Time Warner Cable chokes customers
Time Warner is testing throttled — severely throttled — tiered pricing for internet access, putting it at odds with its customers, with the media industry, and with the future of the internet. I’d like to discuss how they could think differently about their business and customers. What if, instead of a gatekeeper, they saw themselves as platforms or technology innovators or catalysts or enablers?
The AP reports (via PaidContent) that TW will charge subscribers in Beaumont, Texas, will be charged $29.95 a month for slow service at 768 kilobits per second and a 5-gigabyte monthly cap up to $54.90 per month for 15 megabits per second and a 40-gigabyte cap; going over will cost them $1 per gig. For scale, the AP points out, a standard def movie is about 1.5 gigabytes and a high-definition movie is 6 to 8 gigs.
So Time Warner could end up charging customers more for watching a movie than the service selling the movie, whether that is iTunes or Netflix. I’m sure that’s quite on purpose. It is TW’s FU to the net neutrality debate: If we can’t gouge both ends of the pipe, we’ll doubly gouge the one that is stuck with us.
I happen to know that cable companies were making roughly 40 percent margins on the internet access a few years ago. Since then, bandwidth costs to them have been doing down but those savings have not been passed onto customers. Meanwhile, equipment and marketing costs are being amortized. So I’m betting the margins are only getting better. Their poor-mouthing is disingenuous at best. Still, they say that 5 percent of customers take up half their bandwidth and they say that’s not fair. So some cap may be reasonable. Note also that Comcast Corp.is considering a cap of 250 gigs/month. The problem to date has been that cable companies have not told customers their caps or their recourse (witness the throttling of Dave Winer by cutting him off).
TW’s cap is unreasonable and it is nonsensical as a business strategy.
Start with the basic lesson Tom Evslin taught us about internet usage. He, as I’ve pointed out here before, is the unsung hero who made the internet explode when he offered $19.95 flat-rate, all-you-can-eat dial-up access at AT&T Worldnet. Here is his view of subscription pricing and caps. From the AP story: “‘The metered Internet has been tried and tested and rejected by the consumers overwhelmingly since the days of AOL,’ information-technology consultant George Ou told the Federal Communications Commission at a hearing on ISP practices in April.”
We the customers don’t like worrying that we’re going to go over and so we use a metered service less and resent it more. It’s just not good for TW’s relationship with customers — all customers not that 5 percent they hate — to make them all try not to use TW’s service. That is a conflict.
TW is also in a conflict with media models — and you’d think they’d understand that since they are coming out of a media company (though, believe me, having worked there, synergy is not a goal, it is treated as an evil; Warner fought TW Cable hard to try to stop them from using the Roadrunner brand). The essence of the media model is that you want your customers to consume more and more: more pageviews, more shows, more podcasts, more, more more. TW Cable is making itself the enemy of more.
So now both ends of the pipe will hate TW Cable, though TW cable won’t care because it is still a monopoly in most markets. But here comes competition from Verizon. And someday, I still hope that we’ll get mesh and mobile networks to compete with the duopolies. So the monopolistic screw-your-customer model is not a strategy for the future.
So what is a cable company to do?
For starters, it’s a hopeful sign that Comcast is working with Bittorrent to figure out how peer-to-peer can be a friend, not an enemy. Comcast is still reportedly secretly throttling P2P and certain other classes of traffic; that’s evil. But if cable companies used P2P to make their networks more efficient, that’d only be smart.
It’d also be smart if they became technology innovators bringing mesh networks to their own communities before new players bring in wireless competitors. What if I could get online anywhere in my town or my state thanks to my cable company? I’d have a deeper, more loyal relationship with them. But not if they tried to throttle my use of their service unfairly.
Next, if cable companies thought of themselves as platforms for local content creation and media, they’d increase usage and under their current business logic, that would be bad. But if they were built to take advantage of local media, it would be good. What if they encouraged and enabled churches, schools, clubs, sports teams to broadcast over their network? What if the cable company sold local advertising on that? What if they shared revenue with the locals to encourage them to do more? The cable company would explode uploads and downloads and but they would make new money on that traffic and build a stronger relationship with customers and the community. That’s a different way to think about the cost or the benefit of traffic.
What if the cable company became a host for media and content created in the community. They could charge me a reasonable rate for storage and bandwidth or, again, they could monetize my media and make us both money. Why haven’t cable companies been thinking like Amazon and now Google have to create the means to enable people to build content, services, and businesses atop their services? Because cable companies think like closed, monopolistic utilities and not platforms.
