Time Warner has been testing out a “consumption based billing” structure for its broadband internet service in Beaumont, Texas and plans to expand the trials to San Antonio and Austin; Rochester, New York; and Greensboro, North Carolina sometime this summer.
Up to this point, bandwidth has been capped at 5-, 10-, 20-, and 40-gigabyte levels ranging from $30 to $55 per month plus $1 per gigabyte over, but a recent post from Time Warner Chief Operating Officer, Landel Hobbs, responds to some criticism and outlines plans for two additional pricing tiers.
Hobbs first defends Time Warner’s consumption-based billing model by saying that bandwidth usage has been increasing by about 40% per year on the company’s network and that ISPs in Canada, the UK, and New Zealand bill based on consumption, while Comcast, Charter, and Cox here in the US “are using varying methods of monitoring and managing bandwidth consumption.” He also points out that AT&T is testing out consumption based billing as well.
As for new pricing structures, here’s what’s coming to Time Warner’s trial areas:
• To accommodate lighter Internet users and those who need a lower priced option, we are introducing a 1 GB per month tier offering speeds of 768 KB/128 KB for $15 per month. Overage charges will be $2 per GB per month. Our usage data show that about 30% of our customers use less than 1 GB per month.
• We are increasing the bandwidth tier sizes included in all existing packages in the trial markets to 10, 20, 40 and 60 GB for Road Runner Lite, Basic, Standard and Turbo packages, respectively. Package prices will remain the same. Overage charges will be $1 per GB per month.
• We will introduce a 100 GB Road Runner Turbo package for $75 per month (offering speeds of 10 MB/1 MB). Overage charges will be $1 per GB per month.
• Overage charges will be capped at $75 per month. That means that for $150 per month customers could have virtually unlimited usage at Turbo speeds.
• Once we implement this trial, we will not immediately start billing customers for overage. Rather, we will first provide two months of usage data. Then we will provide a one-month grace period in which overages will be noted on customers’ bills, but they will not be charged. So, customers will have an opportunity to assess their usage and right-size their service packages before usage charges are applied.
• Trials will begin in Rochester, N.Y., and Greensboro, N.C., in August. We will apply what we learn from these two markets when we launch trials in San Antonio and Austin, Texas, in October, but we will guarantee at least the same level of usage capacity in these trials.
• As we launch DOCSIS 3.0 in the trial markets, we plan to offer a 50/5 MB speed tier for $99 per month.
It should be noted that in these trial areas, Time Warner has little or no competition. If these trials are eventually meant to extend to Time Warner’s entire network, the company can probably expect to lose bandwidth-hungry customers in just about any market where it faces competition, but may be able to pick up some light-usage households with the slimmed-down 1GB plans at $15 per month. At $150 per month for high-usage households, though, $50 to $60 per month on competing networks looks like a downright steal.