Consumption-Based Billing and The Princess Bride

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One of my favorite movies is The Princess Bride. Remember when the character Vizzini, played by Wallace Shawn, notes the two classic blunders — one of which is never get involved in a land war in Asia and the other, never go in against a Sicilian when death is on the line? There’s probably a third, which is to never go “blog” vs. “blog” with organizations like Free Press that cut its teeth on this medium.

So, it is certainly not a surprise that the Free Press response to my last post smoothly skips over some fundamental points. On the Free Press homepage, the first thing you see is a technicolor box blaring “Tell Congress: Investigate the Unfair Internet Penalty.” In the Free Press response, this has now turned into a mere “inquiry.” Who could be against that? Especially when these plans are rolling out “under the radar.”

Huh? Time Warner Cable couldn’t have possibly been more transparent about their thinking over the last year, including repeatedly briefing members of Congress and reaching out to interested groups like . . . oh, Free Press. And they have repeatedly made clear that they were listening to constructive comments and views.

Thus, Time Warner Cable’s announcement today that they will spend more time on engaging interested parties, members of Congress . . . and most importantly, their customers by deploying metering tools that help all us become more educated consumers . . . is completely consistent with how they have approached this from the beginning. Bottom line: they have been and are engaged in exactly the kind of outreach and transparency interest groups profess to want.

And I have a lot of personal respect for Ben Scott, but I had to chuckle at the very lawyerly but ultimately inadequate attempt to explain why they were really against usage metering before they were for it. But I suppose I will end on a note of agreement: Ben now says, “As for whether metering is fair — it can be.” Right.

None of us knows with certainty what works best for consumers. As broadband providers, we face daunting and ever-changing challenges in ensuring that we do our level best to provide consumers with what they want, when they want it. But our goal has been, is, and will be to communicate with our customers in an open and transparent manner; to try new models that can be used to attract new broadband users and more equitably spread costs among high and low volume users, and – at the end of the day – to let the consumer make the ultimate choice of whether new models survive and thrive or are thrown into the dustbin of history.

  • Pingback: Time Warner Cable Backs Off Pay-Per-Byte Broadband Billing | Peter Kafka | MediaMemo | AllThingsD()

  • Chris

    I agree that certain interest groups are using this to skew their message or lump other issues into this debate, or simply getting the message wrong. The issue of TWC introducing metered billing in and of itself, isn’t a bad thing.

    But the terms and costs of their billing, and the supporting data they used (or neglected, depending on the numbers) is so horribly lopsided that I find it hard to imagine why anyone would be surprised by the outcry. The simple issue behind all of this was that TWC saw (wrongly) an opportunity to increase their profits by raising costs under the guise of funding network improvements.

    The problem arose when the data showed that the network improvements wern’t needed, and that the costs being pushed to consumers was head and shoulders above other ISPs. Piled on top of the fact that TWC has a monolopy in many of the markets it was in, and you can be sure there was going to be an outcry.

    Metering can be fair. But the customer will decide what represents the best value to them. TWC learned that they cannot impose their costs on a lock-in market without this level of complaint. And I see that as a good thing. =)

  • Chris

    I should be a bit more clear: When TWC was discussing metering, no one objected. It’s when they saw the prices that the metering would entail that got people upset.

  • Franklin Thomas

    Metering can be fair, but tripling a users bill with no added value is not acceptable in any circumstances. Also TWs figures are ludicrous. Please check this analysis on ArsTechnica: http://arstechnica.com/tech-policy/news/2009/04/the-price-gouging-premiums-of-time-warner-cables-data-caps.ars

    Thank you,
    Franklin

  • Jon

    Their was NO transparentcy in TW in Rochester. The internet/news broke the story. TW never approached me or any other Roadrunner consumer with the possibility of metered internet service. They never asked for input, never put anything in writing to the consumers. The issue of any cap in an anthema to many Rochesterians who are technologically savvy and see it for what it is. There is no need for further funds when TW averages a 3 Billion dollar profit per year on broadband (per it regulatory filing with the SEC) and spends under $200 million per year in maintenance costs. The broadband width actually provided vis-a-vis bandwidth capacity is miniscule and their rationale for doing this is completely bogus.

  • Mark

    Oh give me a break! No one expects honesty from an association that has as one of its biggest members on the hot seat. Time Warner is gouging and so are all the other companies. You CANNOT make profit year over year over year. At some point you just can’t rape the public anymore.

    Get over your greedy selves!

  • Matt B.

