Sadly, the biggest story to hit Austin yesterday wasn’t an April Fool’s joke – Time Warner, the local cable provider, announced that tiered pricing and bandwidth caps would be coming into effect virtually immediately, for Austin/San Antonio TX, Rochester NY, and Greensboro NC. It’s no coincidence whatsoever that all of these markets are effectively Time Warner monopolies (AT&T just ran U-Verse, which is essentially DSL that can run at cablemodem-equivalent speeds, to our neighborhood last month, in what now seems spectacularly good timing). That sound you hear is everyone dumping Time Warner in Austin for anything remotely approaching internet service… U-Verse, Grande, DSL, carrier pigeon, whatever. Interestingly, J. talked to someone at Time Warner who insisted that Business Week was liars liars pants on fire. Guess they didn’t get the memo from their CEO.
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. Typically, phone and cable companies charge flat fees for unlimited access to the Web. “We need a viable model to be able to support the infrastructure of the broadband business,” Time Warner Cable CEO Glenn Britt says in an interview. “We made a mistake early on by not defining our business based on the consumption dimension.”
Which is more than a little ironic, given that the now parent company of Time Warner gave up “defining their business based on the consumption dimension” in 1996. Clearly, a lot changed in 13 years! What could it be?
Well, the announced bandwidth surcharges ($1 per gig over the limit) hold a clue to that. They are ridiculously punitive – the hosting company that I use for this blog charges me less than 10% of that. I guess those bits cost a lot more when you use them at home. Or, more to the point, if you use more than Time Warner’s top-end cap of 40GB a month, or the probably ridiculously priced supersize option of 100GB a month, or the literally ridiculous budget cap of 5GB a month – Time Warner (and other ISPs) literally do not want you as a customer. You cost them money, because you actually use what you buy. One of the longest running dark jokes among MMO live teams is that MMO publishers would make money by simply banning everyone who logged in. Once you filtered out the customers that actually *played*, your support costs of the remaining people who rarely check credit card statements would drop dramatically! Except with ISPs, it’s not dark comedy – it’s a business model.
So let’s look at typical use cases.
The MMO Player – you don’t watch much online video (unless it’s raiding strategies), you don’t download games or video, you simply play – oh, just to pick a random example, World of Warcraft AND NOTHING ELSE. The good news is that most of the proposed bandwidth caps won’t affect you, because MMO networking is written in such a way that the game is theoretically playable over a dialup modem (though this becomes more and more theoretical a proposition as time passes). So, a good reasonable estimate is that, playing WoW (or Call of Duty 4, or any other online game) 20 hours a week, you’d use about 700 MB in bandwidth. Add in Ventrilo (which is also optimized for bandwidth usage) and the occasional Youtube rickroll and you’re probably at around 2 GB a month of bandwidth usage. Congratulations! Time Warner likes you. You’re well behaved. You’re also an outlier, because outside of online gaming, almost no one uses that little bandwidth any more. And truth be told, how many MMO players do YOU know that JUST play MMOs? Be honest, you have those Naruto torrents running, don’t you.
The Entertained – you play the occasional online game, but mainly your time online is spent watching yesterday’s Daily Show snippets and the occasional program on Hulu. Well, you’re in trouble, because that whole reason you got a cablemodem to begin with – the ability to watch streaming video in something approaching high definition – will break your bandwidth bank. About 7 hours a week of online video will break the 40GB limit.
The Steam Customer - oh, you’re so, so screwed. The last game I bought from Steam – Empire: Total War – weighs in at 14.8 GB. Most AAA games today are of a similar download size. Gamestop is dancing in their used tennis shoes, because online game purchases just quit being cost-effective.
Bill Harris has a piece on his blog on what this is really all about. Money. And not even yours, really.
When in doubt, look for the deep pockets, and in this case, those pockets belong to the content providers. Video-on-demand has absolutely EXPLODED in the last two years, and new services seem to get added daily. Content providers are stampeding to get all of their content online and watchable on demand.