Now I look at my cable operator as the company that tells me what I can’t do, that has a bunch of rules and is always breathing down my neck to stop me from doing what I want to do, that is trying to nickel-and-dime me at every turn and charge me for things I don’t want.
What if, instead, I looked upon my cable company as a platform: a platform that helped me create content and benefit from that, a platform that connected the community better, a platform that served local businesses in new ways (beating newspapers and radio stations to the punch), a platform that kept me connected all the time, anywhere, easily? What if?
: Here’s the BBC getting internet customers to track their bandwidth and map it. The same issue is underway there as the BBC iPlayer is changing the way people watch TV and using a lot of bandwidth. The ISPs, a whining bunch, are complaining that some of the Beeb’s license fee should go to them. Maybe they, too, should look at new technical solutions that allow them to P2P the BBC’s programs.
June 3rd, 2008 at 8:37 am
[...] June 3, 2008 at 1:37 pm | In economic, photography, photoshop, science, tech culture | Time Warner Cable chokes customers The AP reports that TW will charge subscribers in Beaumont, Texas, will be charged $29.95 a month [...]
June 3rd, 2008 at 8:45 am
Jeff,
See my post:
http://www.cincomsmalltalk.com/blog/blogView?showComments=true&printTitle=Metered_Net_-_the_MPAA_at_Work&entry=3389939043
I think this has nothing to do with net neutrality, and everything to do with old media trying to institute a way around Apple’s (et. al.) pricing model.
June 3rd, 2008 at 9:14 am
Real nice post Jeff.
This is all about the active users of the internet rather than passive users of tv. Internet companies havn’t quite figured this out yet.
You’re right though, we need that much more competition for platform services to get the change you’re talking about:
“It’d also be smart if they became technology innovators bringing mesh networks to their own communities before new players bring in wireless competitors. What if I could get online anywhere in my town or my state thanks to my cable company? I’d have a deeper, more loyal relationship with them. But not if they tried to throttle my use of their service unfairly.”
June 3rd, 2008 at 9:33 am
[...] Jeff Jarvis has a great post this morning analyzing Time Warner’s proposed tiered internet service. I’ll update my reaction later, but this, along with Comcast’s proposed bandwith cap overage charges, is making me sick. So much for freedom on the internet’s high seas. [...]
June 3rd, 2008 at 11:14 am
I am confused about the concept of net neutrality-and with the comcast cap in particular.
My take is that Comcast has the right to charge active users more-on either end of the “pipe”-just that they do it consistantly and transparently. In other words, not like cable tv where certain studios/networks get the best/only slots for viewership.
But when I read the definitions for net neutrality- they are all over the place.
This above blog post puts it out there that the cable companies are just stupid for being closed networks and trying to charge certain people more-but really there is not that much competition for platform providers.
So is the answer just wait for the competition to come….or what?
June 3rd, 2008 at 11:51 am
[...] the blogosphere. Silicon Alley Insider notes that the pay-per-use trial will fail. Jeff Jarvis says Time Warner is choking its customers. Headline of the day goes to GigaOm, who noted all the tiers for [...]
June 3rd, 2008 at 12:31 pm
Only fools and dreamers ever believed this was not inevitable. From a background in telecommunications media I can tell you the figures you quote are crazy. There is a lot more to a broadband network than the connection to peoples’ homes. Companies invested big money and sometime there had to be a return on that investment.
With advertising revenues stagnant and looking set to fall be ready more more service providers treading this course.
Stop being a geek Jeff and see the web for what it always was, an idea that had failure built in.
June 3rd, 2008 at 1:23 pm
[...] (All that said, TW’s particular plans may or may not be the right numbers.) [...]
June 3rd, 2008 at 2:32 pm
Ian Thorpe’s comment that only “fools and dreamers” oppose Time Warner’s attempts to gauge consumers is offensive to me personally. Thank heavens we have a few fools and dreamers left in this country.
We need to get every politician running from city council to the White House on record on this issue and start using it in forums, town hall meetings, etc. to identify those lining up with the giant telecoms and those with the average working person.
There has never been a time that unfettered access to information has been more important. Recommend the excellent article in June 16 issue of The Nation on “Who Will Unpolug big Media?” by Robert McChjesney and John Nichols. As well as Chris Hayes’ excellent piece on Lawrence Lessig and his theories on process reform.
June 3rd, 2008 at 4:20 pm
Verizon Fios prohibits running a web server using their domestic service. The average web server that a person would run from home probably generates a tiny amount of traffic, but there are no restrictions (yet) on downloading large files like movies.
