Here are some headlines on usage cap and Internet rationing issues this Thursday evening:

Seen In San Antonio

Seen In San Antonio - Upset About Metering, Courtesy 'Hixster' on Broadband Reports

Texans On Price Protection Plans Temporarily Exempt from Internet Rationing

The Austin Business Journal reports this evening that Time Warner officials have announced customers in Texas who, as part of their Road Runner service, signed “price protection agreement” or service contracts will be exempted from the Internet rationing plan to be implemented in Austin and San Antonio.  Customers in several Road Runner franchise areas are compelled to agree to a term contract to receive the lowest price for Road Runner broadband service.  Customers in these areas are still permitted to sign these contracts, and we recommend that customers in this region attempt to sign for the longest possible term available.

Greensboro, North Carolina Road Runner Customers Outraged By Internet Ration Plan

Greensboro residents are outraged to discover Time Warner throwing their community into the “test markets” forced to endure heavily rationed Internet access plans from Road Runner.  The Greensboro News-Record reported several negative impressions of Road Runner’s bait-and-switch-like tactics.

“To say other people are subsidizing me is ridiculous,” said Jay Montlo, 23. “They sold me an unlimited plan and I bought it because I watch a lot of online video and I’m an online gamer. Now they’re going back and saying it’s not fair for me to use so much of something that’s unlimited for everyone.”

Company officials continue to defend their cookie cutter Beaumont example as being just fine for Beaumont, and therefore just fine for the rest of the country.  Greensboro is having none of it:

Beaumont, Texas is different from Greensboro. It’s smaller, has an older population, fewer college students and doesn’t have the vibrant online community that once earned this city the nickname “Blogsboro.”

“I don’t have any idea how much bandwidth I use right now,” said Roch Smith, a local web designer and blogger. “I don’t really think of it that way.”

But Smith said making customers more wallet-conscious about the way they use the Internet will stifle creativity and keep them from embracing new video and audio products online.

That could be part of the motivation, several customers suggested, because Time Warner has seen increased online competition for its cable TV and movie-on-demand products.

Smith said whatever the reason, the move will mean less innovation.

“I think it’s just a terrible thing for the city to have our highest speed broadband priced in a way that’s unlike every other city our size,” Smith said. “Making us a ‘test market’ makes people on the cutting edge pay more and discourages people from discovering new things, things that are going to be very important in the future.”

Austin Mayoral Hopeful Blasts Time Warner for Internet Ration Plan

Time Warner’s Internet rationing plan threatens to stifle the economic recovery of Austin.  Those strong words are part of a statement issued Thursday evening by Austin City Council member and mayoral hopeful Lee Leffingwell.

Leffingwell says he's "deeply concerned" about Internet rationing plan from Time Warner

In a strongly worded statement released to the Austin press, Leffingwell blasted the Internet provider for insensitively throwing a usage cap on customers during one of the worst economic crisis in Texas history.

According to news reports today, Time Warner Cable is introducing a new pricing structure for Austin-area Internet users.  Under the new plan, consumers would be placed on a tiered and metered billing system, and charged for the amount of bandwidth they use.

This approach, and Time Warner’s specific plan, should be of grave concern to Austin.  Right now we need to be encouraging, rather than stifling, economic recovery and growth in Austin.  This plan moves us in the wrong direction.  It potentially puts Austin at a disadvantage as we compete against other communities to attract, retain, and grow prosperous businesses.

I’m obviously concerned about the impact this plan would have on individuals and families, who would have to begin to monitor their Internet use. The new pricing system would have a significant impact on anybody who uses the Internet to watch videos, download music, movies, or television shows.

But I’m deeply concerned about the impact of the plan on business owners, especially those working in high-tech and creative industries that require regular access to broadband Internet service.  Introducing an economic disincentive for Austin businesses to use the Internet to communicate, collaborate, innovate, and deliver services is very worrisome at best, and catastrophic at worst.

If Time Warner believes that is has no choice but to introduce usage caps, I would call on them to propose caps that are realistic and reasonable.  The usage caps proposed in their new plan are neither realistic nor reasonable.

For example, if a consumer downloads Season 1 of Friday Night Lights in high definition from iTunes, they will have used 30.86 gigabytes of transfer.  This one purchase would put that consumer over the limit of all but the most expensive tier that Time Warner is proposing under the new plan.  It’s easy to see how the costs associated with the ongoing, high volumes of Internet use that many Austin businesses require be could be astronomical.

Internet access should be expanded, not constrained.  Innovation and creativity should be unleashed by the Internet, not shackled by draconian usage caps.  This is vital to Austin’s economic recovery.  I hope that Time Warner will work with City officials and the community at large to reconsider this bad plan.