Particularly interesting is ESPN360, which offers an incredible amount of content, both live and via replay. Well, maybe:
ESPN360.com is available at no charge to fans who receive their high-speed internet connection from an ESPN360.com affiliated internet service provider. ESPN360.com is also available to fans that access the internet from U.S. college campuses and U.S. military bases.Hmm. So if my ISP isn’t an “affiliate,” how do I get access?
Switch to an ESPN360.com affiliated internet service provider or to contact your internet service provider and request ESPN360.com.Oh, and guess what–Time Warner, among others, isn’t an affiliate.
Oh, yes–it’s war.
I think Time Warner has very little interest in us. What they’re interested in is getting money from content providers who are now finding that on-demand video can be very profitable.
This is, of couse, similar to Time Warner (and every other cable company) charging its broadcasters as a business model. Why should the Internet be different? Why indeed. Like Bill Harris, I look forward to the blowback as Time Warner discovers exactly how many ways Austin is a connected town (hint: it’s not just Internet cabling). Because the alternative is fairly grim: the end of the Internet as a content delivery system.
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At first glance someone might think Iconic was the rational guy here – then they would look at the actual caps and prices TW is using and they would realize Iconic is clueless.
The new rates have nothing to do with TW costs and everything to do with increasing profits on an already profitable business.
Regardless of where the caps are, there are people who are using an insane amount of bandwidth compared to the norm. “Unlimited” plans made a lot of sense before Hulu and Steam and CBS streaming the entire NCAA Men’s College Basketball Tournament online in HD.
If the caps are too low and you can get better value elsewhere then by all means do so. It’s your right as a consumer to seek the best value and it’s the responsibility of providers like Time Warner to try to balance the needs of the consumer with their need to compete and make money.
The entire point I’m making is that it’s not a moral issue. Every one involved is purely looking out for their own self interests. If Time Warner is setting the caps too low and making themselves non competitive, they’ll figure it out eventually or get driven out of their market share by AT&T.
To my way of thinking this is no different than Netflix going from free unlimited rentals to having different tiers depending on how many movies you’re actually going to rent in a month.
It makes more sense to segment the market so that each consumer is paying more appropriately for the value they receive than to offer an umbrella plan where a few people are building an entire lifestyle around something that’s too good to be true, while other people foot the bill.
I agree with the notion that this is motivated by TW’s desire to crush the video on demand competition and have their users exclusively use TW’s movie and video on demand services just because it’s too expensive to use a competitor.
They’re wrapping it in the camouflage of bandwidth usage issues, but it’s just good old monopolist behavior around content. The bandwidth charges are just extra gravy.
Hopefully the Feds will have a problem with this.
Iconic, I would agree with you in general except this is NOT just any old business like Netflix. This is – in many places – a monopoly. And most of those local monopolies are the result of years of crappy regulations that left one company with all the rights to a certain area. Those regulations are mostly gone, but the effects linger.
When the time comes that the results of years of bad regulations no longer effects the options consumers have in all areas, then I will agree with you.
You kids these days. When I was at the university, we had to share a T3. Speed didn’t matter, since we only had 10 MB of space on our network accounts, anyway! (Ow, my hip.)
People wondered why I’ve always chosen “slower” DSL for my internet connection. I’ve realized that cable internet was heading to trouble once I understood how a whole neighborhood shares bandwidth on cable. Living in Silicon Valley woke me up to that potential problem early. I suspect the caps are (relatively) low and the charges punitive in order to stop people from saturating the local cable pipes and creating complaints. Anyway, I’ll take truly unlimited access in exchange for not being able to run more than 10 simultaneous WoW clients and preferring to set huge downloads to go when I’m not at the computer.
Ultimately, however, you do have options. You may not like the other options as much as your cherry deal currently, but there are options. Having to go to DSL isn’t the end of the world.
Looks like this is a growing trend. AT&T DSL in the southeast has pretty much given up expanding into any more rural areas and are instead pushing satellite internet. In case you are considering satellite, it is a touch above dialup, and that’s all. High latency, high cost, interruptable during rain, and with ridiculously low caps. But it’s still considered “broadband” so AT&T can list their area as covered…
So yes, the big guys have figured out that you *can* make more money by limiting service than by expanding it.
Lesson Learned: I needed to stop whining for having DSL. Yes i have DSL. And its bereable and i can download what i want without having watch a counter every 5 minutes. Sorry, way too stressing and punishing.
