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Time Warner Money Party – Adding Insult to Injury

Phillip Dampier April 9, 2009 Editorial & Site News, Time Warner Cable/Spectrum 24 Comments

white“It was flaming, flames, FLAMES… on the side of my face… heaving breaths, heaving….”

Mrs. White, from the movie Clue

Well, they’ve done it.  They’ve actually left me speechless tonight.

It’s a good thing I can still type.

You know, I have to be honest.  I really didn’t think Time Warner could have made a bigger mess out of this Internet rationing than they already have, but then… they did!

Imagine my surprise after attending Rep. Eric Massa’s town hall meeting (thank you to all who attended that as well as the other meeting with Rep. Dan Maffei) to find the latest missive  from Time Warner’s COO, Landel Hobbs waiting in my mailbox.  Evidently, this comes as a result of this week’s meetings between Time Warner executives talking with… other Time Warner executives.

I posted it in its entirety without comment earlier because I wanted people to absorb it in all of its splendor.  I read it, stood up from my desk, and walked around the house for a few moments, and took several deep relaxing breaths.  Then I came back and sat down.

Back in 1998, I, along with several other local Internet evangelical types, brought together an enormous crowd in a local hotel ballroom to be introduced to a brand new product that was being introduced in Rochester called “Road Runner.”  It was an exciting event for us and others in this community who could finally put the days of dial up modems and an overpriced ISDN “solution” from Rochester Telephone behind us.  We welcomed Time Warner’s new product, we promoted it, and I’m certain delivered them at least tens of thousands of dollars of new business.

I have been a loyal customer ever since.  My current total cable bill runs some $178 a month, and I don’t have the Digital Phone product.  When Road Runner Turbo was introduced in our area at a great price last July, I ordered it one minute after it became available.  My cable television package had every movie channel, and the service has been generally quite good.  So I have hardly been a critic of the last decade of service this company has provided to so many customers.

And then April 1st, the Day of Infamy arrived.

I honestly don’t know what else this company can do wrong.  I really don’t.  With reluctance, let’s take a look:

Some recent press reports about our four consumption based billing trials planned for later this year were premature and did not tell the full story. With that said, we realize our communication to customers about these trials has been inadequate and we apologize for any frustration we caused. We’ve heard the passionate feedback and we’ve taken action to address our customers’ concerns.

It starts hopeful.  They are apologizing for the enormous amount of frustration they have caused not only the people in my community, but the others “lucky” enough to also be chosen for this “experiment.”  We’ve heard from government officials who have heard the red hot outrage from their constituents.  We’ve seen the news reports from customers absolutely disgusted with the stratospheric rate increase this represents for so many people.  This website has had more than 20,000 unique visitors in the last nine days, and I’d posit most of them were here out of anger and disappointment, and wondering what their options were.  I heard from teenagers, whose parents have already taken away their Internet access out of fear this usage cap is going to result in enormous cable bills.  I didn’t grow up with the Internet; it wasn’t a part of my life from the moment I was aware it was there.  But I can understand and appreciate the tears and panic I am hearing from people actually losing a part of their daily lives because of this.

With the ever-increasing flood of content on the Internet, bandwidth consumption is growing exponentially. That’s a good thing; however, there are costs associated with this increased Internet usage. Here at Time Warner Cable, consumption among our high-speed Internet subscribers is increasing by about 40% a year. As a facilities based provider, we’ve built a network that must be maintained and upgraded. We have increasing variable costs and we have to continue to invest in the network itself.

This is a common problem that all network providers are experiencing and must address. Several other providers have instituted consumption based billing, including all major network providers in Canada and others in the U.K., New Zealand and elsewhere. In the U.S., AT&T has begun two consumption based billing trials and other providers including Comcast, Charter and Cox are using varying methods of monitoring and managing bandwidth consumption.

As a preface, I repeat the challenge to produce the raw data to prove this assertion.  I’m not the only one asking.  When Broadband Reports requested the data, the response was, “we’ve shared our analysis of our data. We’re not going to share raw data…just not going to happen.”

Yes, the Internet is growing.  In fact, it was growing when I first had access in college to this thing called Usenet newsgroups.  It was growing when we were running computer bulletin boards with dial-up modems, and one of our local enthusiasts installed a satellite dish to receive and redistribute those newsgroups on a hobbyist network called Fidonet.  It was growing when we started using this product called Internet in a Box which let us get connected to it through the first Internet Service Providers.  It has actually been growing ever since.  Imagine that.  There have always been costs associated with increasing Internet usage.  Interestingly, as the years progress, the costs for bandwidth and the pipelines to deliver it have actually decreased, as new technology and delivery platforms have come online.  What they claimed last week to be a 50% growth in usage per year has evidently now declined to 40% a year, but that’s fine.  It’s growing.