Apparently the idea that someone might be trying to make some money using their service is what is bothering them, rather than actual load on the network. By the way, when I found this out I asked about a business line and was told it wasn’t available at my location.
Once again the joys of (shared) monopolies.
June 3rd, 2008 at 6:23 pm
This wouldn’t be nearly as bad if cable and telcos didn’t spend more money on trying to protect their monopolies than they do on developing their infrastructure. Governments from locals to national have played along. The result has been huge profits for those monopolies and stifled innovation for the rest of us. While many places in the world forge ahead trying to figure out how to develop the internet of tomorrow, we stumble in this country because the companies that own the networks are for more interested in protecting their slice of yesterday’s internet.
June 3rd, 2008 at 7:20 pm
[...] Time Warner branch in Beaumont, Texas is trying out a system where slow access is cheaper than fast access. This sets up a structure where Time Warner will be [...]
June 3rd, 2008 at 10:46 pm
Love it! Love it! Love it! Here in Toledo, I use Buckeye Cable, and while it is a bit high, the service is very good and no capping. I pay $69.95 per month with 1000 kbs up, and 12,000 kbps down. In reality I often see performance above these figures. I spoke to a tier 2 buddy of mine at Buckeye, and he tells me that Buckeye pays about 12 cents per GB of usage, so they are definitley making a HUGE profit. Thanks for this post and I submitted this to StumbleUpon for you.
Cheers!
June 4th, 2008 at 2:28 am
I have just been through two weeks of hell with Time Warner. My house was hit by lightning taking out my cable, internet, and phone. This happened on a Sunday evening, so I arrived at the Time Warner office on Monday morning at 8 to report the problem. Working from home, I am totally dependent on these services. I tried to be nice and patient with employees I know are underpaid and undertrained, but after two weeks it is impossible. The company certainly isn’t wasting any money on infrastructure or expertise on that infrastructure. Every repairman has had a different story. One barely spoke English. “It’s a trap on the line;” “you need new wiring;” “you need a new box.” The lesson here is don’t rely on Time Warner and especially on the digital package. One bolt of lightning and your business will be ruined.
June 5th, 2008 at 6:32 pm
I appreciate your concern, Jeff, but I don’t think you understand the whole picture here. I work very closely with an ISP in the upper midwest and also a former warez whore. I understand your position on the matter.
The reason Time Warner, and other ISP’s, have considered this model is due to utilization. Average internet usage in the US is rising sharply, due to services like Netflix Watch Instantly and the new trends in internet video sites and video on social networks. Usage statistics report that 5% of the users account for over 50% of the traffic. I’m sure most ISP’s will see similar trends. These 5% are responsible for pushing so much traffic, it impacts or cripples the site or node they are connected to, increasing the costs associated with operating that site. Not only do they increase costs, but they also negatively impact the other 95%.
Imagine a scenario where everyone paid a flat rate for water usage. A handful of people using a significant portion of the water pressure would leave the rest of the neighborhood without ample pressure to water lawns or even take showers. A natural response would be to charge that small amount of people more. Time Warner is simply trying to do that.
Maybe the model they laid out isn’t the best, and I think there could be better priorities as far as money is concerned, but the options are: charge everyone more, shut off the 5%, or find some middle ground where everyone pays for their impact on the network. Internet is not a service like DirecTV. It is a utility, like water or electricity. The sooner people realize this, the sooner they will have realistic expectations.
I guarantee all the other ISP’s in the nation are watching this trial, waiting for the results.
June 5th, 2008 at 10:21 pm
It won’t work. When the so-called “gatekeepers” of the Web gain a control that appears tyrannical, a new service provider will give unfettered access for us die-hards. We millennials will never support this kind of bull smack. Worse comes to worse, grab a wi-fi card and head to any urban location.
Paying for internet access is so 1990.
June 5th, 2008 at 11:11 pm
fios!
June 11th, 2008 at 12:58 pm
With all the recent news on what TM is doing, its no wonder why so many are jumping ship. For me, what kept me on were the LEGITIMATE newsgroups access they had to offer. With that gone now, my motivation to stay is non-existent. Luckily, I found another usenet provider, newsdemon.com that lets me access the newsgroups. Now I just have to find a reputable ISP.
D. Linus
June 18th, 2008 at 2:08 pm
TWC is a monopoly and fits into the greed of our world of the powers that be.
I spend a lot of time on the internet. I upload videos and have found a lot of online services to help me get funding for my documentary. TWC is unreal and as soon as Grande.com comes to South Austin, I am changing over to them. This is unreal and not customer oriented and a control factor of the powers that be in the world. Greed Greed Greed!