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Our Concerns About Time Warner Cable’s New Usage-Based Billing

Phillip "Keeping an Eye on Time Warner's Eye" Dampier

Today’s announcement by Time Warner Cable that it is reintroducing usage based billing, at least optionally for customers in southern Texas, is a concerning development that requires further examination and vigilance.  But before we delve into that, I’d like to thank the company for avoiding the kind of mandatory usage billing/cap system we’ve seen appearing at certain other providers.  We also welcome the company’s admission that they have earned enormous profits from unlimited consumption plans and consider that pricing part of the success story they’ve had selling Internet access.

Stop the Cap! has never opposed optional usage-based billing tiers for customers who feel their light usage justifies a service discount.  However, industry trends so far have made no provisions for truly unlimited usage plans that sit side by side tiered plans without quietly diluting the value of flat rate Internet with tricks and traps in the fine print.  We have serious concerns this “foot in the door” to Internet Overcharging could eventually become mandatory for all customers.  Perhaps Time Warner Cable will be different than all the rest.  We can only hope so.

Let’s break it down:

First, Time Warner Cable’s admission it blew it the first time it experimented with these pricing schemes is most welcome.  Being on the front lines of the battle against the company’s Internet Overcharging experiment in 2009 remains very-well-documented on this website.  We confronted arrogant local management that argued usage billing was “fair” and would barely affect any customer.  In fact, the original plan a later revision would have tripled flat rate Internet access to a ridiculous $150 a month.

The company’s 2009 “listening tour” was also a farce, with a number of e-mailed comments deleted unread (we know, because Time Warner’s comment system sent e-mail to customers telling them exactly that.)  Local media outlets, newspaper editorials, and customers made it quite clear: customers want their unlimited Internet access left alone.  They do not want to learn the mysteries of a gigabyte, they don’t want to watch a gauge to determine how much usage they have left, and they sure don’t want to pay any more for broadband service.

If Jeff Simmermon, Time Warner Cable’s director of digital communications, now represents the prevailing attitude about unlimited Internet access among Time Warner Cable’s executive management, that is a very welcome change indeed.  But we’re not completely convinced.  For nearly two years, Time Warner executives have talked favorably about usage-based billing as the “fairest way” to bill for Internet usage.  Besides Simmermon’s comments, we have seen nothing from CEO Glenn Britt or CFO Irene Esteves that indicates they have changed their original views on that.

Unfortunately, we’ve learned over the last three years today’s promises may not mean a lot a year from now.  We’ve watched too many companies introduce these pricing schemes and then gradually tighten the noose around their customers.  Once broadband usage is monetized, Wall Street looks to the practice of charging for usage as a revenue source, and they pressure companies to keep that money flowing.  What begins as an optional tiered plan can eventually become the only plan when flat rate broadband is “phased out.”

Canadians understand this is not unprecedented.  They’ve been down this broadband road before, and it is loaded with expensive potholes and broken promises to repair them.  Usage allowances have actually dropped at some Canadian providers.  The fixed maximum on overlimit fees has gradually been relaxed or removed altogether, exposing Canadian consumers to broadband bill shock.

Time Warner Cable customers are now paying upwards of $50 a month for broadband after consecutive annual rate increases.  That’s plenty, and usage should remain unlimited for that kind of money.

Still, Stop the Cap! has never been opposed to truly optional usage-based billing plans.  We’re just unconvinced companies will keep the wildly popular flat rate pricing if boatloads of additional revenue can be made dragging customers to tiered usage plans, particularly in the absence of aggressive competition.  Just ask AT&T.

Second, as we’ve seen on the wireless side, “unlimited Internet access” means one thing to consumers and all-too-often something very different to providers.  For example, companies have discovered they can claim to provide unlimited access but then de-prioritize flat rate traffic, or even worse, throttle speeds and give preferential treatment to usage-based billing traffic.  Time Warner Cable needs to commit that unlimited access means exactly that — no traffic prioritization, no speed throttles, and no sneaky fine print.

Third, we don’t expect Time Warner will get too many takers for their Broadband Essentials Internet program.  The discount, just $5 a month, is quite low for broadband service limited to 5GB per month.  Exceeding that limit is quite easy, and after just 5GB of “excess usage,” the discount is eaten away and the penalty rate of $1/GB kicks in.  That could ultimately risk up to $25 a month in extra charges.  I’m uncertain how many customers would want to risk exposing themselves to that for a modest discount.

While we are not issuing a Call to Action over these developments, we will be watching them very closely.  Time Warner Cable should make no mistake: if their usage billing plans begin to eat away at fairly priced unlimited access plans, we will once again picket the company and do whatever is necessary to bring political and consumer pressure to force them to rescind these kinds of pricing schemes yet again.