Part of the cost of being in the business of providing Internet services is that, with the growth, companies must continually upgrade their networks.  It’s only natural, particularly with the increasing importance the Internet holds in the United States today.  What started in our area with several hundred people in a room, clamoring to get online, is now found in tens and tens of thousands of homes here.  Broadband has traditionally represented a highly profitable part of the cable television package, and it remains so.

It is also true that in several countries, where wiring costs can be particularly high (and competition low), Internet access has been expensive and capped.  Australians have written to us with comments like, “welcome to our world.”  Canadians have suffered with usage caps for a long time, often because companies claim the vast distances they must wire makes it prohibitively expensive to provide service.  They, like us, are also suffering from a genuine lack of healthy competition.  But wherever these limits exist, the public clamors for more competition and more choice.  Australia has embarked on a major expansion of Internet access to meet the demand.  If you ask Canadians about how happy they are with their Internet access, you don’t have too far to look before you hear them complain about lack of competition, and the resulting abusive pricing that comes with that.

The assumption Mr. Hobbs wants you to make is that these abusive caps come as a result of the growth of the Internet, not as a result of market concentration, lack of competition, and trying to leverage control over its use out of fear that the online video revolution may someday come to threaten Time Warner’s video business model.

What Mr. Hobbs also fails to explain is that Comcast’s cap is 250GB, with no increase in price for the cable modem service you purchase. Charter has caps for their “lite” plan of 150GB and removes them altogether for customers taking the “deluxe” package. Cablevision has said they don’t need caps, don’t want caps, and are quite profitable at their current pricing, and Verizon FIOS has no caps either.

For good reason. Internet demand is rising at a rate that could outpace capacity within a few years. According to industry analysts, the infrastructure may not be able to accommodate the explosion of online content by 2012. This could result in Internet brownouts. It will take a lot of money to fix the problem. Rather than raising prices on all customers or limiting usage, we think the fairest approach is to move to a tiered model in which users pay more if they use more.

Not the “exaflood” nonsense again!  The study Mr. Hobbs alludes to was debunked as little more than “astroturf,” way back in 2007.  Please take a look for yourself.

The feedback we’ve received from our customers has been very helpful. We’ve made changes to the terms in our current and upcoming trial markets as follows.

Oh goody.  That means they are getting rid of the caps, right?  After all, the issue of capping Internet users has never been popular.  Last fall, International Data Corporation even polled consumers on the idea of caps.  Here were some key findings:

  • 81 percent do not like the idea of establishing a bandwidth cap and charging for use above the cap.
  • 51 percent would try to change service providers if their provider imposed bandwidth caps.
  • 83 percent say that do not know what a gigabyte is or have no idea how many gigabytes they use.
  • Even light users are opposed to the whole idea of bandwidth capping.
  • Only 5 percent said unequivocally that “those who use more should pay more.”

• To accommodate lighter Internet users and those who need a lower priced option, we are introducing a 1 GB per month tier offering speeds of 768 KB/128 KB for $15 per month. Overage charges will be $2 per GB per month. Our usage data show that about 30% of our customers use less than 1 GB per month.

Wow.  I know I’m excited.  My personal guess is this “tier” came not from consumers clamoring for it, but in response to criticism that under the originally proposed new tiers, no consumer would ever save a penny.  The currently available Road Runner “Lite” package was priced lower in our area than the replacement plan which cost several dollars more and was capped at 5GB.

I’d also guess most of the people using the Internet in amounts less than 1GB per month have no idea what that means, but they will know now once they exceed that amount and find a “gift” of overage charges – not at the ridiculous $1/GB, but $2/GB!  A good part of that 1GB will likely be eaten up by the hammering cable modems already get from hackers, network probes, and other illicit attacks on customers from outsiders.  Then count the spam, web ads, software updates, antivirus updates, and all of the other things that eat into their bandwidth allowance, and you’re left with ultimately very little.  Heaven help someone on this tier with a wireless router they never realized they had to secure.  An enterprising neighbor “borrowing” access could cause a heart attack when the customer opens their bill.

And because we care, here's another 5 or 10GB for your ration this month.

And because we care, here's another 5 or 10GB for your ration this month.

• We are increasing the bandwidth tier sizes included in all existing packages in the trial markets to 10, 20, 40 and 60 GB for Road Runner Lite, Basic, Standard and Turbo packages, respectively. Package prices will remain the same. Overage charges will be $1 per GB per month.

