Statement from Landel Hobbs, Chief Operating Officer, Time Warner Cable

RE: Consumption based billing trials
4-9-09

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.

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.

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.

If we don’t act, consumers’ Internet experience will suffer. Sitting still is not an option. That’s why we’re beginning the consumption based billing trials. It’s important to stress that they are trials. 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:

• 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.

• 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.

• 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.

• 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.

• Once we implement this trial, we will not immediately start billing customers for overage. Rather, we will first provide two months of usage data. Then we will provide a one-month grace period in which overages will be noted on customers’ bills, but they will not be charged. So, customers will have an opportunity to assess their usage and right-size their service packages before usage charges are applied.

• 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.

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

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].

Landel Hobbs
COO
Time Warner Cable

For questions, etc:

Jeff Simmermon
Director, Digital Communications
Time Warner Cable

Find us on Twitter at: @jeffTWC, @MsmarTWC, @MelissaTWC_TX

The sun is shining again here in western New York and it’s 52 degrees.  I’m still terribly offended by those videos from the folks in Austin in short sleeved shirts and leaf-filled trees out the window.  Our spring has only just begun!

If you’ve been wondering why the number of articles has dwindled in the last two days, it’s because of the growing number of media interviews I have been doing.  Reporters from across the country are taking an active interest in this story, recognizing that what Time Warner (among others) may try in a few cities will spread like wildfire across the rest of the country if they deem their experiments “successful.”  It is gratifying to know that so many consumers have joined forces to push back against this ridiculous rationing of Internet access at top dollar pricing.

We officially broke through the barrier of 20,000 unique visitors this afternoon.  That number only counts those who have arrived since April 1st.  The top three states being New York (13,043), Texas (3,126), and North Carolina (1,592) for obvious reasons.  More than 4,000 new people found this site yesterday alone.

I am pleased that more than 400 of you have already e-mailed news tips, story links, ideas, and/or have volunteered to help in this group effort.  If you have not seen your story idea or link appear here yet, it’s only because I haven’t gotten around to it yet.  Please don’t stop sending that information.

I have also been working on bringing more writers into our team.  It is my intention to find small groups willing to spearhead our efforts in each of the affected cities.  It appears Austin has gotten ready to step up and be the first, outside of me keeping tabs on what’s happening here in Rochester.  These local efforts are extremely important because each of you in your respective communities know what needs to be done, and it’s going to be easier for some of you to get that information up here fast than wait for me to get to it.  We are always looking for more people.

To get involved, just find the link below on the left to register for an account and send me a note on the Contact form asking for access to the editor.  I will e-mail you back instructions and guidelines, and then get started.

Over the weekend, I am going to create new tags for each of the affected cities, making it easier for people to find out about upcoming events and projects in each area.

I believe keeping us working together as a team is going to be more effective than scattering efforts across multiple sites.  StoptheCap! is about you and the power we have together to force back anti-consumer behavior.  The time has come to say, “we’ve had enough.”

If you are able to attend any of the upcoming events, and you are permitted to record the event, you can then upload your video to DailyMotion, YouTube or any of the other sites that permit us to embed your videos and we will get it up here for everyone to watch.

If you’ve arrived here because of an article in a local newspaper or TV newscast, welcome.  I know you probably have a lot of questions.  Many of them are probably already answered in one of the earlier articles we have here.  This site has the latest content first, and then works its way back in time from there.  You can access the pages that interest you from the Select Category box in the upper left of your screen.  Just click it and a box will open with various topics.  Select one that interests you and all articles pertaining to that topic will appear.  Most categories will have several pages of articles to review.  At the very bottom of the page, you can find a search box to find anything specific.  Also be sure to see the links running horizontally along the top banner.  You may want to explore Alternatives and Take Action regularly, as those sections will be updated often.

Many readers comment on the articles here.  Right beneath the headline, you will see “Comments.”  You can click that and read and reply to any of the reader comments found there.

I have more content on the way, so check back often!

