“It was flaming, flames, FLAMES… on the side of my face… heaving breaths, heaving….”

Mrs. White, from the movie Clue

Well, they’ve done it.  They’ve actually left me speechless tonight.

It’s a good thing I can still type.

You know, I have to be honest.  I really didn’t think Time Warner could have made a bigger mess out of this Internet rationing than they already have, but then… they did!

Imagine my surprise after attending Rep. Eric Massa’s town hall meeting (thank you to all who attended that as well as the other meeting with Rep. Dan Maffei) to find the latest missive  from Time Warner’s COO, Landel Hobbs waiting in my mailbox.  Evidently, this comes as a result of this week’s meetings between Time Warner executives talking with… other Time Warner executives.

I posted it in its entirety without comment earlier because I wanted people to absorb it in all of its splendor.  I read it, stood up from my desk, and walked around the house for a few moments, and took several deep relaxing breaths.  Then I came back and sat down.

Back in 1998, I, along with several other local Internet evangelical types, brought together an enormous crowd in a local hotel ballroom to be introduced to a brand new product that was being introduced in Rochester called “Road Runner.”  It was an exciting event for us and others in this community who could finally put the days of dial up modems and an overpriced ISDN “solution” from Rochester Telephone behind us.  We welcomed Time Warner’s new product, we promoted it, and I’m certain delivered them at least tens of thousands of dollars of new business.

I have been a loyal customer ever since.  My current total cable bill runs some $178 a month, and I don’t have the Digital Phone product.  When Road Runner Turbo was introduced in our area at a great price last July, I ordered it one minute after it became available.  My cable television package had every movie channel, and the service has been generally quite good.  So I have hardly been a critic of the last decade of service this company has provided to so many customers.

And then April 1st, the Day of Infamy arrived.

I honestly don’t know what else this company can do wrong.  I really don’t.  With reluctance, let’s take a look:

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.

It starts hopeful.  They are apologizing for the enormous amount of frustration they have caused not only the people in my community, but the others “lucky” enough to also be chosen for this “experiment.”  We’ve heard from government officials who have heard the red hot outrage from their constituents.  We’ve seen the news reports from customers absolutely disgusted with the stratospheric rate increase this represents for so many people.  This website has had more than 20,000 unique visitors in the last nine days, and I’d posit most of them were here out of anger and disappointment, and wondering what their options were.  I heard from teenagers, whose parents have already taken away their Internet access out of fear this usage cap is going to result in enormous cable bills.  I didn’t grow up with the Internet; it wasn’t a part of my life from the moment I was aware it was there.  But I can understand and appreciate the tears and panic I am hearing from people actually losing a part of their daily lives because of this.

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.

As a preface, I repeat the challenge to produce the raw data to prove this assertion.  I’m not the only one asking.  When Broadband Reports requested the data, the response was, “we’ve shared our analysis of our data. We’re not going to share raw data…just not going to happen.”

Yes, the Internet is growing.  In fact, it was growing when I first had access in college to this thing called Usenet newsgroups.  It was growing when we were running computer bulletin boards with dial-up modems, and one of our local enthusiasts installed a satellite dish to receive and redistribute those newsgroups on a hobbyist network called Fidonet.  It was growing when we started using this product called Internet in a Box which let us get connected to it through the first Internet Service Providers.  It has actually been growing ever since.  Imagine that.  There have always been costs associated with increasing Internet usage.  Interestingly, as the years progress, the costs for bandwidth and the pipelines to deliver it have actually decreased, as new technology and delivery platforms have come online.  What they claimed last week to be a 50% growth in usage per year has evidently now declined to 40% a year, but that’s fine.  It’s growing.

Part of the cost of being in the business of providing Internet services is that, with the growth, companies must continually upgrade their networks.  It’s only natural, particularly with the increasing importance the Internet holds in the United States today.  What started in our area with several hundred people in a room, clamoring to get online, is now found in tens and tens of thousands of homes here.  Broadband has traditionally represented a highly profitable part of the cable television package, and it remains so.

It is also true that in several countries, where wiring costs can be particularly high (and competition low), Internet access has been expensive and capped.  Australians have written to us with comments like, “welcome to our world.”  Canadians have suffered with usage caps for a long time, often because companies claim the vast distances they must wire makes it prohibitively expensive to provide service.  They, like us, are also suffering from a genuine lack of healthy competition.  But wherever these limits exist, the public clamors for more competition and more choice.  Australia has embarked on a major expansion of Internet access to meet the demand.  If you ask Canadians about how happy they are with their Internet access, you don’t have too far to look before you hear them complain about lack of competition, and the resulting abusive pricing that comes with that.

The assumption Mr. Hobbs wants you to make is that these abusive caps come as a result of the growth of the Internet, not as a result of market concentration, lack of competition, and trying to leverage control over its use out of fear that the online video revolution may someday come to threaten Time Warner’s video business model.

What Mr. Hobbs also fails to explain is that Comcast’s cap is 250GB, with no increase in price for the cable modem service you purchase. Charter has caps for their “lite” plan of 150GB and removes them altogether for customers taking the “deluxe” package. Cablevision has said they don’t need caps, don’t want caps, and are quite profitable at their current pricing, and Verizon FIOS has no caps either.

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.

