Time Warner to Roll Out Tiered Web-Use Pricing in Some AreasCategory: Internet
Posted: April 2, 2009 01:45PM
Back in February, we reported how Time Warner was planning to expand its bandwidth capping to more locations, but we were unsure if its initial pricing scheme was going to stick. Earlier this week, Time Warner Cable (TWC), the newly spun-off cable company, announced that it will expand its capping to four new locations, but this time with a tiered pricing structure. Beginning this month, TWC "will begin collecting information on its customers' Internet use in the Texas cities of Austin and San Antonio and in Rochester, N.Y." The new billing changes will not begin in those cities until later this summer, but Greensboro, N.C. will see the changes sooner. TWC will offer four tiers of 5, 10, 20, and 40GB, priced from $29.95 to $54.90 a month. Customers who exceed their plan's cap will be charged $1 for each GB they're over. The new structure is certainly better than Time Warner's initial rollout that just had the 5GB cap, but it still goes a long way from appeasing most customers.
In today's society, downloading and/or streaming high-definition videos over the web is commonplace. A typical HD movie is roughly 8GB of data. According to Sanford C. Bernstein in a recent report, a family on the 40GB plan that streams 7.25 hours of online video a week could end up spending $200 per month in usage fees. A little over seven hours per week may sound like a lot, but to put that into perspective, the average American spends 60 hours per week watching TV. TWC claims that of the 10,000 broadband customers enrolled in Beaumont, TX (where TWC conducted its test of the 5GB cap), only 14% exceeded their cap and had to pay and average of only $19/month in additional fees. However, with the major television networks hosting most of their shows online in HD, and services like Netflix allowing a customer to stream full-length HD movies online, it's not unreasonable to view the 7.25 hours of online video watching per week as lowballing it. The problem with the Beaumont test is that the mere existence of the cap could turn many people away from the more bandwidth-intensive task of streaming HD video, not because they don't want to watch videos online, but rather because they're scared of exceeding their cap and paying enormous fees. In fact, consumer advocates think that tiered pricing could wind up stifling innovation "by crimping demand for high-bandwidth services such as online video and music." Critics further contend that such pricing may "impede new online media businesses before they even have a chance to flourish." Ouch!
But streaming video and music isn't the only contributor to high bandwidth usage; what about gaming? Playing an online game does not use up a lot of bandwidth, but downloading said game, or patching said game...well that's another story. Launched in 2003, Valve's digital distribution platform Steam is one of the hottest gaming innovations of the past decade. It has evolved from a mere content delivery platform to encompass digital rights management, multiplayer matchmaking, friends lists, chatting, achievements, and more. The most important aspect of Steam, however, is its library, which as of March 31, 2009, included a whopping 628 games. Why is that important in the debate on bandwidth capping? For the majority of Steam's 20 million (plus) userbase, purchasing and downloading games over Steam is the norm. Today's games don't often fit on CD's anymore, they eat up gobs and gobs of gigabytes. For example, if you recall a recent news item about Unreal Tournament 3 on Steam, that download was over 8GB. Apparently those test subjects in Beaumont haven't entered the 21st century like the rest of us.
Unfortunately for us consumers, TWC isn't the only company looking at pricing tiers and/or bandwidth caps. One such company, Comcast, is at least a little more reasonable with its caps, capping residential bandwidth usage at 250GB per month. Furthermore, Comcast doesn't charge a customer if they happen to go over. Instead the customer gets a phone call, warning them of the excessive use. Subsequent abuse can lead to a subscription canceled, but at least they get a warning first, rather than a $200 bill.