I feel bad for people in heathen lands like Austin, but there is a bandwidth issue that’s going to arrive sooner or later. The reason caps are a “growing trend” and not a dumb decision pounced on by the competition is that bandwidth usage is multiplying exponentially while available copper is decidedly not. It’s not fair that grannies and soccer families should have to suffer for your daily torrenting and youtubizating.
I can’t help but laugh when I read the wide eyed does observe that “this could mean the end of digital downloads/cloud processing/streaming everything as the default business model of teh futures!” You don’t say. Maybe you should have listened when people were telling you that would happen for, oh, the last ten years.
I agree that TW’s particular numbers are proof they’re trying to make a buck from actually-not-so-extreme bandwidth users. However, just because Exxon-Mobil tries to make a buck off rising gas prices doesn’t mean they’re the cause of it and we don’t have an energy crisis on hand.
I think this is a poor analogy. While I might agree that something will happen [from the corporate end] as a result of increasing usage, the industry structure between telcom and petrochem is not remotely the same, not to mention a host of other political and economic issues; the quantity of copper notwithstanding.
If I want to buy gasoline, I can choose any number of companies, because the infrastructure is not as ‘hard-wired’. The only noticeable difference is if I’m a ‘hardcore’ gas-consumer, who cares about my ratio of ethanol to gas, or some other esoteric distinction between gasoline. Chances are, there are more than four different gas stations in my neighborhood.
In the case of internet connections, some regions in the U.S. have no competitors, as mentioned previously. With TW, which has significant presence in California, there is no Dana; only Zuul.
I understand that the establishment and maintenance of such networks is expensive. I simply hope for developing technology and regulation to come to a point where the basic infrastructure is understood as a (inter)national resource. To monetize individual traffic in the way that TW seems to be doing strikes me as ham-fisted and out-of-touch with real internet traffic.
Is that too socialist of me?
Um…welcome to Australia. Except you don’t have to have 250+ms pings to every server in the world other than a shitty one that is still 100ms when its on your exchange.
We get bent over backwards also, except we somehow complain way less.
Well I have a couple of questions…
First – on the cost of deployment. Why are the phone companies having problems deploying? I mean they took the money taxpayers gave them exactly for this reason – every year for the last 20 years. For example Verison has been paid in tax dollars 4-5x as much as it’s spent on FIOS – so what the fuck does the market have to do with that?
Oh wait – I remember now – this is the reason DSL tech (which was possible in the 70′s) was not allowed – because it made more money to deploy a T1! I got it – it’s a pure money grab… telcos take the tax money and don’t have to spend it….! *sigh* I have no sympathy for the telcos – they have gotten alot of tax money to deploy infrastructure that went nowhere.
Second question… What happens to the poor schmoe with a 5gig cap – that gets zombied by some virus and sends out like 500gig of porn?
I pay for cable and if someone comes into my house and watches TV – I don’t get charged extra.
If someone drives up and hacks my wi-fi now… I could? That’s just a problem waiting to happen.
Ahh you Americans and your crazy internet market. At least in the UK there’s plenty of options. Sure, the cheaper ISP plans tend to have stupidly low limits but once you’re paying £25 a month – unless you’re leaving p2p on 24/7 – it’s generally not an issue. And it can be less if you’re in the bigger population centers which have LLU options…which are also quicker.
Ironically, while the cable internet offers much higher headline speeds here (to 50MBit, rather than even the LLU ADSL’s 20MBit if you’re nextdoor to the exchange), their UBR’s are so badly overloaded in many areas you get…well…much less than advertised. I’m on cable, but in a low-subscription area so it’s great, mind you.
BT are looking to roll out FTTC – the equivalent of U-verse – across the country in the next 4 years too.
Well this may eventually spur high volatage line data transmission which could eventually put a serious dent in broadband monopolies.
http://finance.yahoo.com/news/IBM-and-IBEC-Initiate-iw-14396782.html
I think that I would be hard pressed to generate 40GB of traffic a month at present, but as time progresses things tend to get more bandwidth intensive. I doubt that ISP’s will update their allowable caps in a timely fashion to reflect changes in technology.. especially with more media devices coming along.. Netflix-enabled DVD players, the 360 and PS3 with their video rental services, Apple TV.
