My newspaper column is about Time Warner Cable's tiered pricing plan -- what it means for Greensboro, and what we might do about it.

Time Warner Cable's Flawed Pricing Plan

By Edward Cone
News & Record
4-12-09

During Monday night's NCAA basketball championship game, the CBS announcers took a break from Carolina's epic beat-down of Michigan State to promote a neat online video service. Fans can click to a Web site and watch any tournament game on their computers, free of charge.

But fans in Greensboro and a handful of other cities may end up paying if they use such free services.

Under a new plan to be tested here by Time Warner Cable, high-speed Internet customers will be charged according to the amount of data they download and upload each month. (Other test sites include Austin and San Antonio, Texas, and Rochester, N.Y.) So long, flat-rate pricing; hello, usage caps so ridiculously low that watching even a relatively small amount of online video will jack up your cable bill.

This is a big deal for local consumers. Even if you don't watch much Web video now, your habits might change as your options continue to grow. Renting DVDs is unnecessary when movies arrive via the 'Net. Television shows, new and old, are available online whenever you want to watch them. Last year's Olympics were online, too -- but the site had a warning label advising people with metered plans not to watch. Meanwhile, applications beyond entertainment, such as communications with your health care providers, will become increasingly popular.

There are broader issues as well. As a test market, we will face economic development constraints not felt by other cities across the country.

"The cap is a serious issue for Greensboro," says Vint Cerf, a senior executive at Google who is known as the "Father of the Internet" for his pioneering work as a network engineer. "It will inhibit innovation. People will cut back on usage and become afraid to try new applications. It will be a terrible drag on new entrepreneurial services, and that's got to be exactly the wrong thing at a time when we're trying to stimulate the economy."

Time Warner's announcement has stirred up strong feelings in Greensboro. The blogs are buzzing. City Council members contacted by the News & Record's Joe Killian have voiced their concerns about the plan, and Mayor Yvonne Johnson says she'll work to bring competitors for Time Warner into our market. Yet local politicians have almost no authority over cable operators, and viable alternatives to the cable monopoly could take a while to arrive -- and may not offer much relief when they do.

"The idea of being rescued by AT&T is bizarre," says Cerf, referring to one possible option, which is not known for its customer-friendly approach.

Still, there are ways for Greensboro to fight back. When I described Greensboro's active response to Cerf, I said that maybe Time Warner had chosen the wrong place for this test. He replied that, when viewed from the perspective of those who favor innovation and realistic pricing, "Maybe it's the right place."

What's in a Gigabyte?

Time Warner Cable says metered usage is necessary because video puts a lot of strain on the network, and it needs to pay for upgrades to its equipment. It's true that video sucks up a lot of bandwidth, but the tiers to be tested (five, 10, 20 or 40 gigabytes of data per month, with a charge of $1 per gigabyte overage) put unrealistic constraints on users. Time Warner says it will add a 100-gig tier in the future, but even that is far lower than caps enforced by other companies.

[TWC modified its pricing plan after this article went to press, but the changes do not make a huge difference; also at the link, evidence against TWC's economic argument for tiered pricing.]

Many observers believe that Time Warner's real goal is to inhibit people from viewing movies and other content over the Internet because it wants customers to use its own cable television services, such as pay-per-view movies, instead.

"Tiered broadband as constructed is not about network management, it's about revenue," says Stacey Higginbotham, an Austin-based writer for the technology Web site GigaOm, who has covered the issue extensively.

Cerf adds that the metering plan will meter the wrong thing. Measuring data volume alone doesn't make much sense because users can upload or download a lot of data over the course of a month without putting any stress on the system, depending on when and how they do it.

"People are not making a distinction between rate, and rate times time," he says. "It's like traveling in a car -- it's not how far you go but how fast you go that gets you in trouble." The Time Warner plan could easily penalize users, "even if people aren't demanding much of the network."

Tough fight ahead

Cable companies are tough to fight. "Time Warner is well connected and influential here at the legislature," says state Rep. Pricey Harrison, a Greensboro Democrat who is well-attuned to the issues at hand. The Federal Communications Commission, meanwhile, is rudderless and seems to lack the authority to deal with this specific problem.

But there may be other avenues of attack, especially if the Obama and Perdue administrations are as focused on technology as they promise to be. The lack of competition and the absurd pricing scheme, along with possibly inaccurate claims by cable companies about how much bandwidth they actually deliver at any given moment, make this a consumer issue that might interest the Federal Trade Commission or the Justice Department. The National Telecommunications and Information Administration could be involved. Congressman Eric Massa, who represents Rochester, is discussing legislation to curb Time Warner's plan. Our own representatives and senators need to get in the game as soon as possible.

This is where Mayor Johnson and the City Council can make a difference. Someone needs to step up and lead the charge, to coordinate strategy and make it happen. This could be a defining moment for Greensboro. Let's make it a good one.

© News & Record 2009

Comments

[Joe Killian]

Great column. As they're now saying they'll offer a 100 GB tier for a higher rate and cap overages at $175 things will just get more complicated.

[David]

Bold Broadband Policy: Yes We Can, America
http://snipurl.com/yes-we-can-america

[DeBunkTheMyths]

Now let's see, which founding fathers of the cities decided that these cable companies would have exclusive access to the residents and businesses of the city?

When a monopoly is created, there is no ability for the market to determine pricing, as evidenced by the noose around internet user's throats in these cities.

[Roch101]

DeBunk, Time Warner has had a franchise with the city of Greensboro since 1994. It was never exclusive. A state law passed in 2006 made it even easier for cable companies to enter a market -- they no longer have to negotiate a franchise (exclusive or otherwise), just file a form with the state. So, I'm not sure who you are trying to blame, but it seems premised on a misunderstanding of the facts.