Kyle McSlarrow, president of the National Cable & Telecommunications Association (NCTA), a cable industry trade group, wants cable companies to be able to continue experimenting with metered broadband service.
In an interview with Ars Technica, McSlarrow claims broadband pricing experiments aren’t about “gouging” customers or creating even fatter profit margins. Instead, he claims the cable industry just wants to provide Internet access in a way “that’s best for the consumer.”
According to McSlarrow, there’s no particular rush to pick one business model, and the industry has no “grand plan” hashed out by cigar-smoking executives in clubby back rooms. In his view, though, cable needs to do the experiments to make sure that the Internet survives the coming bandwidth apocalypse.
“As demand goes in a certain direction,” he says, “someone’s going to have to build a network” to deal with “not just instantaneous peak but, more importantly, average peak usage. The whole point is to do it in a way, and to serve your customers in a way, that they have a great experience. If you fail on the network side to do that, particularly with our shared network, that’s a real problem.”
McSlarrow himself enjoys flat rate pricing from his Internet service provider, so he’s not a part of any experiment, nor is he willing to defend Time Warner Cable’s recent attempt to launch metered billing in several cities around the country. But, he feels that broadband service doesn’t have to come with a single monthly price for everyone, claiming that the “majority” of broadband customers consume so little, they are basically overpaying to support heavier consumers of bandwidth.
McSlarrow, who has ties to the Republican party, having been the national chairman for Dan Quayle’s failed 2000 presidential bid, and has worked for two Senate Majority Leaders — Sens. Bob Dole and Trent Lott, is a firm believer in free markets, with no government regulation. He also claims the broadband industry is highly competitive, which means market forces will protect consumers from gouging providers.
McSlarrow must have spoken to Ars Technica on Fantasy Island, because that must be where he is living these days. He certainly doesn’t live in Reno, Beaumont, San Antonio, Rochester, Greensboro, or Austin, where AT&T and Time Warner Cable decided to test their paltry Cap ‘n Tier schemes. It’s no surprise he wasn’t willing to defend Time Warner Cable, which tried to launch a Money Party at consumers’ expense. McSlarrow should also know that free market competition without regulation only works when there are competitors — lots of them, offering similar levels of service. That’s not the broadband industry the majority of America lives with today.
Nate Anderson, who penned the piece for Ars, took a skeptical aim at many of McSlarrow’s claims. We’re willing to go further and say they don’t represent reality, period.
Anderson says it himself when he points to cable’s long history of rate gouging and lousy customer service. The cable industry has had a license to print money, and investors know it. This industry leverages its barely competitive position into fat profits and excellent returns year after year. It has never shown an interest in voluntarily reducing the level of either without government intervention or heavy competition. It’s not about to for broadband either.
Most people usually have a choice in participation in an experiment or trial. AT&T and Time Warner Cable never offered an opt-0ut for their customers. Instead, it was “take it or leave it.” Both companies chose experimental cities where customers were unlikely to “leave it” because the competition was either hampered by slower speeds, unavailable, or worse than the “experiment.” Not one market test has been conducted in a city with a robust competitor offering equivalent service over the entire service area. When consumers thought they had found one in Earthlink, a Time Warner Cable corporate spokesman wrote to one reader to tell them they would make sure Earthlink was made a part of the “experiment” despite their obvious unwillingness to participate.
The hypocrisy of the supposed magnanimity of the cable industry to “help the little guy” who doesn’t use enough broadband to justify his current rate is laughable. This is the same industry that under markets their existing “lite” plans to those customers, and has never shown the slightest bit of interest in offering the equivalent on the video side of their business with a-la-carte pricing. Furthermore, metered broadband experimental pricing initially announced by Time Warner Cable would have cost even lighter users more money than their existing Road Runner Lite plan. Even modified, it would have subjected consumers to a ludicrous cap of 1GB per month, with a $2/GB overlimit fee, nearly 2000% above their estimated costs.
NCTA rhetoric has historically never met actual reality for most consumers, and that remains the case today, particularly with the “exaflood” excuse that even cable company officials rapidly dismiss at investor conference calls as a non issue.
As far as being given the right to conduct “lots of experiments” with transparency and “full input” from consumers, we’ve seen how that works in practice. All of the “experiments” are designed to do one thing – maximize profits through controlling usage and reducing investments. They are transparent once you blow the fog generated by the industry propaganda/PR machine out of the way. Consumers have already given their “full input.” In poll after poll, consumers overwhelmingly reject this kind of billing, often at levels of 80% or more, and the majority will try and switch if their provider attempts it. That, along with other customer input is routinely ignored.
For many customers, cable understands they can afford to ignore them. Where are they going to go? Slower DSL, if it’s available? Satellite or wireless mobile, which is heavily capped and slow? Dial-up?