Not the “exaflood” nonsense again!  The study Mr. Hobbs alludes to was debunked as little more than “astroturf,” way back in 2007.  Please take a look for yourself.

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.

Oh goody.  That means they are getting rid of the caps, right?  After all, the issue of capping Internet users has never been popular.  Last fall, International Data Corporation even polled consumers on the idea of caps.  Here were some key findings:

• 81 percent do not like the idea of establishing a bandwidth cap and charging for use above the cap.
• 51 percent would try to change service providers if their provider imposed bandwidth caps.
• 83 percent say that do not know what a gigabyte is or have no idea how many gigabytes they use.
• Even light users are opposed to the whole idea of bandwidth capping.
• Only 5 percent said unequivocally that “those who use more should pay more.”

• 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.

Wow.  I know I’m excited.  My personal guess is this “tier” came not from consumers clamoring for it, but in response to criticism that under the originally proposed new tiers, no consumer would ever save a penny.  The currently available Road Runner “Lite” package was priced lower in our area than the replacement plan which cost several dollars more and was capped at 5GB.

I’d also guess most of the people using the Internet in amounts less than 1GB per month have no idea what that means, but they will know now once they exceed that amount and find a “gift” of overage charges – not at the ridiculous $1/GB, but $2/GB!  A good part of that 1GB will likely be eaten up by the hammering cable modems already get from hackers, network probes, and other illicit attacks on customers from outsiders.  Then count the spam, web ads, software updates, antivirus updates, and all of the other things that eat into their bandwidth allowance, and you’re left with ultimately very little.  Heaven help someone on this tier with a wireless router they never realized they had to secure.  An enterprising neighbor “borrowing” access could cause a heart attack when the customer opens their bill.

And because we care, here's another 5 or 10GB for your ration this 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.

Oh my.  I am dizzy with excitement.

I knew it.  Dear readers, please take a look at the article I penned early this afternoon, before Mr. Hobbs released his statement.  Does it sound a tad familiar?

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.

Where I was wrong was in my assumption that they would at least double or triple the caps before trying to portray the “generosity” as a “consumer victory.”  Instead, they brushed some bandwidth crumbs off the table for our empty bandwidth bowls.  It’s positively Dickens like.

So now you get to pay more to get a bit more, and you should thank us.

• 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.

This is hardly a concession since they already talked about offering this.  Now we have a price.  Let’s swim in the value:

Before:  $39.95/month (uncapped)

Now: $75/month (100GB cap + overage fees)

• 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.

I am tingling.  So now, instead of paying $39.95 a month, customers using “virtually unlimited” (they won’t even give you an absolute assurance of unlimited at these prices) bandwidth will pay $150 a month.  Why that’s an increase of just $110 a month!

• 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.

On behalf of Rochester anyway, thanks a lot for moving up what some here have called “the pillaging.”  I’m sure you had lots of feedback from both Rochester and Greensboro begging to move up the effective date of this nightmare.  And Texas gets a couple extra months before the “gift” of caps and rate hikes reaches them.  My suspicion remains that the lesson learned from Rochester and Greensboro will inevitably come from the stampede to the exit as customers elect to get their Internet somewhere else.  Anywhere else.

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

Note there is no proposed date for this, nor any mention of what the cap for that will be.

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].

Gosh, thanks.  Mr. Hobbs left me feeling like Tessie Hutchinson, the big winner in Shirley Jackson’s (a fellow Brighton High School graduate) The Lottery.

Honestly, since the day this “experiment” was announced, I have felt abused as a loyal customer of Time Warner.  My trust in this company has evaporated, and frankly tonight I am just stunned by how out of touch these people really are.  Do they not understand it is not just customers who are apoplectic over this?  This has turned into a long article already, and I’m sure readers have plenty to say here as well, but let me close with the reaction some others have over this disaster in the making:

Richard Greenfield, the analyst with Pali Capital, published a blog post Wednesday asking, “Is Broadband Becoming Less Profitable for Time Warner?” Mr. Greenfield said that the company is “making itself a spectacle.”

Nate Anderson, Ars Technica: Time Warner Cable, stung by online criticism of its paltry traffic caps (in tests, these have ranged form 5GB/month to 40GB/month) and ludicrous pricing schemes, has taken to the ‘Net to defend its sullied honor. But it’s hard to defend a scheme with fees so high they might well meet the legal definition of “obscene.”

Rep. Eric Massa (D.-N.Y.), who represents a district in upstate New York, this week denounced Time Warner Cable’s plan as “monopolistic” and an “outrageous, job-killing initiative.”

“We don’t want customers to think about byte caps so that’s not on our horizon… 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.” Jim Blackley, Cablevision Systems senior vice president of corporate engineering and technology.

So far, the only ones who seem adamant this is the right decision… are Time Warner executives.

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

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.

KOOP-FM Austin is presenting its award winning “A Neighborly Conversation” program this afternoon to discuss whether Time Warner Cable’s proposed bandwidth caps are good or bad for protecting the citizens of Austin and driving innovation. KOOP has invited two guests: Chip Rosenthal, Chair City of Austin Technology and Telecommunications Commission and Chris Boyd, owner of Midas Networks, a local internet services company.

The show ran Wednesday afternoon from 12-1pm CDT.   Thanks to our reader Brad who shared this news with us.

We liveblogged the event in the comments section.  I will post a link to the archived show when it is available so you can listen again.