Ed. Note: Time Warner Cable cannot put off investing in 21st Century business strategies — such as improving broadband deployment — if they want to remain comeptitive in the Austin market for years to come. Raising the price of internet access for Austin consumers is a band-aid solution to a complex problem — and it is one we cannot and will not support in its current form. However, there are some very plausible alternatives Time Warner Cable and the City of Austin can pursue moving forward that are better aligned with the city's economic, strategic, and cultural purpose.
I'm encouraged by the early response from both the Lee Leffingwell and Brewster McCracken campaigns, and hope to continue a smart, responsible conversation on the issue going forward. Austin has the opportunity to lead the way on this issue for all of Texas. In two years the Public Utility Commission will be up for sunset review, and the question of how to invest in broadband deployment will take center stage at the Texas Capitol. Now is the time for a smart and responsible dialogue that can generate big-vision strategies for our future. We cannot wait for two years — Austin can lead today.
Over the coming days, I will be facilitating a discussion about better possibilities for broadband deployment in Central Texas. We in the Burnt Orange Report community invite all voices — from Time Warner Cable, consumer advocacy groups, private sector businesses, and University academics — to participate in the conversation, because this is an issue that can significantly change the very purpose of our community — both offline and online — for decades to come.
In a strategy that's likely to rankle consumers but be copied by competitors, Time Warner Cable (TWC) is pressing ahead with a plan to charge Internet customers based on how much Web data they consume. Starting next month, the company will introduce tiered pricing in several markets. [...]
Time Warner Cable had been testing a plan to meter Internet usage in Beaumont, Tex., since last year. By charging a premium to the heaviest broadband users, much the same way cell-phone providers collect fees from subscribers who exceed their allotted minutes, Time Warner would upend a longstanding pricing strategy among Internet service providers.
The Austin-American Statesman followed up with the story today:
Under the plan, customers will be charged on a tiered system based on the speed of their connection and how much they download. The tiers would start at 5 gigabytes a month and top out with a “super-tier” of 100 gigabytes per month. Customers will be asked to pay between $29.95 to $54.90 for up to 40 gigabytes, Dudley said. The $29.95 price would be lower than most Central Texas customers currently pay for the service.
The company says it has not yet figured out what it will charge for the “super-tier.”
Omar Gallaga — my new favorite reporter – had a lot more details up yesterday, based on “conversations he had with Alex Dudley, vice president of public relations for Time Warner Cable.” From his post on Austin 360, TWC/Road Runner tiered Internet pricing coming to Austin/San Antonio:
- No plans for rollover bandwidth from month to month. Use it or lose it.
- “86 percent of our customers at least have nothing to worry about,” Dudley said, “That’s the percentage of customers that will be left unaffected by the trial.” I asked if that’s in comparison to Beaumont and whether that’s a very different market. He replied, “Internet usage is a lot like television viewing. It doesn’t vary from geographic area to geographic area.”
- While this will affect customers in real dollars in San Antonio/Austin, this is still considered a trial in terms of whether it will continue to other TWC markets.
- The three-month grace period will begin in early summer.
- A gas-gauge-like Internet usage monitor will be on the TWC Web site. Customers will also get info on their usage in their monthly bills.
- The 100-Gigagyte “super-tier” will be “significantly more expensive” than the $55/40 GB a month tier mentioned in the BusinessWeek article. However, “We haven’t settled on a price yet,” he said.
- I’m waiting to hear back about customers under contract and how this will affect their terms. [Ed. note: Gallaga later reported that Time Warner Cable had not yet decided if customers can opt-out of their contracts when this change occurs].
- Dudley cited bandwidth-hogging things like HD video and BitTorrent as reasons for the change. “It’s not about trying to limit anyone from doing anything. It’s trying to provide a business model that allows them to do what they want to do for the foreseeable future,” he said. [Emhasis added]
- Final thoughts from Dudley: “We know we’re going to learn a lot in this trial. We will listen to feedback from our customers. We’ll make decisions based on what we learned.”
On the whole, I understand the challenge Dudley is articulating in the second to last bullet — that they are concerned about downloading. But that concern is a fundamental misconception of not only how data is transferred across servers, but of the exponential value of the power of the internet to increase the social network. Jacqui Cheng — writing for the esteemable site, Ars Technica — explains in an article titled, “Shooting yourself in the foot: Time Warner's usage caps”:
Instead of developing plans designed to discourage consumers from feeding at the bandwidth trough, cable companies would be better served in the long run by making investments in new technologies like DOCSIS 3.0 and the kind of infrastructure improvements necessary to meet bandwidth demands. Those kinds of expenditures can be unpopular with shareholders unwilling to see earnings suffer in the short term so that a company can better position themselves to compete in the long term. But it's a better alternative to positioning your company as the Dollar Store of broadband providers.