Oh my.  I am dizzy with excitement.

I knew it.  Dear readers, please take a look at the article I penned early this afternoon, before Mr. Hobbs released his statement.  Does it sound a tad familiar?

I’d also like to share some of the behind-the-scenes contemplating I have been doing on this issue based on the evolving message coming from Time Warner on this issue.  I think the increasing reliance on their use of the words “experiment” and “test,” and the supposed willingness to “rethink” the level of the caps may be part of an effort to lay the groundwork for some sort of damage control announcement that the company is going to “double” or “triple” the caps in their upcoming “experiment.” In thinking about how this industry has worked over the past two decades I have been keeping an eye on them, it would not be outside the realm of possibility for them to try and proclaim a “victory for consumers” by simply increasing the caps, but still imposing them anyway.

Where I was wrong was in my assumption that they would at least double or triple the caps before trying to portray the “generosity” as a “consumer victory.”  Instead, they brushed some bandwidth crumbs off the table for our empty bandwidth bowls.  It’s positively Dickens like.

So now you get to pay more to get a bit more, and you should thank us.

• We will introduce a 100 GB Road Runner Turbo package for $75 per month (offering speeds of 10 MB/1 MB). Overage charges will be $1 per GB per month.

This is hardly a concession since they already talked about offering this.  Now we have a price.  Let’s swim in the value:

Before:  $39.95/month (uncapped)

Now: $75/month (100GB cap + overage fees)

• Overage charges will be capped at $75 per month. That means that for $150 per month customers could have virtually unlimited usage at Turbo speeds.

I am tingling.  So now, instead of paying $39.95 a month, customers using “virtually unlimited” (they won’t even give you an absolute assurance of unlimited at these prices) bandwidth will pay $150 a month.  Why that’s an increase of just $110 a month!

• Trials will begin in Rochester, N.Y., and Greensboro, N.C., in August. We will apply what we learn from these two markets when we launch trials in San Antonio and Austin, Texas, in October, but we will guarantee at least the same level of usage capacity in these trials.

On behalf of Rochester anyway, thanks a lot for moving up what some here have called “the pillaging.”  I’m sure you had lots of feedback from both Rochester and Greensboro begging to move up the effective date of this nightmare.  And Texas gets a couple extra months before the “gift” of caps and rate hikes reaches them.  My suspicion remains that the lesson learned from Rochester and Greensboro will inevitably come from the stampede to the exit as customers elect to get their Internet somewhere else.  Anywhere else.

• As we launch DOCSIS 3.0 in the trial markets, we plan to offer a 50/5 MB speed tier for $99 per month.

Note there is no proposed date for this, nor any mention of what the cap for that will be.

Again, the Internet is dynamic and continually evolves, so our plans will evolve as well and aren’t set in stone. We appreciate the feedback we’ve received. We’ll look forward to more dialogue as we progress in these trials. You can send your comments and feedback to us at [email protected]

Gosh, thanks.  Mr. Hobbs left me feeling like Tessie Hutchinson, the big winner in Shirley Jackson’s (a fellow Brighton High School graduate) The Lottery.

Honestly, since the day this “experiment” was announced, I have felt abused as a loyal customer of Time Warner.  My trust in this company has evaporated, and frankly tonight I am just stunned by how out of touch these people really are.  Do they not understand it is not just customers who are apoplectic over this?  This has turned into a long article already, and I’m sure readers have plenty to say here as well, but let me close with the reaction some others have over this disaster in the making:

Richard Greenfield, the analyst with Pali Capital, published a blog post Wednesday asking, “Is Broadband Becoming Less Profitable for Time Warner?” Mr. Greenfield said that the company is “making itself a spectacle.”

Nate Anderson, Ars Technica: Time Warner Cable, stung by online criticism of its paltry traffic caps (in tests, these have ranged form 5GB/month to 40GB/month) and ludicrous pricing schemes, has taken to the ‘Net to defend its sullied honor. But it’s hard to defend a scheme with fees so high they might well meet the legal definition of “obscene.”

Rep. Eric Massa (D.-N.Y.), who represents a district in upstate New York, this week denounced Time Warner Cable’s plan as “monopolistic” and an “outrageous, job-killing initiative.”

“We don’t want customers to think about byte caps so that’s not on our horizon… We literally don’t want consumers to think about how they’re consuming high-speed services. It’s a pretty powerful drug and we want people to use more and more of it.” Jim Blackley, Cablevision Systems senior vice president of corporate engineering and technology.

