Time Warner Cable Broadband Pricing Fight Rages

The head of the cable association has come out swinging against what he describes as kneejerk criticism of Time Warner Cable’s plan to expand trials of a usage-based pricing structure for its Internet service.

In a blog post today, Kyle McSlarrow, president and CEO of the National Cable and Telecommunications Association, blasted the media-reform group Free Press for trying to sic Congress on “one of the few really healthy, growing and creative parts of our economy.”

The flap stems from Time Warner Cable’s recent announcement that it would broaden trials of a metered-bandwidth pricing structure to test markets in New York, North Carolina and Texas, building on a plan it first put into place last January.

In explaining the move, Time Warner Cable COO Landel Hobbs has said that data consumption among high-speed subscribers is increasing 40 percent a year, with no signs of letting up. The resulting network strain has prompted ISPs to test and implement new pricing structures.

Hobbs pointed out that all major ISPs in Canada, as well as several in the United Kingdom, New Zealand and other countries have gone to usage-based pricing. Major U.S. ISPs, including AT&T, Comcast and Cox have also been tinkering with alternative pricing models.

Hobbs warned that the “exponential” increase in data usage could lead to Internet brownouts if ISPs don’t spend heavily to add capacity to their networks. That investment, he reasoned, should be shouldered by the heaviest Internet users, particularly given the “increasing differences in the amount of bandwidth our customers consume.”

“Our current pricing plans require all users to pay the same amount, whether they check email once a month or download six movies a day,” Hobbs wrote. “When you go to lunch with a friend, do you split the bill in half if he gets the steak and you have a salad?”

But to Free Press, which has held out the possibility that metered pricing could be acceptable under certain circumstances, Time Warner Cable’s plan is tantamount to price gouging.

The group has launched a petition drive in the hopes of demonstrating sufficient concerns that members of Congress are persuaded to open an investigation.

Free Press already has one avowed ally on the Hill. Rep. Eric Massa, D-N.Y., has said he is drafting a bill to “prohibit unfair tiered price structures from Internet providers.”

Massa is upset with Time Warner Cable’s “ill-conceived” plan to bring usage fees in line with bandwidth costs that they have not made public.

“They have yet to explain how increased Internet usage increases their costs,” he said in a statement.

Spokesmen for Time Warner Cable did not immediately respond to requests for comment.

Under the trial pricing structure, Time Warner Cable subscribers would have a baseline service of 768 Kbps downstream available for $15 a month, with 1 GB data cap. Each additional gigabyte would cost $2.

To Free Press, that cap is paltry. Derek Turner, the group’s research director, sees it as the cynical ploy of a cable company looking to quash the groundswell of online video services like Hulu through an anti-competitive pricing model.

“Watch one high-def episode of ‘Lost’ online, and you’re over the limit,” Turner said in a statement. “By putting the cost of Internet video at such a premium, Time Warner is obviously trying to ensure that consumers continue to subscribe to the company’s cable television service.”

NCTA’s McSlarrow took a swipe at Free Press today for demonizing ISPs and failing to understand that his group’s members are acting in response to a legitimate business challenges in the form of ever-increasing bandwidth usage. McSlarrow cast the group as paranoid, insisting that his industry has met online video with a welcome embrace, and is merely trying to cope with the challenges of the strain on the network.

“It is somewhat tiresome to have Free Press repeatedly assert that every effort by network providers to examine any new approach or idea in our or related industries is somehow designed to protect against the supposed ‘threat’ of ‘Internet video,'” he said. “This is so stale, and so at odds with the facts.”

McSlarrow also pointed to a filing (PDF) with the Federal Communications Commission in which Free Press had said metered usage could be an acceptable option for ISPs.

Free Press Policy Director Ben Scott quickly shot back in a blog post that favoring usage-based pricing over the selective blocking of content — the issue at hand in that filing — was hardly a ringing endorsement.

“As for whether metering is fair — it can be,” Scott said. “But that is a question of whether the rates are fair in relation to the costs — the same costs that TWC refuses to disclose.”

In addition to the baseline service, Time Warner Cable is also experimenting with tiers of 20 GB, 40 GB, 60 GB and a 100 GB “super tier,” with overage charges capped at $75.

Rep. Massa said that for residents of Rochester, N.Y., one of the test markets, unlimited monthly data usage under Time Warner Cable’s trial pricing structure would result in a more than threefold spike in a consumer’s monthly bill.

Meantime, in another test market, Greensboro, N.C., consumers are planning a protest at Time Warner Cable’s office on Saturday, according to a report in the News and Record newspaper.

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