Time Warner Suggests $150/Month Internet Access

After having been stung by negative public reaction to the Internet data caps it is trialing in several markets, Time Warner has issued another public statement. The statement from Landel Hobbs, Chief Operating Officer at Time Warner Cable, explains how bandwidth consumption is growing exponentially. While more content on the Internet and more demand for bandwidth is definitely a good thing, it also means Time Warner must maintain and upgrade its network to meet the increased demand. Rather than raising prices on all customers or limiting usage, Time Warner feels the best approach is to move to a tiered model where users pay according to the quantity of bandwidth used.

Time Warner isn’t alone in this struggle to keep up with growing capacity: As Hobbs points out, several providers in Canada, the U.K., New Zealand, and other countries have already implemented consumption based billing. Here in the U.S., AT&T, Comcast, Charter, and Cox all have their own methods of managing and monitoring bandwidth consumption.

With more and more bandwidth-intensive tasks such as streaming video and cloud computing becoming more and more prevalent, we can’t argue with the fact that the demand for Internet is rising at a very fast rate. Time Warner warns that it’s possible the increase in demand could outpace capacity within a few years if no changes are made.

As Hobbs puts it, “If we don’t act, consumers’ Internet experience will suffer…. That’s why we’re beginning the consumption based billing trials.” To the company’s credit, it has been taking the feedback received from previous trials and changing policies as it sees fit. Whether you’ll agree with the changes or not is another story.

To accommodate light Internet users and users looking for a low-price option, Time Warner is now introducing a 1GB per month tier. This tier will offer speeds of 768 KB/128 KB for $15 per month. Under this tier, users will pay $2 per GB per month for overage charges. Time Warner says about 30% of its customers use less than 1GB per month.

For mid-range users, Time Warner is increasing the bandwidth tier sizes in all existing packages in the trial markets to 10GB (Road Runner Lite), 20GB (Road Runner Basic), 40GB (Road Runner Standard), and 60GB (Road Runner Turbo). The package prices will remain the same for these offerings, but overage charges will be $1 per GB per month.

Finally, for users who require lots of bandwidth, Time Warner is introducing a 100 GB Road Runner Turbo package for $75 per month. This package will offer speeds of 10 MB/1 MB. Overage charges will run $1 per GB per month and will be capped at $75 per month. In other words, you’ll get virtually unlimited usage at Turbo speeds for $150 per month.

Time Warner plans to give customers a little slack when the trials are first implemented: Instead of billing customers for overage right away, the company will provide two months of usage data and a one-month grace period where users will see overage charges on their bill but will not be charged for them. Under this plan, customers will have the option to assess their usage and change their package to suit their needs.

Time Warner will begin trials in Rochester, N.Y., and Greensboro, N.C., in August. Trials in San Antonio and Austin, Texas will launch in October.

It’s easy to say people should pay for the costs they incur. To that end, consumption-based billing has a lot of logic behind it. Still, we can image many people won’t be too thrilled about Time Warner’s pricing. Time Warner closed its note by encouraging customers to send comments and feedback to realideas@twcable.com.