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

Phillip Dampier February 27, 2012 Competition, Consumer News, Data Caps, Editorial & Site News, Public Policy & Gov't 26 Comments

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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Joe
Joe
12 years ago

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… Read more »

James
James
12 years ago
Reply to  Joe

Report card on TWC understanding of customer feedback regarding data caps:

F . As in, FAIL.

Loons In June!
Loons In June!
12 years ago

“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

Tim
Tim
12 years ago
Reply to  Loons In June!

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
DJRobX
12 years ago
Reply to  Tim

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… Read more »

Tim
Tim
12 years ago
Reply to  DJRobX

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.

Tim
Tim
12 years ago

That and they will try to monetize the other end of the connection, such as app developers, by charging them extra so their data won’t be counted. There is an article over at DSLR about it. Good ole AT&T, is already trying to do it.

http://www.dslreports.com/shownews/People-Arent-Buying-ATTs-New-Troll-Toll-Proposal-118572

“Feld goes on to note how these kinds of schemes actually create a disincentive to invest in the network, and puts AT&T in an artificial position of power determining content winners and losers”

Couldn’t of said it better myself.

James
James
12 years ago
Reply to  Loons In June!

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… Read more »

DeanSB2000
12 years ago

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… Read more »

jr
jr
12 years ago

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

Richard
Richard
12 years ago

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… Read more »

Munly Leong
Munly Leong
12 years ago

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?

Brion
Editor
12 years ago

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… Read more »

James
James
12 years ago

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
James
12 years ago
Reply to  James

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.

James
James
12 years ago

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

🙂

Andrew Madigan
Andrew Madigan
12 years ago

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?… Read more »

DeanSB2000
12 years ago
Reply to  Andrew Madigan

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… Read more »

Scott
Scott
12 years ago
Reply to  DeanSB2000

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..… Read more »

DeanSB2000
12 years ago
Reply to  Scott

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… Read more »

Andrew Madigan
Andrew Madigan
12 years ago
Reply to  DeanSB2000

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
12 years ago
Reply to  Andrew Madigan

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?

Andrew Madigan
Andrew Madigan
12 years ago
Reply to  DeanSB2000

An argument that is overstated loses its power. Go for well spoken and right, not urgent.

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