    -Metering tools do not a conversation make.-

    If TWC was really interested in this, provide all the information when you announce. Show us that the bandwidth is gone. Give us dates when this was recorded by TWC equipment, or better yet, when somoene else found that to be the problem. Show us your plan to ugrade the system to handle the increase in bandwidth. Show us hard evidence that there even is an increase in the bandwidth being used. SHow us hard evidence from someone other than you that the sky is falling, because so far, it’s still blue up there. If you can make a good case, and don’t try to claim “proprietary information” when we ask about something as simple as what the load on the system is like right now and what the current limits are, we might be more willing to talk to you about what we can accept before we pitch you overboard and demand your franchise be pulled. What TWC did in this case, at least in Greensboro, was not trying to engage anyone. Ttry having some town halls, put up a message board for your clients to post their thought, have a dedicated call center to field the questions and comments. Then, most importantly, listen to what is being said and realize that you might be wrong. We really do know what we’re talking about and we’re pretty technically-minded and can smell when smoke is being blown up our nether-regions.

  • Steve M

    From TW’s Press Release:

    “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.”

    Wow. I’m dizzy from PR spin. Translation: “you all caught on real quick to us trying to price gouge you, shucks.”

    Greed by TW, pure and simple. Note that these “test markets” have virtually no competition for broadband. The only thing “transparent” in the process was their motive: gouge your customers that have no other choice but to stay with you.

  • chris7crows

    Also, it hasn’t escaped anyone’s notice that making higher caps prohibitively expensive would gut VoD and VoIP…which are coincidentally two services that TWC sells commercially. This isn’t about facing “daunting and ever-changing challenges,” it’s just greed.

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      I was so confused about what to buy, but this makes it udnersatndbale.

  • javaroast

    It certainly doesn’t help when the guy announcing the tiered trials (Landell Hobbs TWC COO) publicly admits that TWC profits weren’t at issue and that their is no problem with bandwidth. It also isn’t the best time economically to try to float the lead balloon of much higher costs for internet connections. It seems like TWC is the one that needs educating, I’d say that in this case the consumer has been educated enough to see to know a price gouge when they see it. TWC was far from transparent. They tried to foist FUD onto the marketplace to make the case that caps are needed when all the data points to that being far, far from the case. One only needs to look at the falling cost for bandwidth, the increasing profits of TWC and the statements of their COO to see that caps are simply not necessary.

    http://bits.blogs.nytimes.com/2009/04/08/time-warner-cable-profits-on-broadband-are-great-and-will-grow-because-of-caps/

    Mr. Hobbs tried to strike a balance, saying that while the company is concerned about the cost to maintain its broadband network, investors should not be worried. He said it was “absolutely not” true that Time Warner’s profits were being squeezed by the cost of heavy broadband users.

    “If you are getting feedback that there is an immediate problem, nothing could be further from the truth,” he said.

  • Dan

    You deserve a lot of credit for having this blog and putting yourself out there for criticism and comments – but as most of the posters have said, your industry was by no means “transparent,” any more than a kid is when he claims that he was actually mooning somebody (on purpose, and all in fun) when he was actually caught with his pants down.

    Real transparency would have meant facts and figures to justify. There were none.

    How about a commitment to an open pricing review policy that would include just such measures in the future? It could start with your industry asking customers what they consider transparency to be – and you adopting that as your definition.

  • Armando Ortiz

    “None of us knows with certainty what works best for consumers…”

    I can tell you with absolute certainty not metered billing. That’s something for public utilities like phones, gas and electricity.

    It’s obvious that the broadband ISP’s aren’t listening to the consumers who obviously know what’s best for them.

    And I’ll chime in on this: as a consumer, I don’t need it. I don’t want it. Period.

    As for transparency? I’m not sure what that means. Transparent how? Elaborate, please. Not doing so is opening this can of worms up on both ends.

    To that end, I agree with Dan: if there isn’t anything in the details, then there’s no reason for metered billing. It’s hard for a company like TWC to be totally unbiased in providing the details from both sides of the fence. They’re only going to provide what looks to be in their favor and call it ‘out of necessity.’

    By the way, what defines a “heavy broadband user?” I just gained like 10lbs in the past week and I’m sort of offended by this… 😛

  • jalf

    Heh, I’m just glad I don’t live in the US. It sounds like ISP’s there are living in the stone age *and looking to move further backwards*.

    Can metering be fair? Perhaps, but I find it noteworthy that in most of the rest of the world it is simply not necessary. ISP’s are able to run their businesses profitably, while providing broader (and faster) broadband coverage than American ISP’s, without bandwidth caps or metered billing. When I hear some of my American friends talking about having only one or maybe two ISP’s available in their area, and being limited to at most 768kb/s, I just can’t help wondering what American ISP’s have been doing the last decade. Serving their customers certainly doesn’t seem to have been a big part of it.

    And yet, you feel the next logical step is to move *further* backwards, providing an even more limited service?

