Time Warner Cable's decision to back off from a usage-based pricing change for high-speed Internet subscribers in four cities demonstrates how politically fraught the governance of Internet access and pricing can be.
Time Warner's new CEO, Glenn Britt, issued a statement yesterday saying the company had shelved the pricing trials in Rochester, N.Y., Austin and San Antonio, Texas, and Gressnboro, N.C. Those trials, which started only two weeks earlier, charged subscribers for the amount of bandwidth they used. Time Warner calls it a "consumption-based" model.
Britt said he had heard the public outcry over the pricing change in reaching the decision to pull back. It was an outcry that got members of Congress involved, and at one point U.S. Sen. Charles Schumer, D-N.Y., even met with him to describe Rochester's "outrage" over the proposal, according to a statement Schumer issued.
Maybe Britt would have been better off to launch the trials in other cities where the political machinery is not as sophisticated, one Washington insider remarked.
But the real issues involved are much more difficult than counting the number of demonstrators, or finding a way to quiet them, say observers.
The reality is that data use on the Internet is exploding, primarily due to video and other multimedia. It's becoming commonplace to download entire movies.
While carriers complain that a small number of users, maybe less than 15%, are using so much Internet capacity that they are hurting efficient and reliable Internet access for average users, in a few years, the average user will be a bandwidth hog too.
Carriers complain that to keep up with this growing demand, they have to enlarge their networks quickly, and deploy more efficient technologies that increase capacity. It seems inevitable to all parties that Internet access will cost more, but making the transition to a new pricing scheme based on consumption cannot be done overnight.
"The problem is that Internet customers are holding current contracts that say they get unlimited bandwidth, so to come back with metering is basically the carrier saying, 'We didn't mean it,'" said analyst Jack Gold.
"Really that's like GM or Ford saying if you drive your car over 100,000 miles, we'll charge you more," Gold said.
One lobbyist, a Time Warner Cable rival who asked to not be named, said it was likely Time Warner and other carriers would be implementing metered pricing eventually.
Time Warner Cable said it was going to focus for now on making measurement tools available so consumers can learn how much bandwidth they consume.
Under the trial that was shelved, customers were asked to choose Internet usage plans that capped monthly uploads and downloads at 10GB, 20GB, 40GB or 60GB. Customers would pay $1 per Gigabye if they went over those caps, with overage fees limited to $75.