Rochester Residents May Not Know Their Alternatives, But Anything is Better Than Time Warner’s Internet Rationing

WHAM-TV Rochester, N.Y.

WHAM-TV logged more than 250 comments in a matter of hours from outraged residents of the Flower City furious about Time Warner’s Internet rationing plan.  Some confused Vonage with Verizon, but it made no difference.  All they wanted were directions to the exit.  Rochester, almost night and day different demographically from Beaumont, Texas where Time Warner conducted their first Internet rationing experiment, is up in arms about what most perceive as a ludicrous rate increase.  One of the most technologically advanced cities in New York, Rochester has been the test bed for advanced technology trials for years, but always with introducing more innovation and better service in mind, not pulling the rug out from area residents suffering from one of the worst economic downturns since the Depression.

Cristie from Hilton says, “In light of this, I will be making the switch to Frontier or Vonage.”

Laurie from Rochester wrote: “Time Warner has made a decision to put further burden on customers.”

Matt Slocum wants to know why this is happening? “My first question is–why? What’s the reason to instigate this policy?”

Matt uses the internet at home to watch TV shows or play movies. He also does some of his work at home, and says usage fees would kill him. “I have a family and have to pinch pennies any way I can,” he said.

Folks, the demand on this site from the huge number of you arriving has brought our original server to its knees. We’re going to be configuring a mirror site and/or get StopTheCap! to a more robust server later today. Please hang in there with us through the deluge, and thanks for being patient!

Thanks for the tremendous support from folks not just here in Rochester, but also in the other cities dealing with this. I am overwhelmed with the excellent ideas, suggestions, and responses and am going to begin bringing them together so we can begin work on several different fronts. I will be personally getting back to many of you asking if you can help head up some of these efforts. This absolutely will need to be a group endeavor, and I’d also like to have others writing articles here and helping to keep each other up to date.

I have a major article to write next about alternatives people in Rochester at least can find, but I’m hunting around for options in other affected cities as well. We’ll begin a mass exodus from Road Runner well before there are any usage caps, if only to let them know as customers we feel abused, taken for granted, and outraged over this naked attempt to profiteer. And we’ll be coordinating a public list of those specifically leaving for this reason.

Then, we’re going to get involved in two additional fronts:

– Public policy initiatives to start looking at legislative or regulatory approaches to market abuse;
– Sending gifts and flowers to Verizon corporate begging them to either invade Rochester or write a check from petty cash and buy out Frontier if they are incapable of competing on a level comparable to what Verizon is providing across the rest of the state.

And we’ll be partnering with other websites that are also working on this issue, particularly in places like Austin where the outrage over this action is growing with the same intensity it is here in upstate New York. Stay tuned!

[Update 1:30pm: Kate Perry, the story’s author has responded:

I’m the reporter who wrote the TWC story for the D&C. First, I didnt rewrite a press release (ouch!). They didn’t even issue one. They broke the story to BusinessWeek and never contacted ayone else.
Today’s story obviously left a lot of unanswered questions (I had 45 minutes ’til deadline to write the piece by the time I finally heard back from Time Warner at 9:45 pm Wednesday) but I thought it was important to get the basic info out there for our readers. I have already posted another story on the website to answer some more questions and I am in the process of writing other follow-ups. Just thought I’d let you know I’m not napping on the job.

I appreciate the clarifying information and the fact this story is not at all the last word the D&C intends to print.  The story we referenced came from the D&C site as of mid-morning today.  It was entirely lacking of any contrary perspective, which was why this article was written.  Should you have any questions from our end, or our readers, send them this way and we’ll get you answers. — Phil]

Why subscribe to a newspaper like the Rochester Democrat & Chronicle that can only be bothered to essentially reprint a press release from Time-Warner?

The D&C’s article telling Rochesterians about Road Runner’s new Internet rationing plan never bothered to say a word about the other side, much less do any independent investigation of the facts.  I guess we’re the media now.  Let’s break it down.

The days of flat-fee Internet charges are dwindling if your provider is Time Warner Cable. Prepare to pay by the gig.

Starting this summer, the company will ask customers to review their usage and pick a plan from 5 gigabytes to 100 gigabytes. If customers use more gigs than their plan allows, they’ll have to pay overages. The new billing system will roll out this fall.

First, this Internet rationing plan is only being imposed on customers in a handful of cities, not across all of Time-Warner’s service areas.  And the company has yet to announce any pricing for their 100GB plan, which we predict will be astoundingly pricey and is frankly still woefully inadequate for consumers who have families that utilize broadband video streaming and other bandwidth intense services.  Comcast doesn’t penalize their customers with higher priced tiers with draconian limits.  They simply tell residential customers to keep it under 250GB per month.