    Well, congratulations on seemingly alienating half the internet users in your country.

  • Sonic

    How can you legitimately publish this blog, Kyle? Do you have any conscience whatsoever?

    How can you read these comments (if you’re reading them at all) and continue to post the lies and spin that you do every day? I just don’t understand how people become like you. Who do you think is going to be convinced by what you’re writing? Do you even care, or is writing this blog simply an excuse to write in your next PR announcement how you’re “reaching out to the public”?

    It really saddens me actually, to see such unabashed corruption. I know I’m still young and think rather idealistically, but this… your silly blog posts really leave me feeling disillusioned and bitter.

  • Brett Glass

    Actually, “jalf,” most of the world has metered billing and thinks that it’s fair.

    Free Press has flip-flopped on this issue. First, in the Comcast debacle, they came out against flat rates with limits on consumption. Now, when Time Warner comes out with variable rates but no limit on consumption, the protest that. In short, they’re protesting ANY pricing model which allows a company to keep its pricing in line with its costs.

    The only rational explanation for Free Press’ behavior is that it wants it to be impossible to run a for-profit ISP, or even a nonprofit or municipal one, that is not taxpayer-subsidized. In other words, it must want the Net to be nationalized. Never mind that ISPs invested sweat and blood building it.

  • Josh

    Most of the world has metered billing? Since when? Please, offer up some citations. I don’t think I’ve heard of any places outside of third-world countries that have metered billing services. Instead they’re all faster than the US and either don’t have caps or have *much larger* caps than even Comcast.

  • Brett Glass

    Yes, most of the world. Every European country except the UK (which is now going that way). Australia and New Zealand. And most of Asia except for South Korea, where Internet is government-subdisized.

    I own an ISP, and we currently do not meter but do impose other restrictions (for example, restrictions on duty cycle) to keep costs in line with what the user pays. One MUST do one or the other, or one cannot break even. To put it simply: bandwidth costs money, and it’s not only unfair to ask ISPs to lose money on a customer; it’s a bad idea. You do not want your ISP to be insolvent.

  • Mark

    Oh, I get it now. Brett must be a member of this fine coalition of price gougers and will, of course, state, unequivocally how EVERYONE other then the US has this in place. It’s all BS of course, but that doesn’t matter. Companies who are a member of this coalition pay money to have this coalition argue for them in courts, spin lies to the public, all for a profit for their pockets. These companies are the ones who, being in a market society like we are, make the money hand over fist, and claim that they just can’t make money because their costs keep rising, so therefore, they need to raise prices, figure out new “revenue streams” (God, I hate that word!), ad nauseum…

    How can I say this? I worked for a telephone industry association and saw first hand how real business is done in America. It’s shady, it does NOT have the public interest at heart. It is all for lining the pockets of its member companies. Yet we tolerate this in America, why? I have absolutely no freaking clue why the American public is as weak willed as they are, eyt I have hope they will wake up someday.

    The members of this fine coalition of telecom associations have setup this blog as a way to combat the overwhelming negativity associated with their greed, and, IMHO, they are absolutely no better than the financial industry or the housing industry, the tobacco industry (smoking doesn’t cause cancer!!!!), or any of the other industries that have pushed prices up to ridiculous extremes, only to watch the industries crash. They must feel especially emboldened that America is bailing out these “FAIL” companies. Now they know they have a safety, if you will, a cushion.

    Do not let any ISP or other member of one of these “coalitions” tell you different. You are not a person, you are not a customer, you are a dollar sign, and they will try to rob your wallet of as much as possible and hope that the other companies follow suit, because, well, they’re just as greedy, and in most likelihood, will follow suit, so you are left with thinking the price gouging must be OK.

    Blehhhhh, I feel dirty just posting on this blog.

  • Brett Glass

    Mark, you SHOULD feel dirty, because you are slinging mud. For 17 years, our ISP’s mission has been to bring fairly and reasonably priced, high quality Internet service to rural areas. Our margins are razor thin, and we know our customers personally — every one of them. They are not “dollar signs” to us; they are real people, and they appreciate us for bringing them better service than the cable or telephone company — or, in many cases, for getting them service when the cable or telephone company WON’T do it.

    Being a small business which only does Internet, we do not cross-subsidize and we have a limited amount of capital. We cannot afford to lose money on customers; if we do, we are out of business and everyone who relies on us for service is off the Net. Regulate us so that we become unprofitable or cannot meet payroll and we and our colleagues (there are between 4,000 and 8,000 independent ISPs in the US) will be gone and you will have locked yourself into a duopoly.

    Is that what you want? If not, think twice before being so greedy. Internet bandwidth costs money, and we have to pay the bills. If you consume more, you need to pay more. And we do have a right to ask that you do.

