After skeptical reviews from the media (and online groups like ours) about Time Warner’s original proposal to create broadband tiers that ended up not saving any customer a penny, the company quickly announced a 1GB slower tier for the light user. San Antonio learned about the plan in a brief report, but no details about the fact that exceeding that 1GB tier would cost your 200 pretty pennies for each gigabyte that followed.

The Rochester Democrat & Chronicle produces some edgy video targeted to younger people who probably aren’t getting home delivery of their newspaper everyday (shame on you), but are still plugged in to high technology issues.  So it didn’t take long for the paper to track down two young entrepreneurs running small businesses in the area who would be directly impacted by usage caps and punitive overlimit fees.  One, Justin Kirby, has been well known in the telecommunications circles I travel in for a very long time.  He’s out in Albion, a small town in Orleans county northwest of Rochester.  Albion is served by Time Warner for cable service, and Verizon for telephone.  It will be several years before Verizon FiOS ever reaches into the smaller towns well outside of the urban/suburban communities Verizon now targets for fiber optic cable.  DSL would likely be the next best choice, assuming it is available.

In rural areas, the impact on small business and residential customers is even greater, because these are the communities most unlikely to see robust competition from multiple providers.

DL.TV addressed the issue of bandwidth metering when Time Warner announced its earliest cap tests on Beaumont, Texas.  The parameters of the debate have largely remained unchanged since then.  A 40GB cap, still in place in Beaumont, doesn’t impact the casual web browser and e-mail reader.  But it takes out those who want to use the Internet to watch multimedia or download files.  Time Warner happens to be in the business of providing the former, which is what raised a lot of suspicion about the cap model.

The question ultimately comes down whether customers want Time Warner, or any other cable company for that matter, to effectively regulate through the wallet what people do with their online connection.

One guy is adamant about caps, the other looks like he could be victimized by Time Warner’s Re-Education efforts, because he assumes that customers are primarily using their connections for web browsing and e-mail.  However, the paradigm is starting to change as younger users get online.  What motivated our parents to get online will not be what motivates everyone going forward.

Wilson, North Carolina - An All America City for the 21st Century

Wilson, North Carolina recognizes the transformation of the economy of North Carolina, as manufacturing moves overseas and new high technology businesses get underway. In the new technology economy, a local community like Wilson cannot afford to be left behind by an incumbent cable and telephone company that bypasses their area, missing out on the latest upgrades and enhancements. So city officials decided enough was enough and floated a bond issue, without using any taxpayer money, to construct their own fiber optic network to service residential and business customers with a state of the art broadband platform.

The result was Greenlight, the most advanced fiber optics system in the area, and it actually saves customers money while providing them with service far beyond what the other guys are selling (and they don’t have usage caps.)

But as we’ll learn in this report from WRAL in Raleigh, Time Warner sniffs at the competition, suggesting the expenses going forward will put the project in an untenable position.  Wouldn’t it be better to shelve it now before you waste a lot of money?  Wilson wonders if this will be the last word from Time Warner on their fiber optic project.  Stay tuned… the picture will get snowier.  A lot snowier.

WRAL did a very good job packing a lot of information from all sides into a two minute package.  I found it interesting WRAL seems to be the only station in the area spending a considerable amount of airtime in their newscasts on the Wilson story, which would soon develop into a major controversy.

[Editor’s Note: When the original article below was published, one of our Buffalo readers notified us the clip didn’t match the location, and we accidentally discovered a bug which apparently resulted in a few TV stations using the same video delivery platform getting clips mixed up between them.  My thanks to our reader who wishes to remain anonymous who alerted us to this problem, and allowed us to correct it.  Most of the original article still applies, but I’ve modified the details to match the reality!]

Although Buffalo was spared from any experiments with tiered pricing, they weren’t spared the annual rate hike.  One of the interesting differences between Buffalo and Rochester, which are adjacent to one another, is the competitive situation on the ground.

Buffalo has competition across the telephone, broadband, and television business from Time Warner and Verizon, which has wired a significant portion of Erie county with Verizon’s FiOS fiber to the home service.  The two compete effectively with similar product lines.

Rochester has competition across the telephone and broadband business from Time Warner and Frontier Communications, but the latter is stuck reselling DISH satellite service to provide a competing video package, and also has somewhat slower broadband service.  The two are not equal competitors across the board.

Buffalo, like many Time Warner divisions, offers “price protection agreements” in their territory.  Rochester does not — there are no contracts that commit Time Warner customers to any term of service.  In the Rochester market, the competitive threat from Frontier Communications has been judged so weak, there has never been a reason for Time Warner to bother with them in the Flower City.

Competition explains why one market has them and another does not.  In highly competitive markets, customers are tempted to hop from one provider to the other, and back again, to take advantage of substantial new customer discounts or other incentives.  Marketing costs to provide these discounts and incentives can be substantial, and customers can and do exploit them to save money.

The “price protection agreement,” which is another way of saying a “term commitment contract,” anchors customers with one provider for an extended period (typically one to three years), with a substantial penalty for early cancellation.

In less competitive markets, the dominant provider can avoid using contracts because most customers are reluctant to switch to an inferior product.  It also gives that provider the opportunity to bash the lesser competitors, which often do have contracts, with comparison advertising.  Time Warner Rochester has, attacking Frontier’s bundles for lengthy contract terms and $200-300 penalties if customers try and cancel early.  Clearwire is such a minor player, they exist below the radar.  But they have contracts as well, if you want the lowest price service.

In Buffalo, when Time Warner increased rates, Robin Wolfgang, Public Affairs VP for Buffalo, appeared on WGRZ to explain why rates had increased and also suggested customers hop on a price protection agreement to protect them from price changes during the contract.  During the recent Road Runner tiered pricing controversy, many customers outside of Rochester quickly signed up for these agreements for similar reasons – to avoid tiered Road Runner pricing for a few years longer.

This report from WGRZ has a reporter who sounds very familiar to Rochester residents.  Yes, that’s Dave McKinley who spent 18 years in Rochester broadcasting.  His report covers all of the bases, takes a mildly contrary position about where prices are heading, and lets Time Warner have their say.  I would have liked to see a customer complaining about the rate increases though.