Time Warner to Test Usage-Based Broadband Pricing

Instead of blocking high-bandwidth Internet traffic, why not just charge a little more for it?

Time Warner Cable has confirmed that it will begin testing a tiered pricing structure for subscribers to its RoadRunner cable broadband service in Beaumont, Texas, later this year. Under the new billing model, subscribers’ monthly fees would be based on how much bandwidth they use.

Alex Dudley, a spokesman for Time Warner, said that the move comes in response to the increasing use of bandwidth-intensive software applications, particularly peer-to-peer networks. Dudley said that occasional, unpredictable spikes in Internet traffic due to heavy downloads can impede overall network performance.

“At some point we have to put in place some mechanism that will allow us to serve all our customers equally,” Dudley said in an interview with InternetNews.com.

“One of the things to consider is the impact that peer-to-peer software is having on the network.”

U.S. broadband providers have tried to impose bandwidth caps in the past. Comcast, for instance, has occasionally terminated users’ service for usage that it deemed excessive. However, these caps have been only sporadically enforced, and, at best, nebulously defined.

Time Warner’s plan would bring usage caps out of the shadows. Beginning later this year, new subscribers to Time Warner’s service in Beaumont will have to select a data usage plan based on how many gigabytes they expect to transmit over Time Warner’s network.

The trial pricing model will only affect new subscribers, not existing ones.

Dudley said the likely tiers for monthly usage would be 5 GB, 10 GB, 20 GB and 40 GB, with overage charges assessed on a per-GB basis. He did not comment on pricing.

As subscribers approach their monthly usage limit, Dudley said that Time Warner will send them a warning advising them of the potential overage charges, and offering them the chance to upgrade to a higher data tier.

The success of the trial could determine whether Time Warner rolls out the usage-based subscription model to its other markets, and whether it restructures the service agreements for existing customers.

Time Warner isn’t the only broadband provider scrambling to address the crush of peer-to-peer network traffic.

Comcast, the nation’s second-largest Internet service provider, has come under federal scrutiny for allegations that it blocked downloads from the file-sharing site BitTorrent. In response to vigorous complaints and a formal petition from several public-interest groups protesting Comcast’s management of its network traffic, the Federal Communications Commission recently asked Comcast to explain itself.

Time Warner’s tiered pricing structure would not likely run afoul of FCC regulations regarding Net neutrality, but the response from its customers could be another story. A pricing model that would effectively limit data consumption seems to run counter to many of the trends unfolding across the Web, such as Apple’s recent announcement that it would start offering movie rentals through its iTunes store, the meteoric rise of the video-sharing site YouTube, and the more-or-less reluctant concessions of television companies to make their programming available online.

Quite simply, people are using more bandwidth, not less.

While he cautioned that the Beaumont trial is just an experiment, Dudley seemed unconcerned about customer backlash.

“Folks who are heavy users know they are heavy users, and they don’t mind paying for it,” he said. “The tiers are created to meet their existing needs.”

Some Canadian Internet service providers, such as Bell Canada and Rogers, already employ usage-based pricing models.

Dudley said he did not know why Time Warner had selected Beaumont, a town in southeastern Texas with a population of slightly more than 100,000, as the site for the trial.

RoadRunner, Time Warner’s broadband unit, is the fifth-largest Internet service provider in the country