We'll have a more specific discussion about the possibilities for broadband deployment in the coming days. In the mean time, we encourage our readers to follow up on the resources below, become informed, and help us sustain a dialogue that helps Austin's business and consumer needs.
Resource: “Time Warner: Dominate the bandwidth? It'll cost more” (Statesman)
Resource: “TWC/Road Runner tiered Internet pricing coming to Austin/San Antonio (Austin 360)
Resource: “Time Warner Cable Expands Internet Usage Pricing” (Business Week)
Resource: “Japanese telco institutes upload caps… of 30GB… daily” (ars technica)
Resource: “Shooting yourself in the foot: Time Warner's usage caps” (ars technica)
Resource: “Why Tiered Broadband Is the Enemy of Innovation” (gigaom)
Lee Leffingwell released the following statement earlier today:
According to new reports today, Time Warner Cable is introducing a new pricing structure for Austin-area Internet users. Under the new plan, consumers would be placed on a tiered and metered billing system, and charged for the amount of bandwidth they use.
This approach, and Time Warner’s specific plan, should be of grave concern to Austin. Right now we need to be encouraging, rather than stifling, economic recovery and growth in Austin. This plan moves us in the wrong direction. It potentially puts Austin at a disadvantage as we compete against other communities to attract, retain, and grow prosperous businesses.
I’m obviously concerned about the impact this plan would have on individuals and families, who would have to begin to monitor their Internet use. The new pricing system would have a significant impact on anybody who uses the Internet to watch videos, download music, movies, or television shows.
But I’m deeply concerned about the impact of the plan on business owners, especially those working in creative industries that require regular access to broadband Internet service. Introducing an economic disincentive for Austin businesses to use the Internet to communicate, collaborate, innovate, and deliver services is very worrisome at best, and catastrophic at worst.
If Time Warner believes that is has no choice but to introduce usage caps, I would call on them to propose caps that are realistic and reasonable. The usage caps proposed in their new plan are neither realistic nor reasonable.
For example, if a consumer downloads Season 1 of “Friday Night Lights” in high definition from iTunes, they will have used 30.86 gigabytes of transfer. This one purchase would put that consumer over the limit of all but the most expensive tier that Time Warner is offering under the new plan. It’s easy to see how the costs associated with the ongoing, high volumes of Internet use that many businesses require be could be astronomical.
Internet access should be expanded, not constrained. Innovation and creativity should be unleashed by the Internet, not shackled by draconian usage caps. This is vital to Austin’s economic recovery. I hope that Time Warner will work with City officials and the community at large to reconsider this bad plan.
UPDATE: Brewster McCracken has issued a statement as well.
I recognize Time Warner’s legitimate concern about the viability of its business model, but the approach they are proposing is bad for Austin. By placing a tariff on the flow of information, Time Warner is also undermining the Internet’s fundamental values of openness and equality.
More than virtually any city, Austin is a center of innovation and creativity. That innovation and creativity increasingly is taking place through digital media, video games, independent film and social media.
For instance, digital independent filmmaking has empowered creative artists to make movies without the financial backing of corporate studios. When the city funded the upgrades to Austin Studios recently, we funded installation of terabytes of digital media bandwidth. This will empower the independent filmmakers and video game creators working at the studios to transmit their content over the Internet. Time Warner’s approach could make it so prohibitively expensive to produce films and video games using digital technologies that filmmakers would have to return to celluloid and projectors and video game producers would abandon multiplayer online games.
It isn’t just filmmakers and video game creators. Musicians and social media innovators are developing new distribution models that rely on Internet streaming and downloading to achieve new independence from the old corporate studio and label model.
That’s why Time Warner’s information tariff proposal negatively impacts our efforts to position Austin as a leader in independent film, music and creative media.
The Time Warner proposal also undermines political expression and organization. President Obama, for instance, used the Internet and social media tools to empower new voters and create new ways for political campaigns to organize. This increased voter turnout, particularly among younger voters.
Finally, everyday customers are increasingly saving money, accessing new products and information and better connecting with each other through video streaming, music downloading and social media networks.
As a community, we need to be concerned about the impact that Time Warner’s actions will have on the local economy and on community values.
This proposal will make it more expensive to innovate. It will increase costs for local businesses. The very people who would carry the brunt of this tariff are the people who the Internet has empowered to connect and create without having to turn to large corporations to fund their efforts.
Time Warner’s information tariff proposal is inherently constricting to the local economy. This business model also severely hinders the potential of the Internet. It is not good for Austin. It is bad for the principle of an open Internet. It undermines the public interest.