This Week in Tech covers the Road Runner usage caps issue

Coming on the heels of yesterday’s report about the amazing inconsistency of responses coming from Time Warner customer service employees to our readers, here comes another one.  This Week in Tech [thanks to Steve Rea from Sound Bytes for pointing the way] covered the usage cap story this past weekend, and if you are new to this site and don’t understand what all the fuss is about, this is around eight minutes you need to hear to understand what is going on.  It covers the broadband industry model, the inconsistent messages the broadband industry is sending to consumers, and what one of the fundamental goals of broadband capping seeks to achieve: a reduction in risk to their primary video programming delivery business.  The more you watch online, the less you’ll think you need those bloated cable TV packages with all those channels you never watch.  A cap that makes watching video online an expensive proposition means you’ll think twice before watching another Hulu or Netflix movie on your computer.

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.

When you hear this podcast talking about Time Warner employees referring to some “internal memo” or “email” on this subject (and we’re always happy to receive our copy here at StoptheCap! should someone anonymously drop one our way), it would hardly be surprising if something akin to this wasn’t under consideration.

But I want to make everyone clear that a cap, of any kind, is honestly not a victory for anyone. It’s a Band-Aid.  And even assuming they tripled the proposed caps, where the maximum 40GB becomes 120GB, that still puts them below other competitors in this race to the bottom, and your bill is still going up, and now you have to watch a gas gauge every time you sit down in front of the computer.  And using their own claim that average subscribers are increasing their usage by 50% a year, we’ll be right back here on this issue soon enough as people start getting larger and larger cable bills for “going over.”

The only real victory here is a complete revocation of the “cap experiment.”  No caps.  If Time Warner wants to rake in additional revenue, why not consider creating new super-tiers that are priced higher, but also offer heavy users faster speeds, particularly for uploads.  There are plenty of heavy users of the net who already pony up an additional $10 a month for Road Runner Turbo, if only for increased upload speed.  I am among them.  In many markets, like Rochester, there is room to grow on the top end without imposing caps on anyone, and still collect additional money from subscribers who choose a better level of service.  Punitively punishing every customer from the very light to the very heavy user is nothing less than market abuse and an effort to extract even more dollars out of your customers.  The costs to upgrade their facilities to provide a level of service capable of easily growing with broadband demand is not nearly as expensive as they would lead you to believe.  We’ll get into the weeds on that issue shortly.

And it’s not just consumers saying caps are bad.  Other cable companies and those in the financial sector who track Time Warner are saying it too:

Pali Capital analyst Rich Greenfield, in a note to investors Wednesday, said asking consumers to keep checking their consumption “sounds tedious.”

“Let’s start with a simple premise: moving from an all-you can eat ‘buffet line’ for bandwidth usage via broadband to an a la carte system of paying for every gigabyte you eat is subscriber-unfriendly and will be confusing to the average broadband user,” he wrote, referencing the opposition by Massa and the Greensboro city council.

“In an increasingly competitive world, the age-old saying of ‘keep it simple stupid’ should not be overlooked,” Greenfield continued. “If competition exists, we suspect a provider offering broadband without caps or a simplified strategy toward broadband will gain meaningful market share, assuming TWC continues to move forward with its bandwidth-cap strategy.”

At last week’s Cable Show ’09, Jim Blackley, Cablevision Systems senior vice president of corporate engineering and technology, said on a panel discussion that bandwidth-usage caps are not in the MSO’s plans.

“We don’t want customers to think about byte caps so that’s not on our horizon,” he said. “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.”

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p style=”text-align: left;”>Press the play button to listen (you must remain on this web page to hear the entire segment):

Hat tip to Miguel who caught these comments on video from Wednesday’s meeting.  Thanks for doing this, and for holding up what I suppose is a cell phone for that long!  There are three segments.

Another series of town hall meetings you should try and attend to thank Congressman Massa for his efforts on our behalf:

Thursday, 4/09/09 6:30-8:00 pm
Pittsford Sutherland High School Auditorium
55 Sutherland St
Pittsford, NY 14534

-or-

Friday, 4/10/09 7:30-9:00 pm
Henrietta Fire Dept Training Center
60 Erie Station Road Extension (corner of E. River Road)
Henrietta, NY 14586