They’re right about one thing though, if they’re really serious about consumption based internet access, they made a mistake long ago. I suppose it’s better for them that they tried to pull this now, instead of years later.
Thankfully, I don’t use Time Warner OR Comcast for my ISP. My ISP hasn’t done anything that says “I hate you”.. at least, not yet.
It’s fairly simple: The barriers to entry are extraordinarily high for ISPs. Deregulation isn’t an answer for everything, despite what some chicago and austrian schoolers would have you believe.
You’re going to have rogue wireless connections becoming more of an issue. Alot of people now have an incentive to piggy back off someone else’s router, while trying to keep theirs locked to the max.
I used to pay $10 for a record, then $15-20 for a CD.
I used to pay the hourly charge at Compuserve.
I used to pay $5000 for a new PC that does 1% of what a entry level PC does today.
I used to pay hundred of dollars a month in long distance calling public BBSs.
Settle down kids, move out of your parent’s basement, and realize how good you’ve got it now.
I am so glad hitnrun brought up the discussion about “not enough copper for all of this bandwidth-intensive content”, because I think hitnrun falls into a very common misconception about why we’re in the situation we are now.
The reason there isn’t a large enough “copper” in place NOW, is because these companies have, for the longest time, had monopolies in the local areas. So, they sell 20,000 people a connection on a network meant for 1,000. This is common practice, because most people still DON’T use what they are paying for. Funny how we don’t see super low-end plans being offered in conjunction with the usage caps.
Usage caps are simply a way for TW and other companies to continue over-subscribing their equipment and keeping 20,000 subscribers operating on the equipment meant for 1,000. It actually has nothing to do with the physical copper. Ever wonder why your cable line can be instantly upgraded to 2, 5, 10, etc. Mbps by paying a bit more? Oh, maybe because the physical media in place can already handle the faster speeds, but the networking equipment behind it can’t, so they have to attempt to gate customers and protect their 20 to 1 ratio.
And anyone that thinks DSL is immune to bandwidth caps, you should start a new line of thinking. DSL is over-subscribed 2x worse than cable on average, but since DSL is viewed as an already inferior service, it would be a marketing nightmare to institute. Sure, DSL isn’t being shared with your whole neighborhood, but there is a DSLAM meant for 100 people sitting somewhere with 2,000 people in your area configured on it.
As DSL numbers dwindle, it wouldn’t be unreasonable to see a usage cap instituted as networking technology in the background is consolidated.
@Heartless_
You are wrong. Period. Oversubscription is *NOT* “a connection meant for (capacity of x box)”. Oversubscription runs off the same rules of any system – you will not have 100% utilization of public services at any one time.
Funny how you get people doing traffic duty at large football/baseball games? Funny how the water system is not designed to have every single person on it use it at the exact same time?
The reason for this is the cost would be literally absurd to have true 1:1 service ratios for any of these items. But that is what people like you insist is wrong with the consumer broadband systems – and then cry that the cost of broadband today is too high.
Oh, and FYI? It is definitely not the “equipment behind the DSLAM” (or CMTS for cable modems) that is at capacity – it is very much the edge bandwidth that is limited. The cost of putting copper (or ANYTHING) in the ground for literally miles and miles is far more then you realize, not even including the material cost of the actual copper you are putting into the ground. The engineering problems of the backend networks are solvable for far less money then you are talking about to just double the actual edge bandwidth to every home (DSL or cable).
Please, do not ever use this argument again, as it is just flat out misleading and wrong.
\o/ Another reason not to like capitalism!
I think everyone is missing the core problem: bandwidth, eventually, is a finite resource. It’s never been a big deal before because there’s never been anything that would cause people to use a glut of bandwidth. Youtube isn’t the culprit, it’s the changing nature of media and software. Steam has changed software on the PC. Carrying PC games in-store has been a losing proposition for years. Now you buy online and download directly. Adobe has done the same thing. Now movies appear headed that way. Streaming and downloads of HD content (with multiple GB of data) are looking to become a norm. As long as people were dealing with downloads of, say, 20MB, having lots of customers was no big deal. But when you have everyone downloading multiple GB at the same time those fantastic speeds slow to a trickle.
