Time Warner Cable is increasing the cost of renting your cable modem. In the third increase in ten months, using the company-provided cable modem will now cost subscribers $5.99 a month. But the costs don’t stop there. Last week, Time Warner announced it was raising the price of its broadband service an average of $3 a month. Taken together, the cost of standalone 15/1Mbps broadband with a leased modem will now cost $61 a month.

SB6141 is a DOCSIS 3 modem

Time Warner introduced its $3.95 monthly modem rental fee last fall. In June, the company announced it was raising the price of the modem rental to $4.99 a month for new customers,  and has now decided customers can afford to pay more — $6 a month for equipment that costs the cable company, on average, less than $50 per unit according to Wall Street analysts.

CEO Glenn Britt remarked earlier this year that customers accepted the modem rental fee with few complaints. Britt foreshadowed the modem rental fee increase saying the company had significant room to boost prices, noting Comcast charges $7 a month for its modem.

Customers can escape modem rental fees altogether by purchasing their own equipment. At Time Warner’s new prices, most customers will recoup the cost of the equipment within one year. Unfortunately, as news of the modem rental fee increase made its way to retailers and eBay resellers, prices have soared for equipment on Time Warner Cable’s approved modem list.

The popular Motorola SB6141, which sold for $78 two weeks ago, has now shot up to $99.99 in anticipation of a new wave of buyers. Prices on Newegg have also increased from $78 to $99.99 as of this morning. Best Buy has also boosted prices to $99.99. Amazon still lists this white version of the SB6141 this afternoon for $87, but is expected to quickly sell out.

Based on the last two waves of price increases, if thinking about buying your own modem the time to buy is right now because major retailers are likely to temporarily sell out and eBay resellers will begin a wave of price increases in response to demand.

Stop the Cap! top rates the Motorola SB6141 among the modems on the approved list. It is DOCSIS 3 capable, which means it will support faster Internet speeds. But also be aware that if you upgrade to a DOCSIS 3 modem, Time Warner’s Speedboost technology, which delivers a few seconds of additional speed at the start of a download, will no longer work. Speedboost is gradually being phased out by most cable operators so we still think buying a DOCSIS 3 modem makes the most sense over the long term.

In addition to an August broadband rate increase for western New York’s Time Warner Cable customers, those in Rochester will also be among the first to experience a new 30GB usage-capped billing option for broadband service.

The subject of usage-based billing is a major sore spot for customers in the Flower City, who joined forces with customers in Greensboro, N.C., and San Antonio and Austin, Tex. to force the cable company to shelve a mandatory usage billing scheme announced in 2009. Stop the Cap! was in the middle of that fight, although this group was founded after Frontier Communications proposed a 5GB usage cap the summer before.

Time Warner Cable CEO Glenn Britt personally promised Sen. Charles Schumer (D-N.Y) that the cable company would yank its planned experiment with usage caps and consumption-based billing after it became clear Rochester and other cities were being singled out where Verizon FiOS would never offer competition, making it seem Time Warner was taking advantage of a lack of broadband competition to charge dramatically higher prices.

In 2009, Time Warner Cable planned mandatory broadband usage pricing starting in Rochester, N.Y., Greensboro, N.C., and San Antonio and Austin, Tex.

But Britt has never stopped believing in usage pricing, and Time Warner has since switched to a more gradual introduction of the pricing scheme, this time offering discounts to customers that agree to limit their Internet usage.

Time Warner’s current usage billing plan offers a meager $5 discount to those who limit consumption to less than 5GB per month. That plan was originally introduced in Texas and Time Warner Cable employees confidentially tell Stop the Cap! it has attracted almost no interest from customers.

Now Time Warner Cable plans to introduce a second usage limited plan, with a yet to be disclosed discount for subscribers who keep Internet usage under 30GB a month.

“Those who use the Internet for e-mail or to surf the web need not pay the same rates as those who download games and the like,” said company spokesperson Joli Plucknette-Farmen.

As far as we can tell, the 30GB capped plan is new for Time Warner Cable and Rochester will be among the first communities to experience it. Unless the company chooses to more aggressively discount both the 5GB and 30GB plans, we expect few customers will take Time Warner Cable up on their offer.

For now, Time Warner says the usage capped plans are optional and that flat rate Internet service will continue. But company executives have not said for how long or what the company might choose to eventually charge for unlimited broadband usage.

Britt has stressed repeatedly he wants customers to get re-educated to accept “a usage component as part of broadband pricing.” But customers may not accept that, particularly considering the cable company already enjoys a 95% gross margin on flat rate broadband service.

Out

In a widely anticipated move, Time Warner Cable CEO Glenn Britt will retire from his leadership role in December, replaced by his chief operating officer Robert Marcus.

Marcus will assume control of the nation’s second largest cable company with a promise to improve customer service, corporate culture, and growth in residential subscriptions.

Marcus told the New York Times the company has to develop a level of emotional connection with customers, many who loathe the cable company and complain regularly about the increasing cost of cable service.