The 5-gigabyte plan will start at about $29.95 a month, Time Warner spokesman Alex Dudley said Wednesday.

And that is about the first and last time you will really see much about this plan.  Time-Warner already offers a lower tier of service for light users, yet almost never promotes it.  Is the company truly on an altruistic bent to save light users money with a plan that you have to peel out of them to discover?

A majority of Time Warner’s customers currently have the standard tier plan, which costs about $49.99. The soon-to-come 20-gigabyte plan will cost about the same and allow customers similar Internet usage.

Similar to what?  The standard tier plan is priced at $39.95 a month for most customers in this area, not $49.99 (unless you do not have a cable TV package.)  It’s hardly “similar” to anyone who uses over 20GB a month, and that is going to be a lot of folks in this area, either currently or in the near future, if they’ve discovered many of the Internet’s broadband-leveraged features, many of which Time-Warner heavily promoted to sign customers up in the first place.  They giveth, and now taketh away, unless you cough up $1/GB more. But how would Mr. Dudley know? He’s not from Rochester. He’s a corporate spokesperson in New York City. When he goes home tonight, his Road Runner will not be rationed.

The new payment plan will be more equitable, Dudley said. Now, a small portion of customers use a massive amount of the company’s bandwidth;  the 25 percent who use the most bandwidth consume 100 times more than the 25 percent who use the least. With the current flat-rate plan, everyone pays for the upgrades to Time Warner’s system that the heavy users’ habits require.

Last summer Frontier tried the same argument.  But when StoptheCap! asked to see their data or independent verification of their claims, we were denied because the data “was proprietary.”  So we take their word for it?  I have no doubt there are extraordinarily heavy users on every ISP’s network.  Those running illegitimate servers, keep peer to peer file swapping applications running 24/7, and those with unsecured wi-fi in their homes can rack up some serious bandwidth usage.  Of course, under their existing subscriber agreements, ISPs have the right to warn and discontinue service for these individuals, many of whom may not even realize what is going on in their own homes.

But independent analysts have no way to verify whether Time-Warner’s claims are inflated puffery, like the “national bandwidth shortage” scare we were hearing about last summer, or represent the dire need to make an immediate change.

All of the warning signs point to a naked cash grab, because of the number of inconsistencies in Time-Warner’s arguments that the D&C can’t be bothered to explore.

With the new plan in place, those who want to use a lot of bandwidth will have to pay for it.

Dudley said increased Internet usage across the board, especially video downloading, has required the company to constantly improve its broadband infrastructure, something that will continue in the future.

“Our customers used 50 percent more this year than they did last year, and we expect them to use 50 percent more next year and the year after that,” he said.

The good news is, most customers won’t pay more, Dudley said. The plan is already in place in Beaumont, Texas, and 86 percent of the customers there pay the same as they did with the flat rate. Of those who pay more, the average monthly overages are about $19, he said.

Beaumont, San Antonio and Austin, Texas, Greensboro, N.C., and Rochester were selected to be part of the usage-based payment trial because they represent a diverse collection of Time Warner users, Dudley said. The results of the trial will determine if or when the company rolls out the payment restructuring nationwide.

You bet they’ll have to pay a lot for it.  Let’s break down how much, for the average users that other cable companies are considering realistic when they develop usage caps:

A 50GB household formerly paid $39.95. They will now pay $64.95.
A 75GB household formerly paid $39.95. They will now pay $74.95.
A 100GB household formerly paid $39.95. They will now pay $114.95.

(based on Time-Warner’s proposed $54.95/40GB tier + overage charges)

And Time-Warner’s argument falls apart on several other levels the D&C account doesn’t consider or question.

If the majority of subscribers are on the lower end of bandwidth growth, where is the urgency to move their rationing plan into place with such draconian caps?  AT&T’s u-Verse sees their average customer usage potentially warranting a usage cap at the 100GB level, something we’re not convinced about either.  Comcast, the nation’s largest cable operator, has a simple limit of 250GB per month on residential customers.  No massive rate increase for customers using the Internet for media streaming who have to find a higher tier.  No draconion limit before subjecting them to outrageous overage charges.  Verizon FIOS has zero usage caps.  It’s a sales point for them, to give customers a reason to switch and to give them the comfort they deserve in using the Internet without having to watch some “gas gauge.”  Is Verizon nearing bankruptcy and crisis with their non-capped service, which runs faster than Road Runner and is provided on an all-fiber network?  Of course not.

