Metering the Internet Losing Traction?

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Last year, New York-based cable company Time Warner Cable started testing metered billing of Internet service - what it calls consumption based billing - in Beaumont, Texas by offering service plans with 5 gigabytes to 40 gigabytes of monthly internet bandwidth limits, then charging $1 extra for each gigabyte over the plan's limit. The 5 gigabyte plan cost around $30 per month.

The reason for going to metered billing, the company claimed, was fairness. Just 5 percent of subscribers were using 50 percent of the bandwidth, it said, and so they should pay more.

According to a story in the Wall Street Journal, the company said the caps didn't affect 86 percent of its customers, and felt the Beaumont test was enough of a success to try the concept elsewhere.

About two weeks ago, the Time Warner Cable said it was going to expand the metered billing test starting this summer and continuing through the end of year in Rochester, New York, Greensboro, North Carolina, and San Antonio and Austin, Texas. It was also going to offer a $15 per month plan with a 1 gigabyte cap, and for $75 per month, a 100 gigabyte cap.

However, when Time Warner Cable tried to start its test in Rochester, a public backlash quickly ensued. U.S. Rep. Eric Massa, D-N.Y., even said that he was going to be drafting legislation to prevent downloading caps. Senator Charles Schumer, D-N.Y., also voiced opposition to the plan.

As a result of the fuss, Time Warner Cable decided to shelf the plans - for now - to expand its Internet metered billing tests.

Time Warner Cable Chief Executive Officer Glenn Britt said in a press release, â''It is clear from the public response over the last two weeks that there is a great deal of misunderstanding about our plans to roll out additional tests on Consumption Based Billing. As a result, we will not proceed with implementation of additional tests until further consultation with our customers and other interested parties, ensuring that community needs are being met. While we continue to believe that Consumption Based Billing may be the best pricing plan for consumers, we want to do everything we can to inform our customers of our plans and have the benefit of their views as part of our testing process.â''

It may be down, but the idea of Internet metered billing is far from out.

However, as pointed out in this week's New York Times article, it may be a much tough sell from a political standpoint. The article points out that Internet "providersâ'' profit margins are stable, and that investment in network equipment is generally falling."

It goes on:

"Indeed, the equipment needed to add capacity to any household costs a fraction of one monthâ''s Internet service bill. Comcast, the nationâ''s largest cable provider, has told investors that doubling the Internet capacity of a neighborhood costs an average of $6.85 a home."

"The cost of providing Internet service is about to fall even more, as cable companies install new technology, called Docsis 3, that will both increase their capacity and allow them to offer much faster download speeds."

I think it going to be hard to justify rate increases to the regulators and politicians when your infrastructure costs are coming down, and the government is increasing your market size and further reducing your costs by providing over $7 billion in stimulus money as well.

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