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Currently there are 26 comments on this Article:

  1. Joe says:

    TWC said they were going to “temporarily shelve” their overcharging scheme back in 2010 when they threw in the towel on their first bid to screw consumers. At that time they said they needed more time to “re-educate” consumers.

    I believe we are seeing the first part of the “re-education” plan. You and I both know that this $5.00 discount isn’t going to work and if we can see it you can bet that they can too.

    Bonus points to he who can explain why TWC would offer a program they know in advance isn’t going to be accepted. My guesses:

    1) Most of us assumed the real reason they temporarily shelved their overcharging scheme was to let things die down before trying it again. Maybe this is just a big toe in the water to see how much they can get away with?

    2) “See, we tried to do it the right way and nobody wanted to sign up so now we have to go to a forced plan”.

    3) They know anyone with any brains at all wouldn’t go for this but they also figure there are X amount of idiots and X amount of average people who just don’t understand the whole “GB thingy” so they might as well try to steal as much from them as they can.

  2. Loons In June! says:

    “you and I both know that this $5.00 discount isn’t going to work”

    It may work for many people that are very lite users of the net unlike anyone that visits and posts on this site. For everyone that lives on the net I can find 2 that just do email and the occasional surfing.

    Its a start, lets see where it goes, at this point its not affecting anyone reading here

    • You’d be surprised who reads this site. I think at least 1/4 of my e-mail comes from people who think +we+ are their cable company, antenna manufacturer, or phone company. A lot of these people are casual users who probably found us from a Google search.

      I don’t actually think this discount will work either, but for specific reasons:

      1) Those most casual about Internet usage are least likely to understand what a GB is.

      2) How do you simply market this? Can you imagine having to include a brochure about usage meters, a glossary of usage terms and measurements, and even worse, telemarket it?

      3) Your support costs to take calls from confused customers who get warnings or a high bill may make it even less worthwhile.

      4) For $5 more, get peace of mind knowing you won’t face up to $25 in overage fees.

      Mobile carriers get away with the barely useful 200MB-$15 plan because it is cheap. Even so, most financial reports seem to indicate customers opt for the standard higher use plans.

      My personal theory is this is more about testing the usage meter, billing, and customer reaction than actually bothering with “Broadband Essentials” as a useful product. I suspect it will get very limited interest from consumers.

      My greater concern is that we’ll hear the drumbeat increase from Wall Street by the next conference call whining that Time Warner is leaving ARPU/revenue on the table by not leveraging fatter usage-based profits. I can hear Craig Moffett now….

      As I said before, I have no objection to optional UBB so long as the Gouge Train doesn’t pull into the station and start derailing the unlimited plan the way AT&T is killing theirs with secret limits and throttles.

      This also better mean no outrageous rate hikes for the unlimited plan to herd customers away from it.

    • Tim says:

      You sir are delusional if you think they would give you a $5 discount just because you are a “lite” user. I am sure these guys have worked out the math and KNOW that they will make a killing off of this. I hope you really don’t think that corporations such as Time Warner have your best interest at heart.

      • DJRobX says:

        They cannot make a killing off of this in its current form. The only logical conclusion is that TWC has other plans for this long term.

        Optimistically, they would require metering on low cost tiers in an effort to push heavier users to more expensive plans. But the realities can be far worse, as Dampier articulated quite eloquently.

        There’s quite a pricing chasm between TWC’s 30/5 and 50/5 tiers. $59/month vs $99/month in my area. Speculation: Perhaps TWC intends for that $40 difference to cover “unlimited” access down the road? Or worse, as a “weapon against cord cutting” – unlimited plans available when bundled with TV subscription only.

        • Tim says:

          Are you kidding me? It could cost you $25 bucks more a month! And who says that they wouldn’t raise that maximum billing limit in the near future? Trust me friend, they have already had people think this out and do the math already. They know the current trends and where data usage is going. These corporations aren’t stupid.

          • I am surprised no company ever tried a usage cap that went away if you signed up for a triple play package. The lust for that extra cash is so great, even obvious marketing tie-ins like that escape the industry in favor of Internet Overcharging.

            I think Canada is the take-away lesson to learn from. Canadians have been exactly here several years ago, when usage caps and overlimit fees were gradually introduced and then the noose was tightened. Even today, maximum overlimit fees keep increasing (or are dropped altogether so they can charge as much as they want).

