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Wall Street: We Expect Time Warner’s Usage Based Billing to Become the Rule, Not the Exception

Moffett

On the heels of Time Warner Cable’s recently announced return to usage-based billing, some Wall Street analysts are sending signals they expect the cable operator not to dabble in usage-based pricing for long, but rather jump right in, charging all of their customers usage fees to boost revenue and profits.

Time Warner Cable’s careful effort to position usage pricing as an “option” does not seem to impress Sanford Bernstein’s Craig Moffett, who expects the cable company to roll out Internet Overcharging schemes to all of their customers.

“Over a period of years, as the market becomes more accustomed to (usage-based pricing), we expect these plans to become the rule rather than the exception,” Moffett wrote in a research note to his investor clients.

The concept of usage pricing is also provoking Netflix, dubbed one of the net’s biggest usage offenders by some providers, to become more vocal in its support for flat rate broadband.

With some Netflix movies coming in at nearly 3GB in high definition, Time Warner’s usage-limited Internet Essentials customers will rapidly erode their usage cap into the overlimit territory.

Netflix executives dismiss provider claims that broadband traffic explosions are undermining profits, especially considering the cost of delivering broadband traffic to consumers continues to plummet.

One Wall Street analyst looking to maximize those provider profits chastised Reed Hastings, founder of Netflix, for putting service providers under “financial pressure.”

“Yeah, that 92% Comcast operating margin is really under a lot of pressure,” Hastings responded at the Morgan Stanley Technology, Media and Telecom conference in San Francisco. “There is no financial pressure on ISPs.”

Variety reports Time Warner has said nothing about keeping flat rate broadband at its current $40-50 price point.

Moffett points out there is plenty of room for Time Warner Cable to accustom subscribers to a metered future. 

The analyst believes Time Warner will eventually move flat rate Internet to an “ultra premium” price point that will be far more expensive than customers today are accustomed to paying.

In 2009, Time Warner offered customers scheduled to participate in its failed usage pricing experiment flat rate service for $150 a month.

Currently there are 7 comments on this Article:

  1. jeff s says:

    What a douche

  2. Munly Leong says:

    This is the time to raise hell. It’s not too late. Don’t let the US become Canada. http://www.worldbroadbandfoundation.org/content/special-report-att-led-data-capping-trend-its-not-too-late

  3. jordan says:

    If they even try to do this in Maine I will do all I can to discredit their BS.Greedy Frakkin ISP’s…………I am so sick of this Country and its Corrupted Ways.

  4. Tim says:

    This is how these cats play nowadays. Make money anyway you can. If that means squashing the little guy, then so be it. Ars Technica had a good article, about how if you had more money, you were less moral. Really didn’t need a study to figure that out. Wall Street pretty much is immoral. They don’t give a crap about us. If you do a little research on the real reasons the economy nearly collapsed in 2008, you will see that.

  5. SO_CAL_RETAIL_SLUT says:

    Note: I posted this same comment over at the Time Warner Cable Untangled blog. The comment awaits moderation. We’ll see if it’s posted….

    Concurring to Mr. Dampier at stopthecap.com, my hunch is that once this “test” in Time Warner Cable’s San Antonio and southern Texas markets completes, Time Warner Cable will roll this out to more markets, most likely it’s entire footprint including Bright House Networks.

    With the “RoadRunner” “Time Warner Cable” brand names going away during 2012, the newly branded named company fka Time Warner Cable can very easily introduce this “savings” tier as well as introduce caps, all under the ruse of the “new” company name…how convenient.

    As Time Warner Cable has publicly stated in various publications, blogs, media interviews, analyst presentations, etc., caps and/or blocking certain types of traffic, such as non-Time Warner Cable/renamed company VOIP calls for it’s residential and business customers is not the most wise business decision, but in markets with little or no competition (or those competitors that already have caps), Time Warner Cable can basically implement caps and nobody will blink an eye.

    Of course, in these Texas markets (as in the first test), Time Warner Cable does not face stiff and intense marketing competition from the likes of Verizon’s Fios offering.

    Two markets that come to mind are the New York City and greater Los Angeles areas where Verizon Fios is available in many areas (not all), and in the case of southern California, AT&T has a large footprint, so no worry on Time Warner Cable’s part to have to compete with AT&T DSL or U-verse on caps. Southern California is a large market, and Verizon’s own legacy wire line footprint covers a wide and diverse (from very high-income, to lower income) areas of southern California, so, I do not see Time Warner Cable and the newly renamed company implementing caps anytime soon in those markets, if at all.

    But for these named Texas markets, and other markets where Time Warner Cable has little or no competition…look out!

    Also, a comment for Mr. Simmermon. You may want re-phrase your choice of words when referring to the Time Warner Cable TV Essentials service as a “stripped-down” service. I don’t think your marketing professionals think of it that way!

    For whatever it’s worth, in my area of the city of Los Angeles, CA (a legacy Adelphia market), I am subscribed to the Broadcast level of service, and the monthly fee is $17.00, plus tax and franchise fee.

    In addition to the local over-the-air Broadcast channels and sub-digital channels, I also receive CSPAN, CNN, Discovery Channel and National Geographic included in the Broadcast channel line-up. Granted, Los Angeles has the largest number of over-the-air channels, and when you take out the foreign/ethnic stations from the mix, you are still left with a great number of viewing options. Plus, I still receive CNN, Discovery and National Geographic, and supplant that with Hulu Plus and Amazon Prime with three Roku boxes throughout my home, and occasional RedBox rentals.

    Ironically, I just pulled the plug yesterday, February 29, 2012 on the Netflix streaming service, as Starz Play and Disney content is no longer available.

    Yes, today, consumers do have choices, unfortunately, in markets (usually small to mid-size) competition does not really exist to the degree that it does in large markets such as Los Angeles and New York, and the number of choices in those small to mid-size markets pales by comparison.

    SO_CAL_RETAIL_SLUT

  6. Bryan says:

    I’m sick of this Steve Moffet guy and other “wall street analysts” like him are the reason why so many investors are duped into thinking maximizing profits is the same thing as growing and maintaning a viable business model.

    Companies that put customers and the quality of the product they offer first will allways succeed and do well and stay arround for the long haul.

    Companies that seek to please wall street analysts (assuming incorrectly that investors care about what analysts have to say, I am an investor.. and I find most analysts to be full of nothing but hot air ergo I don’t care what they have to say since they are 99% wrong) will quickly find that the analyst only seeks to enrich themselves and perhaps a few weathly clients who they serve. If they can make a buck making a company turn a quick high profit quarter but in a way that long term will burn the company.. they don’t care. Analysts are not in it for the long investment game.. just the 90 day return cycle..

    In short.. Steve Moffett is a bafoon.. what he is proposing will ruin time warner cable’s reputation as the leader in residential broadband.

    • GG says:

      Wall St. doesn’t care about the long term view for these companies, it does simply come down to as much profit as quickly as possible, if it can be squeezed, slashed, burned, then that’s what will be done.

      Why should Wall St. care? They’re no better then the Mafia was getting leverage over small business people, leveraging their credit to the hilt, then burning their business down for the insurance money while leaving the owner facing the blowback. The lesson is there’s always another sucker, another business out there to take advantage of, it’s all just a game.

      The only difference with Wall St., is they’re legal, while the mafia was called organized crime for what they did. Whether Wall St. is really as regulated or has sufficient oversight over abuses and activities is quite up to debate.

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