In South Texas, Time Warner Cable customers have been given “usage trackers” that tally up all a household’s internet use. Customers who sign up for a light plan of 5 gigabytes of broadband, the equivalent of two high-definition movie downloads, are rewarded with a $5 discount each month if they don’t go over. If they do, they pay $1 for every additional gigabyte.
“We’re moving away from one-size-fits-all,” said Jon Gary Herrera, a Texas spokesman for the cable company, which now tends to call itself a broadband company instead.
Some of Time Warner Cable’s competitors are moving in the same direction toward pricing tiers for higher speeds and larger amounts of broadband at home. Usage-based billing may be advantageous for a companies bottom line but it is definitely the opposite for customers watching more and more video on the Web, as well as companies like Netflix that distribute content. Some believe that as customers are made more aware of how much broadband they’re using each month, they’ll use less of it. This will in turn protect traditional forms of entertainment distribution but will also have the negative effect of discouraging new Internet services.
Executives at cable and broadband providers say it is in their best interest to make broadband a must-have product. “The exploding growth of online video usage undercuts any argument that cable is standing in the way of this business,” said Brian Dietz, a spokesman for the National Cable and Telecommunications Association, the industry’s trade group.
But some government officials aren’t convinced. The Justice Department’s antitrust lawyers are conducting an investigation into the cable industry’s treatment of online video companies with an eye toward deterring anticompetitive behavior. Some analysts say the investigation could actually accelerate the move to usage-based billing.
Usage-based billing is seen by some as a fairer alternative to broadband caps, a term most closely associated with Comcast, which had been enforcing a limit of 250 gigabytes per Internet customer per month. Although only a small minority of customers ever exceeded the cap, it became a lightning rod for competitors like Netflix, which accused Comcast of unfairly favoring its own services.
Comcast said this spring that it would start to test usage-based billing. “Our network is not an infinite resource, and it is expensive to expand it,” David L. Cohen, a Comcast executive, said at the time.
Along with news and entertainment, the futures of entire industries — commerce, health care and transportation — are being built atop a broadband foundation. Companies big and small are coming up with ways to get faster broadband to more people; many people believe that broadband speeds will inevitably improve as time goes on, just as computer chip speeds have.
Critics say that the marketplace lacks sufficient competition, which keeps the price of broadband higher than it otherwise would be. They wonder whether strategies like usage-based billing will worsen what is already an economic barrier for some Americans. “It’s like locking the doors to the library,” said Nicholas Longo, the director of Geekdom, a new collaborative work space for small companies in San Antonio.
Time Warner Cable started testing usage-based billing in San Antonio four months ago by offering the $5 discount to lighter users. Customer service representatives at a suburban call center are now trained to ask new customers about how they use the Web; once uses (listed on a work sheet) like “Internet gaming,” “watching TV/movie clips” or “video chat” are mentioned, callers are steered toward a pricing plan with unlimited bandwidth.
The Netflixes of the world are wary of these moves, though there may be little they can do. Concerns about both caps and usage-based billing have already caused one would-be online video competitor, Sony, to rethink its plan to sell a bundle of cable channels over the Internet.
Dish Network and other companies have been preparing plans for similar bundles, which could help cause the so-called unbundling of television that consumer advocates have dreamed about for decades. But “these guys have the pipe and the bandwidth,” said a Sony Network Entertainment executive, Michael Aragon, referring to cable and broadband providers, while speaking at a meeting sponsored by Variety in April.
Still, Mr. Aragon added, “We do believe there’s a business model out there.”
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