            Past precedent remains very important to me, and to the Wall Street types who lust for the increased revenue per subscriber. If TWC has a metering system for some customers, I guarantee you there will be pressure by shareholders to expand it to more.

            The $5 discount for south Texas screams “experiment” to me. I’d be surprised if they even found1,000 customers to consider it.

    • James says:

      Loons,

      Sure there are some folks (mainly senior citizens) who do only a very light amount of web browsing and e-mail checking. But very honestly, it doesn’t take much for such users to ramp up their use of the Internet (and of course, using more data in the process) once they discover and expand their knowledge of what can be done online.

      “Let’s see where this goes?” It’s pretty clear where some people in TWC management top brass would like for this all to go.

      Websites like this one are merely calling out companies like TWC and their plans for what they are attempting to implement – a money-grubbing, greedy scheme to extort more $ from their customers.

      Network management is a complete red herring. As was pointed out on this site in the past, bandwidth is not a consumed resource like water, electricity, etc. – when the load on the network subsides, more bandwidth magically becomes available. But in the past TWC saw the need to “educate” it’s customers to think that Internet bandwidth is analogous to other utilities. Quite plainly, it is not.

      Time for another re-education on our part.

  3. DeanSB2000 says:

    If my provider, Mediacom, EVER switches to “usage-based billing”, THEY WILL LOSE ME AS A CUSTOMER IMMEDIATELY!!! Storm Lake, Iowa is one of the LUCKY communities which have THREE (3) Broadband Internet providers…Mediacom, Knology, and CenturyLink!!

    So far, ONLY CenturyLink is talking about imposing “usage-based billing” on THEIR customers, however, I’m KEEPING A CLOSE EYE on Mediacom from this point on, because IF they were to impose THEIR version of “Internet Overcharging”, I WILL SWITCH BACK TO KNOLOGY IN A HEARTBEAT!!!

    I, as an Internet consumer, REFUSE TO BE BULLIED WITH THESE OVERCHARGING SCHEMES, and I think that EVERYONE SHOULD SIGN THAT PETITION AT CHANGE.ORG DEMANDING AN IMMEDIATE END to ALL “Internet Overcharging” schemes!!!

    THESE PROVIDERS MUST UNDERSTAND that WE, AS CUSTOMERS, WILL NOT BE “JERKED AROUND, and that WE DEMAND EXCELLENT CUSTOMER SERVICE from those whom we get our Internet service from!!!

  4. jr says:

    Time Warner had a 44% jump in fourth quarter net profit but they “can’t afford” not to gouge

  5. Richard says:

    I’ve signed the petition mentioned above at change.org opposing broadband caps. Thank you federal government for allowing the cable and dsl providers to have a monopoly in most areas that do not have community fiber. Also thanks for turning 18-20 states here into broadband backwaters and not allowing any kind of 21st century fiber competition. Remember that when people and tech businesses start either leaving because of overly expensive broadband, or not wanting to move in because of usage capped ISP plans. I know here in California, some of this state has very good broadband, Sonic.net and Paxio that provide up to 1 gbps symetric. This is only in Northern California for now though.

  6. Munly Leong says:

    The most worrying thing is that their meter is built, deployed and implemented.

    Essentially this just could be a monetized field test. You’re right to respond with caution/cautious optimism?

  7. Brion says:

    It is good to see they listened to feedback. I had several private conversations with Jeff Simmermon via email and Twitter discussing this issue at the time. One of the suggestions I made to him was they try a different tack by creating an incentive for people to voluntarily limit their usage instead of a punitive approach for going over and make it voluntary.

    I’ll re-post two articles I wrote discussing both the problem as I see it an a proposed alternative, elements of which I kind of see in their current UBB scheme. I agree with Phil that we need to keep an eye on it, but I’m encourage that they’re backing off the Thumping Stick(tm) a bit and giving a nod to financial incentives (albeit very paltry incentives).

    Please bear in mind the numbers I use in my proposal are intended to get the attention of TWC and not necessarily the final numbers I would like to see (e.g. $150/mo for 50Mbps is incredibly expensive).

    http://brions.blogspot.com/2010/06/explaining-futility-of-data-caps.html

    http://brions.blogspot.com/2009/04/new-pricing-scheme-suggestion.html

  8. I am attempting to directly engage Mr. Simmermon and Time Warner Cable on that company’s blog. Here was my message to them, and I’ll follow-up with any replies I get:

    Stop the Cap! got started in 2008 battling unjustified usage caps and throttling of home broadband accounts. In 2009, we were in the front lines here in Rochester doing battle with Time Warner for their ridiculous cap experiment that offered unlimited Internet, for those who wanted it, for a whopping $150 a month.

