Despite the propaganda campaign underway in the domestic broadband marketplace, especially among cable operators, the NY Times reported today that profits remain high for broadband service while costs for bandwidth, and the level of investment by those companies to provide it, is on the decline.

This comes in marked contrast to the public relations campaigns underway at some broadband companies, which seek to impose punitive caps, limited tiers, steep overlimit fees, and increase prices on residential broadband service.  As late as last week, Time Warner Cable sought to effectively triple the rate for their broadband customers in five cities for an equivalent level of service.  Road Runner subscribers paying $39.95 per month for service would now, under last week’s proposal, have to pay $150 a month for the same service.

The resulting firestorm of customer protest, and the involvement by Congress, temporarily sidelined Time Warner’s tiered pricing scheme, but company officials in the Triad region of North Carolina hinted strongly tiered pricing was coming back after a “customer education campaign” had been completed.

These plans to charge for above-average Internet use “are unjustifiable for almost everywhere in the country except for rural America,” Richard F. Doherty, the research director of the Envisioneering Group, a consulting firm that studies cable technology.

The Times report by Saul Hansell found that network engineers plan their networks based on peak potential traffic loads.

“All of our economics are based on engineering for the peak hour,” said Tony Werner, the chief technical officer of Comcast. “Just because someone consumes more data doesn’t mean they drive more cost.”

This belies Time Warner’s claims that light use customers might be effectively subsidizing heavier users.  In fact, the Times reports that the actual costs for Time Warner are identical whether a consumer watches 50 movies or doesn’t even use their connection that day.

The costs for upgrading networks is declining at an even steeper rate than StoptheCap! realized.  Comcast’s own reports to its shareholders now reveals the upgrade cost to manage the Internet growth Time Warner officials have been worrying about is an average of $6.85 per home to provide double the speed of existing service.  That’s a far cry from a 300% rate increase, per month, that Time Warner was seeking in lieu of punitive caps with substantial overlimit fees.

Costs are dropping even more rapidly with the implementation of DOCSIS 3, a new technology that increases capacity, dramatically raises speeds, and actually reduces expenses for cable systems, who currently have to face sub-dividing traffic congested neighborhoods.  In fact, Comcast told investors it will actually cost them less to provide 50 megabits per second connections than to continue the current level of service, at around 6 megabits per second.

This raises an even larger number of questions about why Time Warner, among other providers, needs to overcharge customers and penalize them for using their Internet connections with enormous overlimit fees that are possible with a tiered rate system, when their own bottom line would benefit from completing the upgrades without making any changes to customer’s bills or level of service.

Hansell also hints domestic broadband providers may be charging too much now.

Comcast has introduced a new 50-megabit-per-second service at $139 a month, compared with its existing service that costs about $45 a month for 8 megabits per second. Time Warner just announced it will charge $99 for 50 megabits per second [Editor’s Note: This service was to be capped at 150GB per month minimum, as per TWAlex].  By contrast, JCom, the largest cable company in Japan, sells service as fast as 160 megabits per second for $60 a month, only $5 a month more than its slower service.