  • Michael Turk

    To everyone who has posted, whether you agree with us or not, we appreciate the feedback. Despite the accusations of some, this blog was set up to engage in a dialog with people about telecom issues. We’re not always going to agree, but we will always try to be respectful. We are thankful for those that do the same, and hope you’ll continue to engage with us.

    To reiterate the point of both of Kyle’s posts, “This is a test. This is only a test.” Time Warner has stated that it will halt plans to roll out these tests pending further discussion with its customers, the public, interested third parties, and elected officials. Their commitment to do so is in line with the way they have moved forward to date.

    Frankly, nobody knows what pricing model will work to provide Internet service while consumption increases dramatically year over year. NCTA’s member companies will likely have different approaches to business and pricing. Preventing companies from collecting data to make sound business decisions is a recipe for disaster. Our view, as consumers ourselves and as advocates for an industry, is that consumers absolutely have the right to – and absolutely should – weigh in on any issue they care to . . . but we draw the line at legislating out of existence any pricing model that hasn’t even been implemented.

  • Armando Ortiz

    “Frankly, nobody knows what pricing model will work to provide Internet service while consumption increases dramatically year over year.”

    @Michael Turk: flat rate for speed differences works just fine.

    Not all of us need 19,874,561,235Mbps of pipe. I’m quite happy with 1Mbps – EXTREMELY happy. And I pay for it. And I KNOW I’m paying for it. And I’m HAPPY to pay for it.

    I mean…how do you impose a cost on “use” when sometimes a faulty piece of hardware can cause someone’s “use” to exponentially increase?

    Are you saying that charging the customer a gazillion dollars for that faulty piece of hardware is justifiable because it’s considered “use?” Hardware can do that for DAYS before anybody notices.

  • Brett Glass

    Armando, that’s what’s called “responsibility.” If you leave the water running, you still have to pay the bill at the end of the month. Same if your plumbing springs a leak. If you leave the lights on, you have to pay the bill; same if your thermostat malfunctions and turns the heat on when you’re away. And it’s exactly the same if you leave the video streaming or your P2P program downloading movies (and sending copies of them to the rest of the Net). Our ISP would prefer to set a flat rate, with limitations such as restrictions on P2P. But if the FCC and/or Congress bans these things (and the “network neutrality” lobbyists are pressing them to do so), we’ll have no choice but to switch to metering. Bandwidth coosts us money and we have to charge for it.

  • Mark

    Again, it’s greed, pure, plain and simple. When is enough going to be enough? Never from what I’ve seen here.

  • Mark

    And Brett,

    I’d have to say, unequivocally, that the U.S. has been and continues to be the Joke of the international community for the LACK of bring high speed to the masses. I travel quite frequently and I am always impressed with how countries have so much more successfully brought high speed bandwidth to the people.

    American companies SUCK because they’re concerned with gouging more and more dollars from their customers without really bringing anything new to the table.

    Say what you like, but until Congress starts to mandate what your companies can and can’t do with much more efficiency, we’ll continue to see absolutely nothing from you companies but higher prices.

  • http://www.utexas.edu Michael Cerda

    As many have said, it’s not the caps that is the problem but rather the cost. How about something fair? Establish what money you need to generate from a connection at a given speed. Then charge for each GB used. Make that a fair rate, << $1/GB.

  • Brett Glass

    I see, Mark: when I ask for someone to pay enough for the services they are receiving from me to cover their cost, I am OBVIOUSLY evil and greedy and all sorts of other unspeakable and dastardly things. Clearly, you believe that I should be a charity — that I should bust my derriere building out the Internet, pay for Internet bandwidth, and then give it away for nothing. What’s more, you have the gall to state that you’d like the government to mandate that I do that.

    Fortunately, the United States has a Constitution that prohibits it.

  • Joe

    Cablevision has just announced they will begin offering a 100 MEGABIT connection for $99/month. That’s 100/15 Mb/s with NO CAPS, no per GB charges, no strings attached, and they’ll even let you run your own web server. How does TWC defend itself against that pricing plan?

  • http://www.pricebonus.com/ PB

    Armando, that’s what’s called “responsibility.” If you leave the water running, you still have to pay the bill at the end of the month. Same if your plumbing springs a leak. If you leave the lights on, you have to pay the bill; same if your thermostat malfunctions and turns the heat on when you’re away. And it’s exactly the same if you leave the video streaming or your P2P program downloading movies (and sending copies of them to the rest of the Net). Our ISP would prefer to set a flat rate, with limitations such as restrictions on P2P. But if the FCC and/or Congress bans these things (and the “network neutrality” lobbyists are pressing them to do so), we’ll have no choice but to switch to metering. Bandwidth coosts us money and we have to charge for it.

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