Meter Starts To Tick On Internet Access Pricing
From InformationWeek - June 07, 2008
By Rob Preston
Judging from the outcry, you'd have thought that martial law had been imposed on the Lone Star State. The news: Time Warner Cable plans to test metered pricing for its Internet access service, starting in Beaumont, a city of 114,000 in eastern Texas.
Under the pilot program, instead of charging a flat fee for unlimited service, Time Warner plans to charge customers an additional $1 per month for each gigabyte of content they download or send over their allotment. Its service starts at $29.95 per month for speeds of 768 Kbps, with a limit of 5 GB, which Time Warner estimates would amount to some 340,000 e-mails, 170 hours of online games, or 1,300 downloaded songs. At the premium end, customers pay $54.90 a month for speeds of 15 Mbps and a limit of 40 GB, which amounts to 124 hours of standard-definition video or 11,000 song downloads. Comcast has been considering a similar pricing scheme for select markets.
Time Warner told the Associated Press that metered pricing is "the fairest way" to finance needed investments in its network infrastructure. The cable company estimates that 5% of customers now use half of the capacity on its local lines without having to pay more than low-usage customers.
Critics of the Time Warner plan argue that the company is abusing its monopoly (it evidently has one in Beaumont), is whoring for "excess profits," and that its plan would damage the commercial "ecosystem" that depends on cheap Internet access. Read some of the hundred-plus comments posted to Antone Gonsalves' story "Time Warner Cable To Test Metered Internet Access" for some thoughtful perspectives (and a few rants) on the Time Warner initiative. This issue isn't clear-cut.
On one hand, some readers note, 5 GB will barely get you a few movies before the surcharge meter starts ticking. Even customers with modest usage patterns, at least by today's standards, will end up paying plenty more than before. And in an economy ever more dependent on the Internet for commerce and telework, ratcheting up its pricing--if much higher access pricing becomes widespread--could constrain what economic growth hasn't been choked off by rising energy prices and unstable financial markets.
On the other hand, let's not be so quick to portray profit-motivated service providers as capitalist pigs while the profit-motivated spammers and pleasure-motivated gamers and P2P fanatics who hog much of the providers' bandwidth get a free pass. Actually charge people for the Internet capacity they consume? Next thing you know, airlines will charge passengers per flight, utilities will charge by the watt, and lawyers will bill by the hour!
If Internet access is becoming unaffordable, the solution is for local governments to pave the way for competition, not dictate pricing models. If "excess profits" really are to be had in providing Internet access in places like Beaumont, then competing DSL, wireless, and/or satellite providers will move in and keep prices in check--as long as those competitors are unfettered by government-brokered deals that protect incumbents.
Meantime, if Time Warner and other providers considering metered pricing want to make a good-faith gesture, they should consider setting their caps to reflect modern Internet usage patterns. If customers will exceed their cap by downloading a couple of movies or sending several PowerPoint presentations a month, the cap is too low. And if Internet providers are aiming to extract more money from the biggest capacity hogs, they also could lower the all-you-can-eat price for those customers who barely nibble.
In the end, though, an open market must decide how much providers can get away with charging. If we had a dollar for every time someone told us that he's the last person in the world to call for government intervention in free markets, but this time ... we'd all be able to afford Internet service no matter the pricing.
VP and Editor in Chief
Here's another one for the pundits who think the next wave is downloading video content. So if Time Warner plans to charge customers an additional $1 per month for each gigabyte of content, then it will cost $11 to download a two hour HD (Blu-ray) video. At that rate, I think discs will be around for a long while.
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