We’ve reached out to some of the lighter users who pondered whether Time Warner Cable might have had something for them, but were skeptical and suspicious this would give them the savings they were seeking. They were right to be skeptical, having known a cable industry that never sends a lower bill for anything, unless you drop services. They never realized Time Warner Cable even offered a “Lite” plan, because it’s not well marketed (and was nearly impossible to find online in Rochester). Given the option of paying a few dollars more for the peace of mind flat rate service provides, versus a plan that charged exorbitant overlimit fees for exceeding the tiny usage allowance given, they preferred the existing Lite plan or decided to stay with the standard plan they already had.
Perhaps an honest experiment might be the one that they are terrified to try — asking customers if they want to remain on the current system, or switch to a metered billing approach, and let them decide. Of course, they already know the answer, which is why it’s the one experiment not coming to a city near you.
“McSlarrow, who has ties to the Republican party, having been the national chairman for Dan Quayle’s failed 2000 presidential bid”
That says all I need to hear. If he thought Dan Quayle could be President, he hasn’t been living in reality for quite some time!
paying 1,800 dollars a year to use a decade old modem is “what’s best for the consumer”
Well cable companies can charged metered billing or test the pricing model, after said companies that provide TV services FIRST make it where you don’t have to pay for 300 channels you have no interest in watching or paying for, just to be allowed to order on subscription based channel service. As long as said TV/cable companies want to start prorating TV services, then show that they know how to make it work on a per use basis, then they can start messing with ISP services. As long as I have to pay a flat rate for 300 channels I… Read more »
Ok, so if bandwidth usage was such a big problem, then why go to metering it when you have a perfectly good plan already in place, ie Road Runner Lite? If the lite users were interested in lite usage, a lot of people would be on Road Runner Lite right? Boy, is it me or is it starting to stink around here.
The problem is they don’t really offer RR-Lite. You have to pull teeth to find out about it IF it is offered in your area. They just tell you up front a one price thing and never mention other options. It is a scam the way they run it because they don’t want to sel people RR-Lite, so just don’t tell people about it. The only people really informed about choices in services are businesses that have packages to choose form, but most often residential are informed about only one price plan. So if they really DID want to offer… Read more »
I’m a Republican and all for the so called “free market”. How is the cable industry a free market? They operate as monopolies or duopolies at best.
Time Warner and all monopolies need to be government regulated! Fast internet access is just as important as electric, roads, and the air we breathe. Government regulates the utilities and now it is time to regulate the cable industry.
@Rob I second that. I use to be a Republican, going Independent. I am all for free markets but when the cable company is the only game in town or when they offer speeds that a competitor can’t match, that isn’t the free market at work. I hate to tell the guy that. @waiting and Watching The RR Lite plan use to be shrouded in intrigue and mystery but now in my area they advertise it plain as day in their rate comparison chart. The “smell” I was referring to, was the BS being put forth that there is a… Read more »
@Tim I agree something smells rotten in Denmark, erm…TWC land and they don’t even udnerstand the technology they are selling. But again AOL bought Time Warner and controls 55% of the shares, so therein is probably where all this comes from. Glad your area if frely offered Lite, because I had to pull teeth to find out info as some local CSR don’t even know we have VOD channels on our TV service, and with RR national help discontinued and internet service going through those same CSR for TV, then it is about to get worse, where they don’t even… Read more »
Yea, around here, they had to unveil RR Lite. At&t, or at the time Bellsouth before At&t bought them out, had a DSL Liite plane for like $15/month. In response, Time Warner had to advertise something similar or lose people. $15 is pretty cheap for broadband even though it was only 768Kb/sec or something like that. But I can sympathize with areas where there isn’t competition and I can see why they don’t want people knowing about their Lite service. They don’t make a lot of money like they do on the other plans so they don’t want you on… Read more »
Rob and Tim, hear hear! You guys “get it”. The market for broadband internet is in most areas either oligopolistic, duopolistic, or just plain monopolistic.
On a somewhat unrelated note, from what I understand, in some areas when utilities were deregulated, most customers saw an increase in their price paid, and not a decrease.
Also, in my view, the Internet is far too important to the country’s future to have to subject its users to egregious metering and capping schemes.
In New York, gas and electric service is deregulated and it created a colossal amount of NOTHING. The first year, ConEd Solutions low-balled a flat rate for electric which was a good deal, but the renewal rate after 12 months sure wasn’t. Natural gas from any supplier other than our primary utility – Rochester Gas & Electric, was a foolish idea — they charged more than RG&E did! Every December, when it comes time to “Voice Your Choice,” the confusion and scams start. One provider was handing out those $50 gift checks which resulted in a service contract for service… Read more »