: "With regard to consumption-based billing, we have determined that as broadband usage and penetration grow, there are increasing differences in the amount of bandwidth our customers consume."
"Our current pricing plans require all users to pay the same amount, whether they check e-mail once a month or download six movies a day," he added. "As the amount of usage has dramatically diverged among users, this is becoming inherently unfair and not the way most consumers want to pay for goods they consume."
Consumers Not Happy
Consumers revolted and some even formed petitions. On Friday, the company buckled under the pressure and announced it would shelve plans to offer the tiered service in four markets.
"It is clear from the public response over the last two weeks that there is a great deal of misunderstanding about our plans to roll out additional tests on consumption-based billing," TWC CEO Glenn Britt said after Sen. Charles Schumer (D-N.Y.) announced the same news during a press conference in front of TWC's New York building.
The company's plans may be shelved temporarily, but TWC will continue its trial in Beaumont and still plans to roll out software. The software was described by Hobbs as a "gas gauge" to show customers how much bandwidth they use.
Other cable providers, including Cox Communications, haven't announced plans for consumption-based billing. "Cox was an early innovator in offering customers choice among Internet service packages so that customers may choose the right amount of speed and features that fit with their budget, and today we offer five different speed/feature packages for our residential customers," said spokesperson David Deliman.
He wouldn't comment on whether TWC's plan for consumption pricing was what the industry needs. "Cox will not speculate on consumption-based billing; a number of ISPs worldwide offer such a billing model and are in a better position to comment how well it works for their business."