Time Warner Caves, Postpones Usage-based Billing
April 17, 2009
After much consumer outrage--and the intervention of Senator Chuck Schumer (D-NY)--Time Warner says it will postpone its broadband pricing trials "while the customer education process continues."
Bowing to a groundswell of populist outrage, Time Warner Cable has dropped plans to expand trials of a usage-based pricing plan for its Internet service.
The company put out a press release Thursday charmingly announcing that it was "shelving the trials while the customer education process continues."
That misunderstanding had manifested in some pretty ugly forms, with allegations of price gouging and monopolistic behavior. Time Warner Cable claimed the steps were necessary to shoulder the bandwidth costs associated with providing service to an increasing number of insatiable data gluttons who spend their days downloading movies and playing massive multiplayer games. The problem was that the data caps (1 GB on the low end) seemed too small, while the fees (maximum $150 per month for exorbitant data usage) appeared extravagant. The talking point became that the pricing change could more than triple the cost of an unlimited data plan. While in practice that would have only been the case for a very small portion of subscribers, the sticker shock was bound to raise some eyebrows. And it certainly did.
Non-profit advocacy group, Free Press, jumped on the case with a petition drive that as of Thursday morning had registered about 15,000 angry consumers calling for Congress to investigate.
One congressman, Eric Massa of New York, didn't need any convincing. Before Free Press' petition drive really got rolling, Massa said he was planning to introduce a bill to eliminate broadband caps. Massa put out a statement today praising the grass-roots movement that pressured Time Warner Cable into dropping its plans, but said he still intended to go ahead with the legislation.
It seems that Time Warner Cable made two mistakes here. The first is the rather dramatic increase in the rates that some consumers would have to pay unless they significantly altered their Web habits. At a time when the administration and dozens of members of Congress are proselytizing for policies that will encourage the deployment and usage of broadband for noble but data-intensive applications like telemedicine and distance learning, this seems a little out of step with the times.
Second, the company failed to provide the faintest of indications of how much of a financial hit it's taking from increasing data usage. Bandwidth isn't free, we know that. But when a company floats a plan to dramatically raise rates--in a recession, and only in markets where it operates with minimal competition--it might help its public image if it was a little more forthcoming with the rationale behind the proposed rates.
None of this is to say that usage-based pricing can't work or shouldn't be considered by ISPs (unless Massa gets his way and it becomes illegal). But by God, give some thought to how it's going to play with the Internet watchdogs. They're a vocal group, and a lot of people listen to them, particularly in the new policy regime in Washington.