Everyone seems to be up in arms about how Time-Warner plans to penalize broadband users if they consume too much bandwidth.
The sky is falling, it’s the end of broadband as a buffet service, Time-Warner is evil, consumers are being ripped off, blah, blah, blah.
Look, Time-Warner isn’t being evil; it’s being smart and, arguably, serving the needs of consumers in a better way.
Huh?
People love broadband but they use it in different ways for different reasons. Some people download copious amount of video and data while others like the speed but use it primarily for e-mail and a modest amount of Web surfing. Should both groups pay the price very month? No.
What Time-Warner is really suggesting is the introduction of tiered services based on your usage profile. If you download a lot, they’ll be happy to give you tons of bandwidth if you’re willing to pay for it. If you’re a “regular” broadband user, you’ll be able to select a tier that meets your needs.
This is no different from what BT offers in the U.K. with bronze, silver and gold packages. In Canada, the ISPs such as Rogers and Bell Canada have done the same thing with lite, regular, extreme and ultra-exteme plans. The faster connection you want, the more you pay. Simple.
For Time-Warner, its proposed plan does two things: introduces the concept of tiered service based on bandwidth, and compels heavy users to pay more for more bandwidth. This is something all ISPs are going to embrace sooner or later. Time-Warner’s is going be chastised in the short-term but fairly soon everyone will be doing it.
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curious, where do you think this leaves voip users like me who use the standard tw residential roadrunner and vonage packages.?
Depending on much VoIP bandwidth you use, you may have to upgrade/increase your bandwidth, which is exactly what TW wants you to do.
I don’t necessarily think that this is a bad thing, but you’re incorrectly comparing speed with size. If I choose to pay for a slower speed, then I will just have to wait longer to download my movies or music or whatever. That is my choice.
When you pay by the byte, then I have no choice. If I want more content then I pay more, or I simply cannot afford the content.
Right now if Bell or Rogers ups the cost for a particular speed package, you may select a lower cost package. If they up the charge per MB, will you just download less email? Upgrade applications less frequently? Download 10% less music? How will you feel paying for the spam you get?
How well this works depends on the cost bands they choose. If they only make those who use large amounts pay more (as they claim that is the problem) then this shouldn’t be an issue. But if there are huge jumps at 1GB, 2GB, or 3GB, then I think that you can kiss digital music and movie downloads goodbye.
There is the chance that they may kill the demand for their own product.
And as you pointed out, the economics of VOIP cease to exist.
Larry:
I agree that it’s a fine balance facing the ISPs as they play the bandwidth game. It depends on why they want to do it – force heavy users to pay more or move towards a pay-as-you-go approach (which, as you suggest) could temper demand.
The flaw in this logic is that the marginal cost of bandwidth is next to zilch. As long as there is excess capacity in the system (and currently that is the case), then it is economically rational that different types of users pay the same amount.
From a business point of view, price should be based on what the service is worth to the customer. The best way to establish that value would be competition between providers (those who don’t like what Time Warner charges should have the option of DSL).
Of course time warner is being greedy. The cost of extra bandwidth is marginal for TW, yet they want to charge for it. If every ISP uses this model, this will put a stranglehold on the net, and will set it back 10 years in terms of content. We’re just seeing now the proliferation of broadband around the world spawning a lot of rich media on the net in terms of video, voice, web apps. If people have to pay for incremental bandwidth, then it’ll made everything uneconomical, and we might as well go back to websites with just images and text.
James: The question – and the challenge – is balancing the best interests of the web with the self interests of ISPs, who have near monopolies on broadband service. As a result, they can pretty much do what they want from a pricing and service perspective given there’s little competition. Given broadband has become a much-need utility for many people, what can consumers do to make ISPs “behave”? Should broadband be – heaven forbid – regulated so schemes like what TW wants to do are reviewed? Lots of questions as we move forward.
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[...] actually–I’m not sure why everyone’s got their panties in a twist. Mark Evans has some reasonable commentary on the [...]
[...] Mark Evans points out that Time Warner is being smart, not greedy with their plans for tiered broadband service and now that I think about it, I think he is right. As the broadband market stands today, every customer pays an equal amount for an equal share of resources. The problem is that not every customer uses or needs all of the resources alloted to them. [...]