Time Warner Cable has lost cable television customers and growth in other services has continued to slow as consumers explore competitive offers from the phone company and satellite providers. The company has made up the loss of revenue by raising prices and aggressively expanding business service by wiring offices and complexes for cable broadband.

In

Wall Street has complained Time Warner’s financial performance has fallen behind other cable operators, notably Comcast. Some also mention Time Warner’s broadband speeds are slower than other cable operators. Some analysts also continue to pressure the company to drop flat rate Internet access to accelerate earnings.

The cable company’s current market position has made them a target for a takeover, notably by John Malone and Charter Communications. The two companies have met informally to discuss a potential merger deal, but Britt doubted Charter — far smaller than Time Warner Cable itself — could run the combined entity effectively.

Marcus told the newspaper Time Warner Cable’s attitude towards a merger would depend entirely on how much value it would create for the company’s shareholders.

What was best for customers was not mentioned as a factor.

Bruce

Charging usage-based pricing and monetizing your use of the Internet is key to enhanced profits and higher earnings as broadband becomes the key product for cable operators.

That is the view of Robert Bruce, president of the communications division of Rogers Communications, eastern Canada’s largest cable operator.

“[The Internet] is the key to the future of our business, hence monetizing the increased bandwidth usage will rapidly become the future across all our businesses, whether it is wireless or wireline,” Bruce told a financial analyst in response to a question about ongoing Internet rate increases from the cable company. “There are clearly some unlimited offers out there and we think they are fairly shortsighted as the Internet is the future of the business.”

Bruce believes there is plenty of room for future rate increases, especially as the cable company boosts Internet speeds and ends network traffic management, improving the perceived quality of Rogers’ Internet service.

“We have significantly enhanced the value of this product and over time it is our plan to monetize it accordingly,” Bruce explained to the analyst. “The price increase that you receive in the mail would have just been one step in the monetization that we think will continue as Internet service becomes the backbone product in the home.”

Rogers admits it will continue to lower the bar on customers with usage caps and higher broadband pricing.

Ironically, Rogers is currently offering its own unlimited use plans, primarily in response to a competing offer from Bell.

Dr. Michael Geist, a broadband industry observer and law professor at the University of Ottawa notes competition is the only thing keeping Rogers’ pricing and usage caps in check.

“If the Bell offer disappears, so will the Rogers plan,” Geist predicts. “With limited competition, favorable pricing plans will come and go, with executives anxious to increase prices and implement usage caps. The only solution is sufficiently robust competition that all players are continually forced to improve service and keep pricing in check to retain and attract customers.”

Rogers may tell the public Canadian broadband is robustly competitive but the company signals something very different to the investor community. With OECD data already showing Canada among the ten most expensive countries for broadband service in the developed world, Rogers is primed to raise prices even higher as it further tightens Internet usage caps.

Rogers’ improvements in its broadband service do not necessarily correspond with the company’s pricing power. As consumers increasingly consider Internet access an essential utility in the digital economy, Rogers is finding it can set prices as it likes and regularly increase them without effective subscriber backlash. With most Canadians buying service from the cable or phone company, if both providers avoid a pricing war, investors will be able to extract OPEC-like earnings from the barely regulated service.

Providers routinely claim rate increases are tied to costly upgrades, but Rogers’ own financial statements and comments to shareholders say otherwise. The cost to deliver broadband service in Canada is dropping, but the price charged for Internet access and the overlimit fees collected when customers exceed their usage limit will continue to rise as a growing percentage of company revenue now depends on broadband service.

Time Warner Cable is once again raising its broadband prices, reflecting the fact Internet access continues to be a “must-have” product with room to raise the cost without driving customers away.

On average Time Warner Cable customers in the northeast with broadband-only service will pay $3 more a month starting Aug. 9, according to public relations manager Joli Plucknette-Farmen. Customers now pay $51 a month for 15/1Mbps service. After the increase, customers will pay $54.99, not including the modem rental fee. In early 2010, customers were paying $39.95, around $15 less.

Time Warner Cable’s new broadband prices will range from $34.99 a month for Lite 1/1Mbps service to $104.99 a month for 50/5Mbps service.

The rate hike will likely spread across the rest of Time Warner Cable’s systems around the country over the summer and fall.

Plucknette-Farmen said the increase will help the company offer the best possible broadband service.

Not every customer will immediately face higher pricing. Customers on promotional pricing packages will remain unaffected until those offers expire.

Because Time Warner Cable increasingly prices its services on a customer-by-customer basis, assessing the full impact of rate changes is extremely difficult because customers can pay dramatically different rates for the same services. A Time Warner Cable customer paying regular prices for standalone Internet service will find their neighbors with bundled service packages paying much less and those with promotional/customer retention deals paying the lowest rates of all.

In 2012, Stop the Cap! wrote a guide for Time Warner Cable customers to negotiate a better deal for themselves. Readers report the method still works.