So far, the only ones who seem adamant this is the right decision… are Time Warner executives.

Currently there are 24 comments on this Article:

  1. Ben says:

    Couldn’t agree more, I think they’re obviously more in touch with their accountants than they are with their customers or reality! I shall call TW once again tomorrow and see what BS they try and tell me this time. I just like reiterating to them that Caps = No money from me as a former customer!

    Haven’t heard from Alex Dudley in a few days……….What will he say next?

  2. Erich says:

    “I didn’t grow up with the Internet; it wasn’t a part of my life from the moment I was aware it was there. But I can understand and appreciate the tears and panic I am hearing from people actually losing a part of their daily lives because of this.”

    I am one of those. I’m 20, and a college student. the internet has become such an essential part of life and TWC knows it. They know its something we can’t live without and are banking on it. I do school work online, communicate with teachers online, heck I take an online course. Not to mention the hours of entertainment, and most importantly Xbox Live. Like i commented earlier, to pay the same price my family pays now, the whole family’s usage must drop below 20gb a month? With where I live unable to get frontier’s service we’re going to be left with pretty much no other option. I wonder how companies like Microsoft will respond to this? I know my good buddy Bill won’t be happy to lose my brother and I as loyal XBL subscribers due to TWC’s greed. Not to mention how much i will miss good ol Call Of Duty 4. Oy what is the world coming to?

  3. Earl Cooley III says:

    It’s like a nasty flashback of when SWBell tried to destroy the BBS hobby in Texas by trying to charge business rates to BBS sysops, back in the day. (shudder)

  4. Andrew S. says:

    Great article. I went to the Maffei meeting, but didn’t get to ask my question. Someone else did, however, and he took it seriously.

  5. Andrew S. says:

    By the way, this isn’t just greedy Time Warner – it’s an agenda to move people onto a regulated, restricted ‘free’ Internet 2. Look up the internet consortium and read the white papers.

  6. Mike M. says:

    Let me make the crystal clear to TW. If you implement caps I am gone. I live in the city and frontier IS an option for me and I will use it. I have your phone service so you will lose that too.

    I am not a heavy users but a pretty moderate one. I have run a monitor program for a couple years now so I have a general idea what I use. 40GB will not do it for me even if I would except your idea of caps.

    My parents have your all-in-one package and I will do my best to convince them to leave also.

  7. Robert S. says:

    First i want to say that i have posted a link to this site on a game site that i play were they had started a thread about the metered billing (caps) to help spread the word, allot of whom didn’t like this cap idea. caps are bad for us all

  8. Wes says:

    I like the sound of 50/5 uncapped for $99. I am likely leaving for frontier, but may stick around for TWC if they offer a reasonable uncapped offer in addition to their capped plans…. not holding out much hope though. The company seems pretty out of touch.

    • Time Warner did not say this was uncapped. We don’t know.

    • Jeffrey_Bays says:

      The likely hood of them delivering this in Rochester any time soon is zero. They don’t have a problem with network capacity here. Their test is merely a pricing test. Only markets that may face competition from other cable providers or high speed providers will get this upgrade any time soon.

  9. Uncle Ken says:

    I picked up on a line form Erich’s post that needs to be driven home again. Contact Microsoft and all the subscription services you use. Explain to them what is going on and why you can no longer subscribe to their offerings because of caps After all these companies built business models around the concept of their users being able to use the services. Every company that you use to obtain content from is how they exist. Call these companies the big guns of the net. Net commerce will take a hit because of a cap you can no longer brose or download a stores catalog no more viewing a long pdf menu for a local restaurant or even order a pizza for fear of being charged more for the usage. Commerce is a two way street. Some order from out of state but remember others order NY products and services. This keeps smaller shops and people in jobs that we so woefully need right now without a $500 cable bill. It will all come crashing down if we let this cancer spread.

    • German John says:

      This IS the best idea yet,

      Send a letter to All the services you are using, Google(you-tube) internet merchants, TV and radio stations, newspaper, Shopping channel (even if you have no use for them introduce yourself as potential shopper to QVC and others), Write MS and tell them you will have to change from the MS products to others that require less extensive updates, tell them sorry but you can’t use the services anymore in the future as the available band-with will be limited by TW and you will need to use the BW for other uses (kids schoolwork, work, whatever).

      This will put additional pressure on them from the outside..this can only be accomplished if ALL of us write ..do it now

      John

  10. James D. Legan says:

    My email to Eric Massa this morning:

    Congressman Massa,

    I was unable to attend your meeting in Pittsford last night, but I wanted to do two things.

