Time Warner Cable has put the brakes on a trial that was testing its new "consumption-based billing" system for its broadband service, the company said Thursday.
Chief Executive Glenn Britt said in a statement that there has been "a great deal of misunderstanding" by consumers and lawmakers who have criticized the plan.
Britt said that the company still believes that consumption-based billing may be the best way to handle rising network costs among its heaviest bandwidth users. But he conceded the company will not proceed with tests until it consults further with customers and interested parties.
Sen. Chuck Schumer (D-N.Y.) and Rep. Eric Massa (D-N.Y.) announced Time Warner's change of heart during a rally in Rochester, N.Y., the Rochester Democrat and Chronicle reported earlier on Thursday.
Massa, who represents Rochester, was an early opponent of the plan and has promised to introduce legislation that he has said would protect consumers against companies introducing tiered services, such Time Warner's proposed billing plan.
Massa is still not giving up on his legislation that would ban metered billing.
Time Warner had quietly been testing its metered billing service in Beaumont, Texas, since last year. But last week, the nation's second largest cable provider said that it was planning to expand the test of the bandwidth caps to other cities, including Austin, San Antonio, Rochester, N.Y., and Greensboro, N.C.
The way the plan worked is that Time Warner would cap data downloads and uploads at 10 gigabytes to 60 gigabytes a month with prices ranging from $25 to $65 per month, depending on the region. The company also planned to introduce a new plan that would have offered 100GB of downloads for $75 a month. Additional downloads would be charged $1 a GB with a cap of $75 on the extra fee, essentially making an unlimited plan cost $150 per month.
Time Warner said that it was testing metered billing because some of its subscribers were using an inordinate amount of bandwidth. And as more video and peer-to-peer services come online, the company said that it needed a new business model to handle the rising cost of maintaining and managing its network.
But consumer advocates have argued that Time Warner is simply trying to protect its cable TV business by making it very expensive for users to watch competing video services online. Public Knowledge, one of the more vocal opponents to Time Warner's metering plans, was pleased with the company's decision to table the tests.
"The company properly listened to its subscribers, the public, and policymakers, all of whom were highly critical of the proposition in the first place," Gigi Sohn, president and co-founder of Public Knowledge, said in a statement. "It quickly became clear the plan had nothing to do with managing Time Warner's network, and everything to do with increasing profits at the expense of captive customers in an uncompetitive broadband market."
Time Warner Cable's plans to cap broadband speeds and charge $150 a month for unlimited broadband downloads has caused quite a stir among consumers and politicians.
U.S. Rep. Eric Massa of New York is promising to introduce in Congress that will curb the use of tiered broadband services in areas where there is only one service provider. And angry consumers have taken to the blogosphere to express their outrage at a new plan that would theoretically charge them more on a per Gigabyte basis for downloads than they'd et from other services.
Last week, Time Warner Cable, the nation's second largest cable operator, said that it plans to expand its test of using bandwidth caps for its broadband data service. Last year, the company began testing broadband services in Beaumont, Texas that allowed 5 to 40 gigabytes of uploading and downloading a month. Now the company is planning to expand the test to other cities this year including Austin, San Antonio, Rochester, NY and Greensboro, NC. The company also has plans to increase the caps to between 10 GB to 60 GB a month with prices ranging from $25 to $65 per month, depending on the region.
Time Warner also said that it would introduce a new plan that offers 100 GB of downloads for $75 a month. Additional downloads would be charged $1 a GB with a cap of $75 on the extra fee, essentially making an unlimited plan cost $150 per month.
By comparison, Comcast's service, which costs $43 a month, has a bandwidth cap of about 250 GB per month. And Verizon Communications' cheapest broadband package with its fiber-to-the home Fios service costs $45 a month and has no download limit.
Time Warner's plans ignited a firestorm of protest among consumers and consumer advocates, who believe the company is unfairly hiking prices on broadband services for some subscribers. And Congressman Massa has called the plan, "nothing more than a large corporation making a move to force customers into paying more money."
Time Warner's Chief Operating Officer Landel Hobbs, tried to explain the company's position in a letter posted on April 9. Hobbs said that the reaction to reports of the new tiered offering are overblown. But he said the company has heard the "passionate feedback" and is taking steps to address the concerns. And he outlined some minor changes.
For example, the company will also offer a new $15-a-month plan that is suitable for light e-mailers. The service offers download speeds of 768 kilobits per second and a 1 gigabyte monthly cap. And it will offer a new 50Mbps download and 5Mbps upload service over its new DOCSIS 3.0 infrastructure in some trial markets for $99 a month.
Hobbs explained that bandwidth usage is growing about 40 percent a year on Time Warner's network and the company has to come up with a new business model to handle the added cost of handling so much traffic.
"As a facilities based provider, we've built a network that must be maintained and upgraded," he said. "We have increasing variable costs and we have to continue to invest in the network itself. "
Indeed, managing bandwidth has become a big deal for broadband providers over the last couple of years. Comcast got into hot water two years ago when it was caught slowing down BitTorrent traffic on its network. The Federal Communications Commission said that Comcast's actions were illegal, and the cable company has reformed its practices.
Time Warner believes the metered approach will help it better manage traffic on its network, and control bandwidth bogs who use an inordinate amount of bandwidth on the network.
But the truth is that today Time Warner's customers aren't using that much bandwidth anyway, according to an article published a couple of weeks ago by Business Week. Of the 10,000 subscribers in the Beaumont, Texas trial, only about 14 percent exceeded the cap and had to pay the additional fees, which totaled on average about $19. The company also learned that the top 25 percent of users consumed 100 times more data than the bottom 25 percent of users, which suggests a pretty big gap in how consumers are using broadband.
For now, the trials appear to be angering consumers, who likely aren't breaking these caps anyway. But the very idea that the company could meter its traffic may be enough to cause some subscribers to cancel their service and sign up with a competitor that offers no caps. And for those customers who don't have a choice of another provider, Time Warner's trials may spur a more aggressive eye from lawmakers, who would want to curb the use of these caps.
- prev
- 1
- next