    We raised a ruckus then and we’ll raise one again if Time Warner ever returns to those kinds of Internet Overcharging schemes.

    While our group has never been opposed to optional usage based billing, the historical trend is that once established, providers (with Wall Street’s encouragement) start whittling away at the remaining unlimited plans until they are gone.

    I appreciate your admission Time Warner makes buckets of money on unlimited service — they do, and unlimited access is one of the reasons for the runaway success of TW broadband. We also appreciate your understanding that consumers overwhelmingly do not want flat rate broadband taken away.

    But we still have some concerns that need answers before we consider this no threat to the unlimited broadband Time Warner has sold us for well over a decade:

    1) Can you assure us the unlimited option will continue at the same basic price point it has since inception? Time Warner’s earlier experiment would have dramatically hiked the price for unlimited service.

    2) Can you assure us unlimited users will enjoy the same priority access to Time Warner’s broadband network metered customers do? Traffic prioritization and throttled speeds are increasingly concerning AT&T wireless users grandfathered on unlimited plans the company is clearly trying to make as unattractive as possible.

    3) While your attitude about unlimited access is refreshing, CEO Glenn Britt and CFO Irene Esteves have repeatedly called usage based billing ‘inevitable’ and Esteves alluded it was the perfect weapon against cord cutting in statements as late as December. That weapon isn’t much of a threat if UBB is optional. Do Mr. Britt and Ms. Esteves now share your sentiment about unlimited access, or are you stating your own personal views. We’d like to know the top management of TWC has modified their positions away from ramming this kind of pricing down customers’ throats the way AT&T and certain other cable operators are now attempting.

    There is simply no justification for limiting access at today’s prices, especially with Time Warner’s upgrade to DOCSIS 3 technology. That being said, we have no problem if the company wants to market a lower cost alternative to those who want it and can switch plans at any time.

    Our best wishes,
    Phillip M. Dampier
    Editor, Stopthecap.com

  9. James says:

    Here we go again! What’s the point of a big pipe to the Internet if you would blow through it in no time.

    It seems TWC hasn’t learned a damn thing nor “listened to any feedback” from their customers, they’re back to their old tricks when think no one is watching. **Sigh**.

    The Internet needs to show them that people ARE watching their EVERY MOVE.

    And TWC bought Insight in the past year or so … they are becoming a monopoly in many markets.

    • James says:

      Correction to above, “… of a big pipe to the Internet if you would blow through the CAP in no time…” .

      Makes any marketing campaign advertising the connection speed seem downright silly.

  10. James says:

    TIME TO RAISE A RUCKUS AGAIN! Indeed. TWC shenanigans will not stand!

    :-)

  11. Andrew Madigan says:

    It comes down to this: Time Warner will only make money off this if people switch to it and then get surprised by a higher bill. No doubt their sales people will push UBB as a “discount” and not mention the $25 over-use penalty. Less technically-minded people will think “5 gigabytes” is a lot and take the discount. The first time the bill is too high, they’ll call in and make a fuss until TW switches them to the unlimited plan retroactively. Meanwhile, they’ll continue to get negative PR over bill shock.

    How does any of this make TW money? It doesn’t, which means this is step 1. Perhaps they’ll simply freeze the price of UBB for a number of years (while continuing to raise the 5GB limit). Unlimited plans will slowly rise to be $20+ more than UBB, and more people will switch to save cash.

    Ultimately, this ends with most of TW’s customers on UBB by attrition, likely with something like a 25GB cap and a max overlimit fee of $50. That will be enough to keep customers afraid of using “too much” and will thus discourage them from using high bandwidth services, which is bad for the tech industry and the users, but good for the cable co.

    • DeanSB2000 says:

      And THAT is the EXACT REASON WHY WE ALL NEED TO SIGN THAT PETITION AT Change.org to STOP this practice of Data-Capping FOR GOOD!!

      We MUST NOT let companies like Time Warner Cable, Charter, Cox, Comcast, and other companies like those start putting bandwidth caps on our Internet services, because if they’re allowed to get away with THIS, HEAVEN ONLY KNOWS what they’ll try NEXT!!

      I also sent a message on to my Iowa 5th District Congressman, Steve King, asking that he introduce legislation federally to STOP STATES FROM ENACTING ANTI-COMMUNITY-BROADBAND LAWS by giving the local communities BACK THEIR AUTHORITY TO DETERMINE THEIR OWN BROADBAND FUTURE, FREE of ANY “INCUMBENT” PROVIDERS WHO MAY WANT TO HOLD THESE CITIES BACK!!!