    1) Thank you for your efforts on this matter. I emailed you last week regarding this but I want to echo my earlier sentiments.

    2) To ask you not to be swayed by the frankly insulting memo released by Landel Hobbs regarding Time Warner “good faith” effort in trying to resolve this issue. These changes represent a paltry effort at best and will still transition the internet portion of TW cable bills of many families, college students, etc. from $39.95 today to $150 for the exact same service.

    This wreaks of Time Warner intentionally releasing low ball numbers so that at a later date they could make a good faith yet insulting offer… which was apparently last night.

    I implore you to stand your ground and continue to stand with your constituents on this matter.

    Regards,

    James D. Legan

    • Jeffrey_Bays says:

      I would like to see a public a chalenge like this.

      We respect your right to “test” this priicing. To ensure accuracy of the “test” pleases keep competition in the market when the test is performed. Those customers on earthlink and AOL should remain on the unlimited plan. We understand that they are essentialy on the same RR network, but this “test” is not about network performance, rather a pricing test. Those that want to pay for the tiered pricing will provide accurate data. Those that do not want to change will provide accurate data as well.

  11. Brian Kramer says:

    Well… I’m pushed over the edge. I was taking a wait and see attitude on this and planned to cancel the moment that these plans were introduced. Not any more. As soon as I get home this evening I will be canceling my all-in-one package with TWC. I’m sick and tired of their irresponsible actions and their belittlement of their consumers. Do they really think this communication will “fix” the current swell of anger in the community. I don’t know how everyone else feels, but this makes things worse.

    Brian –

  12. Kevin says:

    Okay, first and foremost: I’m against caps.

    That said: has anyone bothered to take a look at TWC’s earning’s lately?

    2007: $1.12 billion profit
    2008: $7.34 BILLION LOSS.

    Maybe, just maybe, they actually do need money…not all corporations are rolling in giant piles of money, you know. This still doesn’t seem like the right way to handle it, though.

    • Not for broadband. Their costs decreased AND their profits increased. The only loss they incurred was a loss of interest in spending some of those profits on infrastructure improvements.

  13. Jeffrey_Bays says:

    Our usage data show that about 30% of our customers use less than 1 GB per month.

    I find this hard to believe.

  14. Brad says:

    Time Warner’s CEO must want to break last year’s income. 21.5 Million was not enough. Please empty your pocketbooks.

    http://finance.yahoo.com/news/APTime-Warner-CEO-awarded-apf-14886943.html

  15. John P. says:

    The Ars Technica link in this article is wrong. The author is citing this article:
    http://arstechnica.com/tech-policy/news/2009/04/the-price-gouging-premiums-of-time-warner-cables-data-caps.ars
    but links to the first AT article on the issue.

  16. Angus says:

    Like others, I was taking a wait and see hoping that TW would come to their senses. But, this seals the deal; I’ve just signed up with Frontier. Hopefully in the first 30 days service will prove adequate for my needs and I won’t have to cancel DSL to stick with TWC (even if I do need to cancel DSL, I’ll give ClearWire a chance before sticking with TWC).

  17. Kenneth says:

    Well, I’m in Austin (technically Cedar Park, just outside) and now that my rage has worn off I’m trying to figure out what to do next. The only other option I have in my area is ATT and when talking with them I’m only able to get their Pro plan (3.0 down) which I don’t feel is quite good enough for the video streaming that I do occasionally. Uverse is all around me but they quite haven’t gotten into our neighborhood. Part of me wants to say screw it and just go with ATT and just give up the streaming but part of me says to keep writing and calling everyone that would listen to keep them from going through with this. I even had a silly moment and thought if people can send things to try to save tv shows why not have everyone send in bottle caps with the word no written on them so that they might get the point. Frustrating!

  18. Rick says:

    I also am trying to get past the rage to figure out the next step. It is very clear to me now; my only option is to stand by my principles and boycott TWC if and when they impose bandwidth caps. I have also been extremely successful in convincing my friends and family to do the same. I have yet to meet anyone who supports TWC’s drive to implement bandwidth caps. So the bottom line is BANDWIDTH CAPS = LOSS OF REVENUE FOR TWC.

  19. DENNIS TEEL says:

    after reading the article and the posts,i believe i’m ready now to switch internet providers.i’ll continue with twc’s digital cable service but i’ll drop the high speed internet service and i plan to send them an email telling them exactly why!! this is an outrage!! twc seems to think that lining their pockets with loot is more important than the satisfaction of their customers, i thought that nothing could rile me worse than washington politics.well,TWC has proven me wrong!!

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