And the dirty little secret is, despite Dudley’s claims, this Internet rationing plan is not being “tested” anywhere where they face competition from Verizon FIOS.  It’s a diverse collection of Time Warner customers who all just magically happen to live in areas where competing ISPs either offer significantly poorer service or have plans to institute their own caps or have considered doing so.

But there’s more.  Beaumont, Texas is not Rochester, or Austin, or San Antonio, or Greensboro.  StoptheCap! looked at the Beaumont trial last summer and found it to be hardly representative of what Internet customers would find acceptable.  The Beaumont trial only applied to new customers, not to existing ones.  That skewed the results to show favorable acceptance only by those who signed up for new service figuring they would never exceed the caps.  Yet 14% did so anyway, and many of those were likely first time broadband customers.  And an average monthly overage of $19, half the price of the original monthly subscription, is nothing to sneeze at.

Indeed, we also do not know for certain what happened to those customers who received overage charges.  Did they cancel service and head for a competitor?  Did they succumb to Time Warner’s rationing plan and simply force themselves away from the computer?  Did they force themselves to pay more for a higher tier, or simply discover they maxed out at the highest tier then available (40GB) and will forever more be paying those overage charges on an Internet that is always growing and expanding.

As a customer, do you feel it was “good news” if you didn’t see any price change if you manage to stay within your tier or were you simply relieved?  Are you upset that you now have to be ever watchful of some Road Runner “gas gauge” that ticks ever downwards towards empty everytime you receive spam, everytime some hacker tries to break into your home network, and everytime you do anything on an Internet that is becoming more and more a multimedia bazaar.  Oops, that web ad just cost you a nickle. If Time Warner’s own numbers are right, you can do your own math.  Every year, under threat of overage fees, your consumption is going to increase by 50%.  How long before you find an ever growing Internet bill in your mailbox, with sky high increases coming month after month with no end in sight?

When Road Runner was introduced in Rochester in 1998, I among a handful of others were the first consumer beta-testers of the service.  It’s been a great experience and an excellent service. That’s all about to end because the company has decided to abandon its current business model, which afforded enough revenue to make a handsome profit and still invest money to grow their network and provide support. It’s more profitable to adopt a rationing plan to artificially reduce demand, which then requires fewer investments in network growth to support. It also has the side benefit of stopping the growth of video streaming online, which cable industry analysts ponder might one day threaten the cable TV package. If enough content can be streamed through Road Runner, why have a cable TV package at all? Slam a cap on customers to make that prohibitively expensive, and they can stop pondering.

And the irony is, the same company that tells its customers it cannot afford to give you a-la carte access to limit your video channel package to just those channels you want to watch at a lower monthly price, is the same one telling you that they must drop the unlimited plan they’ve provided for more than a decade because it “cannot afford” to give it you any longer.  Unless, of course, you live in an area where a competitor has no trouble doing that.  No Time Warner usage cap there.

It’s a shame the D&C couldn’t spend a few minutes exploring this themselves.

Time-Warner Road Runner customers face staggering increases in their monthly Internet access bills, according to a report published yesterday in The Business Insider.

Reporter Dan Frommer analyzed the impact of Road Runner’s new usage caps on customers who use their connection for streaming video or other data intensive applications like online backup and file downloads.

What does this mean for you? If you watch about 7 hours a week of standard-def video, or 2.5 hours a week of hi-def Web video, you could easily pass even the 40 GB/$54 a month plan cap. After that, each iTunes movie rental — or Netflix (NFLX) stream, or whatever — could cost $1 to $4 more. Or Hulu episodes could cost $0.30 to $0.50. That doesn’t even include your other Web usage, such as downloading music, using the Web, etc.

Although some Internet users spend their time doing little more than casual web browsing and checking electronic mail, an increasing number of users have found catching up with TV shows online to be easy and convenient, and soon to be potentially very expensive under Road Runner’s new rationed Internet plans.  Customers used to flat rate service will now be forced to contemplate the impact of everything from spam in their e-mail to bug fixes from Microsoft to online file backup, downloading software, and even using the Internet to make and receive telephone calls.  And with usage caps as low as 5GB per month on the economy plan, that’s less data than can be stored on the average portable memory stick.  Just one high definition movie easily will exceed that cap.

We’ll see if Time Warner Cable is able to expand this into more, bigger markets. If it works — and Web video fanatics don’t mind spending $200 per month on Internet service — that’s good news for Internet providers.

But if subscribers bolt in big numbers for competitors like Verizon (VZ), which doesn’t currently cap bandwidth, it could be a disaster. (More likely: It will have to bump caps up to a more reasonable 150 GB or more when customers revolt at $100-plus cable modem bills.)