[Update 1:30pm: Kate Perry, the story’s author has responded:

I’m the reporter who wrote the TWC story for the D&C. First, I didnt rewrite a press release (ouch!). They didn’t even issue one. They broke the story to BusinessWeek and never contacted ayone else.
Today’s story obviously left a lot of unanswered questions (I had 45 minutes ’til deadline to write the piece by the time I finally heard back from Time Warner at 9:45 pm Wednesday) but I thought it was important to get the basic info out there for our readers. I have already posted another story on the website to answer some more questions and I am in the process of writing other follow-ups. Just thought I’d let you know I’m not napping on the job.

I appreciate the clarifying information and the fact this story is not at all the last word the D&C intends to print.  The story we referenced came from the D&C site as of mid-morning today.  It was entirely lacking of any contrary perspective, which was why this article was written.  Should you have any questions from our end, or our readers, send them this way and we’ll get you answers. — Phil]

Why subscribe to a newspaper like the Rochester Democrat & Chronicle that can only be bothered to essentially reprint a press release from Time-Warner?

The D&C’s article telling Rochesterians about Road Runner’s new Internet rationing plan never bothered to say a word about the other side, much less do any independent investigation of the facts.  I guess we’re the media now.  Let’s break it down.

The days of flat-fee Internet charges are dwindling if your provider is Time Warner Cable. Prepare to pay by the gig.

Starting this summer, the company will ask customers to review their usage and pick a plan from 5 gigabytes to 100 gigabytes. If customers use more gigs than their plan allows, they’ll have to pay overages. The new billing system will roll out this fall.

First, this Internet rationing plan is only being imposed on customers in a handful of cities, not across all of Time-Warner’s service areas.  And the company has yet to announce any pricing for their 100GB plan, which we predict will be astoundingly pricey and is frankly still woefully inadequate for consumers who have families that utilize broadband video streaming and other bandwidth intense services.  Comcast doesn’t penalize their customers with higher priced tiers with draconian limits.  They simply tell residential customers to keep it under 250GB per month.

The 5-gigabyte plan will start at about $29.95 a month, Time Warner spokesman Alex Dudley said Wednesday.

And that is about the first and last time you will really see much about this plan.  Time-Warner already offers a lower tier of service for light users, yet almost never promotes it.  Is the company truly on an altruistic bent to save light users money with a plan that you have to peel out of them to discover?

A majority of Time Warner’s customers currently have the standard tier plan, which costs about $49.99. The soon-to-come 20-gigabyte plan will cost about the same and allow customers similar Internet usage.

Similar to what?  The standard tier plan is priced at $39.95 a month for most customers in this area, not $49.99 (unless you do not have a cable TV package.)  It’s hardly “similar” to anyone who uses over 20GB a month, and that is going to be a lot of folks in this area, either currently or in the near future, if they’ve discovered many of the Internet’s broadband-leveraged features, many of which Time-Warner heavily promoted to sign customers up in the first place.  They giveth, and now taketh away, unless you cough up $1/GB more. But how would Mr. Dudley know? He’s not from Rochester. He’s a corporate spokesperson in New York City. When he goes home tonight, his Road Runner will not be rationed.

The new payment plan will be more equitable, Dudley said. Now, a small portion of customers use a massive amount of the company’s bandwidth;  the 25 percent who use the most bandwidth consume 100 times more than the 25 percent who use the least. With the current flat-rate plan, everyone pays for the upgrades to Time Warner’s system that the heavy users’ habits require.

Last summer Frontier tried the same argument.  But when StoptheCap! asked to see their data or independent verification of their claims, we were denied because the data “was proprietary.”  So we take their word for it?  I have no doubt there are extraordinarily heavy users on every ISP’s network.  Those running illegitimate servers, keep peer to peer file swapping applications running 24/7, and those with unsecured wi-fi in their homes can rack up some serious bandwidth usage.  Of course, under their existing subscriber agreements, ISPs have the right to warn and discontinue service for these individuals, many of whom may not even realize what is going on in their own homes.

But independent analysts have no way to verify whether Time-Warner’s claims are inflated puffery, like the “national bandwidth shortage” scare we were hearing about last summer, or represent the dire need to make an immediate change.

All of the warning signs point to a naked cash grab, because of the number of inconsistencies in Time-Warner’s arguments that the D&C can’t be bothered to explore.

With the new plan in place, those who want to use a lot of bandwidth will have to pay for it.

Dudley said increased Internet usage across the board, especially video downloading, has required the company to constantly improve its broadband infrastructure, something that will continue in the future.

“Our customers used 50 percent more this year than they did last year, and we expect them to use 50 percent more next year and the year after that,” he said.