Sooner or later there will have to be metered usage. Nothing “unlimited” ever is. And of course everyone prefers unlimited. I remember when I signed up for MCI’s “unlimited long distance” plan. Reading the fine print I found “unlimited” translated to 5000 minutes per month. Not a big deal (that’s a crazy high number to be talking on the phone) but I got worry free LD. And, in the end, Comcast (and their 250-500GB hard limits) gets this.
Time Warner, however, has really missed the mark. Either that or they’re trying to drive their highest usage customers to competitors (not an unreasonable assumption) so there’s more bandwidth to spread (even the 5GB customers will complain loudly if their service is slow). But TW could do better if they ran the 5GB service at $19.95/mo (teaser to compete with DSL) and ran up to, say, 200GB/mo at the $54.95 price point. I can’t say $1/GB is all that bad for a residential service overage. It needs to hurt or you don’t get the desired effect of punishing excessive use. The reason server accounts get their overage for much less is that server overages (where you already get hundreds, if not thousands of GB of transfer) need only hurt if you outrun your allotment by a lot.
@Queso
If we were communists we’d all have a state run dialup (and no competition) with a hard cap of 20 hours/mo.
Where I live we used to have insight. I signed up with insight and had a cable modem with them for around 9 years.
This gave me unlimited internet at (roughly) 7meg down / 1 meg up as measured by a speedtest.
Never had an issue other than normal network problems – those were always fixed promptly and if I had an issue they would credit me for the time I was down – no questions asked.
Then comcast bought them out. Same lines… same equipment – except now I have 700ms+ ping times and I’m lucky to get 1.5 down/256k up.
Same equipment – same lines. Same neighborhood.
You guys are drinking the kool aid if you really think it’s a last mile problem.
The only thing that changed at my local cable company was the upstream link and the router that connects it – guess what…. comcast sucks – they don’t know how to manage their network – and they are blaming users for the problem.
Go figure.
“…bandwidth, eventually, is a finite resource.”
Yes and no. At any given moment in time there are limits, but technology will keep pushing those limits forward. As long as the advancement curve stays ahead of the demand curve, we’ll be fine.
It’s a monopoly. That’s all that this is about. It’s not about backbone limitations or the “last mile” or lower users “subsidizing” higher ones.
It’s about natural monopolies and oligopolies that companies have acquire from the natural problem of stringing fibre and copper, and governments that are loathe to treat the like monopolies and oligopolies, because campaign funds tend to come from the guys doing the monopolizing.
Playing the apologist because you think that bandwidth can’t be upgrading won’t help you when you’re paying twenty bucks a gig.
(Sorry, that should be “playing the apologist.” Like, say, Boanerges there. I’m impressed that you can count, but a buck a gig is ridiculous, and only the start.)
If Time Warner’s really charging an outlandish price, then there’s money to be made by entrepreneurs buying optical carrier lines and redistributing the bandwidth via ethernet. Cable and Telco monopolies have kept players like that out of the market thus far via price, but if the prices go up, then such competitors will appear. Or I should say re-appear. I remember at the dawn of the braodband era there were some apartment complexes here in town that offered just such a service as part of the rent. Crashing prices for regular broadband put an end to that business model.
Look … Verizon DSL is $35 a month unlimited … Time Warner $150 unlimited … That’s crazy … Time Warner is $1380 a year more! Every Year!
Yes, I can stream Hulu and Netflix just fine on Verizon’s 3mb DSL thank you.
I don’t think they will get many takers at $150 … and I don’t think they expect to either … the point of their structure is to deter video downloads from the internet in order to preserve their cable television base. By having caps and overages fees to worry about most people will be wary of streaming for fear of receiving a gargantuan bill at the end of the month.
Internet access has become a “conflict of interest” for Time Warner.
In Rochester, the company has decided to not implement the tiered pricing program due the massive public outcry:
http://www.democratandchronicle.com/article/20090416/BUSINESS/90416024/1168/RSS
Not just Rochester, according to Schumer.
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