Plan to Charge Internet Usage Fees Meets Resistance

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Time Warner Cable Inc.’s plan to charge Internet subscribers by how much they use their high-speed connection rather than on download speed is meeting resistance from consumers, according to the Associated Press.

The plan is currently being tested in certain markets across the country, but it’s really running into resistance in Rochester, N.Y.

Why you ask?

Time Warner’s competitor for local broadband service, Frontier Communications Co., isn’t playing by Time Warner’s new rules.  Frontier was considering a similar move but when public reaction to the decision by Time Warner was almost universally negative, Frontier dropped the idea.

With Time Warner Cable facing the fury of consumers and threats of legislation, Frontier said this week that it won’t sell Internet service with “tiers” of usage, much like the minute allowance of a cell phone plan.

“We have gotten hundreds of calls from Time Warner customers into our call centers,” said Ann Burr, the head of Frontier’s Rochester unit. “I guess it’s been a public relations crisis for Time Warner.”
That move bodes poorly for the future of metered Internet billing. Because the idea is unpopular with consumers, cable and phone companies need to match one another’s moves in introducing it, or one of them gains a competitive advantage by offering the standard all-you-can-eat service.

Stamford, Conn.-based Frontier had 579,900 Internet subscribers at the end of the year. New York-based Time Warner Cable had 8.7 million, making it the third-largest Internet service provider in the country.

The cable company started testing metered billing in Beaumont, Texas, last year, offering plans with 5 gigabytes to 40 gigabytes of monthly traffic, then charging $1 extra for each gigabyte over that.

Many ISPs cap their subscribers’ monthly traffic usage, but the thresholds are usually much higher — at Comcast Corp., it’s 250 gigabytes. It’s also very unusual for ISPs to charge extra when customers go over their limits.

By charging by the gigabyte, the cable company said it hoped to shift the cost of providing Internet service, and the cost of upgrading the network, from those who use the Internet the least to those who use it the most. All ISPs find a small percentage of Internet users consuming most of the bandwidth, usually by downloading or watching movies.

Frontier Chief Executive Maggie Wilderotter outlined an approach very similar to Time Warner Cable’s last fall, saying the company would provide tiered usage and charge $1 to $2 per gigabyte above 5 gigabytes per month.

Consumer advocates point to a few problems with the metered approach.

For one, not many people know what a gigabyte is, so ISPs will have to educate their customers.

Secondly, Internet usage keeps growing at about 30 percent per year.

A subscriber with a metered plan could find costs growing every year, unless they curb usage of new services like online movies and gaming.

Comments

  1. I’ve never been so happy to live outside a Time-Warner market.

  2. I use to think that Comcast sucked until I got Time-Warner.

  3. Frank in WA says:

    It is hard to suddenly start charging for “metered” service when the public is used to a “flat fee”. During telephone deregulation 25 years ago, the phone companies thought that would be a bright idea for local telephone service (charge by the minute) but ALL State Legislatures shot it down.

    Not only is such a change unpopular with the public, it is not good public policy since it has a “chilling effect” on use of the service. Additionally, internet sevice is very competative. The phone and cable companies are all scrambling for lucrative internet service customers. Whoever goes to metered service would be cutting their own throat, provided lawmakers let them get away with it.

  4. Justathought says:

    Agree.

  5. Talk about dumb idea of the week. I liked AOL back in the day, but had to give them up because of the per minute cost.

  6. Brandon says:

    If ISP’s introduced a metered approach, what would happen to businesses that use huge amounts of bandwidth? Google paid $344 million in 2008 for internet service but used a 16.5% share of all US consumer bandwidth. If Google paid for exactly what they used their internet bill would jump to ~$6.9 billion. Is it fair for companies like Google to pay their fair share of infrastructure? Or would their dramatically increased costs cripple their business?

    http://precursorblog.com/content/google-uses-21-times-more-bandwidth-it-pays-first-ever-research-study

  7. Why the heck would the cable company’s charge for per-minute useage? Greed, plain and simple. Internet Useage does not cost the cable company a Dime. Wear and Tear and Upgrades and replacement of hardware Should have been consitered in their Per Month charges for the internet Access. Cell Phone company’s are dealing with the “Greed” problem right now, that is why you have seen the costs for cellphone useage drop Drastically in the last 5 years. Now they are just about giving away free texting and calls 24/7 for 1 flat fee. Just seems to me that if cable company is going to try to charge for per-gig useage, they are taking a step back not a step forward. Also consitering the “new technology they will be comming out with soon, cablemodems are going to be consitered a thing of the past (like dial-up is right now).

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