The good news is, most customers won’t pay more, Dudley said. The plan is already in place in Beaumont, Texas, and 86 percent of the customers there pay the same as they did with the flat rate. Of those who pay more, the average monthly overages are about $19, he said.

Beaumont, San Antonio and Austin, Texas, Greensboro, N.C., and Rochester were selected to be part of the usage-based payment trial because they represent a diverse collection of Time Warner users, Dudley said. The results of the trial will determine if or when the company rolls out the payment restructuring nationwide.

You bet they’ll have to pay a lot for it.  Let’s break down how much, for the average users that other cable companies are considering realistic when they develop usage caps:

A 50GB household formerly paid $39.95. They will now pay $64.95.
A 75GB household formerly paid $39.95. They will now pay $74.95.
A 100GB household formerly paid $39.95. They will now pay $114.95.

(based on Time-Warner’s proposed $54.95/40GB tier + overage charges)

And Time-Warner’s argument falls apart on several other levels the D&C account doesn’t consider or question.

If the majority of subscribers are on the lower end of bandwidth growth, where is the urgency to move their rationing plan into place with such draconian caps?  AT&T’s u-Verse sees their average customer usage potentially warranting a usage cap at the 100GB level, something we’re not convinced about either.  Comcast, the nation’s largest cable operator, has a simple limit of 250GB per month on residential customers.  No massive rate increase for customers using the Internet for media streaming who have to find a higher tier.  No draconion limit before subjecting them to outrageous overage charges.  Verizon FIOS has zero usage caps.  It’s a sales point for them, to give customers a reason to switch and to give them the comfort they deserve in using the Internet without having to watch some “gas gauge.”  Is Verizon nearing bankruptcy and crisis with their non-capped service, which runs faster than Road Runner and is provided on an all-fiber network?  Of course not.

And the dirty little secret is, despite Dudley’s claims, this Internet rationing plan is not being “tested” anywhere where they face competition from Verizon FIOS.  It’s a diverse collection of Time Warner customers who all just magically happen to live in areas where competing ISPs either offer significantly poorer service or have plans to institute their own caps or have considered doing so.

But there’s more.  Beaumont, Texas is not Rochester, or Austin, or San Antonio, or Greensboro.  StoptheCap! looked at the Beaumont trial last summer and found it to be hardly representative of what Internet customers would find acceptable.  The Beaumont trial only applied to new customers, not to existing ones.  That skewed the results to show favorable acceptance only by those who signed up for new service figuring they would never exceed the caps.  Yet 14% did so anyway, and many of those were likely first time broadband customers.  And an average monthly overage of $19, half the price of the original monthly subscription, is nothing to sneeze at.

Indeed, we also do not know for certain what happened to those customers who received overage charges.  Did they cancel service and head for a competitor?  Did they succumb to Time Warner’s rationing plan and simply force themselves away from the computer?  Did they force themselves to pay more for a higher tier, or simply discover they maxed out at the highest tier then available (40GB) and will forever more be paying those overage charges on an Internet that is always growing and expanding.

As a customer, do you feel it was “good news” if you didn’t see any price change if you manage to stay within your tier or were you simply relieved?  Are you upset that you now have to be ever watchful of some Road Runner “gas gauge” that ticks ever downwards towards empty everytime you receive spam, everytime some hacker tries to break into your home network, and everytime you do anything on an Internet that is becoming more and more a multimedia bazaar.  Oops, that web ad just cost you a nickle. If Time Warner’s own numbers are right, you can do your own math.  Every year, under threat of overage fees, your consumption is going to increase by 50%.  How long before you find an ever growing Internet bill in your mailbox, with sky high increases coming month after month with no end in sight?

When Road Runner was introduced in Rochester in 1998, I among a handful of others were the first consumer beta-testers of the service.  It’s been a great experience and an excellent service. That’s all about to end because the company has decided to abandon its current business model, which afforded enough revenue to make a handsome profit and still invest money to grow their network and provide support. It’s more profitable to adopt a rationing plan to artificially reduce demand, which then requires fewer investments in network growth to support. It also has the side benefit of stopping the growth of video streaming online, which cable industry analysts ponder might one day threaten the cable TV package. If enough content can be streamed through Road Runner, why have a cable TV package at all? Slam a cap on customers to make that prohibitively expensive, and they can stop pondering.

And the irony is, the same company that tells its customers it cannot afford to give you a-la carte access to limit your video channel package to just those channels you want to watch at a lower monthly price, is the same one telling you that they must drop the unlimited plan they’ve provided for more than a decade because it “cannot afford” to give it you any longer.  Unless, of course, you live in an area where a competitor has no trouble doing that.  No Time Warner usage cap there.

It’s a shame the D&C couldn’t spend a few minutes exploring this themselves.