      We MUST NOT LET THE STATES DO THIS, because I feel it SHOULD BE FOR THE COMMUNITIES THEMSELVES to decide if they want to build their own state-of-the-art, fiber-to-the-home Broadband networks to more effectively compete against the “incumbent” providers!!!

      • Scott says:

        They can always start doing exactly what the wireless industry is doing as long as they get a free pass to violate network neutrality and exploit their control over broadband.

        They can start using their packet filtering equipment to identify specific applications on a per customer basis, blocking them, then charging an additional $1-10/mo fee to ‘unblock’ your application if you want to use that software.

        They can blame the software for being a “data hog” and because the developer doesn’t “pay their share” and uses their pipes “for free” claim saying it’s only fair that YOU pay extra…

        Thus..

        Skype traffic will now be an extra $5/mo if you want that enabled on your account, or $10/mo to enable all Video/Voip applications
        Facebook will be free, because that makes it a marketing perk..
        Online gaming? Oh Warcraft will be an additional $2/mo, or $5/mo to enable all XBOX/Console/PC games.
        Netflix/Hulu/Youtube package will be $10/mo..

        Gee look., I just increased company profit by 66% without adding any additional cost since everything was already paid for by customers existing plan fee’s of $50/mo for their broadband.. free money.

        • DeanSB2000 says:

          And that is ALSO REASON ENOUGH to DEMAND that “Network Neutrality” (and I mean FULL NETWORK NEUTRALITY here) be MADE THE LAW OF THE LAND FOR GOOD, and that these companies SHOULD be PUT ON A SHORT LEASH when it comes to how much they can charge for Internet access at certain speeds, and PROHIBITING THEM from DOING THOSE TYPES OF “PAY-EXTRA” SCHEMES when it comes to stuff like online gaming, online video, Skyping, or VOIP conversations!!!

          The Internet SHOULD be treated like a FULLY RENEWABLE NATURAL RESOURCE…PROTECTED FROM PREDATORS (like Time Warner Cable, Charter, Comcast, Cox, AT&T, Verizon, and other companies LIKE them!!! It would OUTLAW ANY AND ALL “PREDATORY PRACTICES” from being DONE by these companies in the first place!!!

          “Network Neutrality” is THE reason, ABOVE ALL ELSE, that I VOTED for Barack Obama back in 2008, and SO FAR, his FCC Chairman, Julius Genachowski, HAS DROPPED THE BALL!!! It’s HIGH TIME to DEMAND BETTER from him and Obama in the next term!!

          And THAT is ALSO A BIG DIS-INCENTIVE to vote Republican because THEY believe in letting corporations like Comcast, AT&T, Verizon, Time Warner Cable, Charter, Cox, and OTHER Cable & Phone Internet Providers “OFF THE HOOK” WHEN IT COMES TO PUTTING FORTH SENSIBLE REGULATIONS on them to REQUIRE REAL “NETWORK NEUTRALITY”!!!

          I DO NOT BELIEVE THAT THESE COMPANIES SHOULD BE ALLOWED TO GET AWAY WITH WHATEVER THEY LIKE, AND DO TO THE INTERNET WHATEVER THEY PLEASE!!!

          In THIS respect, “letting the “free market” work its “magic” IS A RECIPE FOR DISASTER, and a “GET OUT OF JAIL FREE CARD” to ALL BROADBAND ISP’s to GIVE THEM LICENSE TO SCREW US OVER, both in the WALLET, AND IN CUSTOMER SERVICE!!!

          “FREE MARKET” MY ASS!!! It’s TIME to put some SENSIBLE REGULATIONS on this market, and let the Consumers decide how they will use the Internet, AND HOW MUCH INTERNET THEY WILL USE, WITHOUT imposing bandwidth caps, usage-based billing, Internet throttling, and traffic de-prioritization, on the Customers!!!

          It’s TIME FOR THE CUSTOMERS TO STAND UP AND DEMAND TO BE HEARD, and DEMAND ACTION TO BE DONE ON OUR BEHALF…NOT on the “behalf” of the Corporations!!!!!

          • Andrew Madigan says:

            It’s also time for someone to take away your caps lock key. I couldn’t even read your comment for all of the caps. If you want to be taken seriously, stop YELLING.

            • DeanSB2000 says:

              Sorry Andrew. My bad. :-(

              I do that to try and convey a little “force” and “emphasis” behind what I’m saying.

              I do think that these companies have done, and are doing, stuff that warrants a little “yelling” towards them.

              However, if it please you, I will do better to remove using the Caps-Lock key so much.

              But how else to relay the “urgency” of what I’m trying to say?







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