Monday, April 13, 2009

N.Y. Congressman Plans Bill Banning Internet-Usage Billing

Ahhh government! Always there to interrupt free market. Not that I think internet usage billing is a great idea; rather, that I think it provides competitive differentiation to let market forces impact its success. Through technological innovation, change will occur. Usage issues can also lead to a whole new type of internet, more efficiently run. Bad ideas lead to failure and business losses, good ideas to innovation and new leaders.

"A New York Congressman wants to make it illegal for Internet service providers to charge subscribers based on the amount of data they download." While politics should be in play to maintain that people play by the rules, they shouldn't force companies, especially those that have competition, to operate a certain way. Cable companies,unlike water and electricity companies, are not utilities. They should have the freedom to set their prices and let the consumer decide who they want to do business with.

I may not agree with usage pricing, but government intervention is not the answer, competition is. Let in more competitors into each community and let the consumer decide which broadband provider they want.

Time Warner Cable Tweaks Bandwidth-Billing Plans

We pay for our usage of electricity, water, even cell phone minutes, why not broadband usage. That is certainly what Time Warner believes; especially as broadband pipelines get clogged up with heavy graphics and video. More users, more usage slows down the pipe, a traffic jam that can slow down speeds and aggravate users at the same time. Usage pricing puts the higher cost to the heavier user, but under the Time Warner plan, grants them faster speeds.

So what is a consumer to do. Well, if you just use your broadband for email and web surfing, probably nothing. Time Warner contends "that about 30% of customers use less than 1 Gigabyte per month", and would be charged a lower rate for service. The MSO will show customers what the usage has been to let them know what package may best serve them. "The MSO also will offer a 'gas gauge' tool to show subscribers how much bandwidth they've used up in a given monthly period."

As for the heavier user, Time Warner's plan is probably more costly. Unless Time Warner can demonstrate that their is more to gain with faster speeds for a higher price, the other option is to switch vendors. And that could prove better news for competitors like Verizon and AT&T. Unless of course they follow a "me too" strategy and move to a usage model, too.

Time Warner says that other countries follow a broadband usage model. But the all you can eat model has been around here for a while so may prove difficult to gain acceptance. Most may find it a convenient reason to switch. The question to Time Warner might be are heavy users highly correlated with being triple tier customers; that is, are you risking losing your best customers, who are already paying you top dollar, with even higher cable bills. If this research proves true, then perhaps it is not worth the risk of losing this best consumers to your telco competitors.