Time Warner is among the cable companies slowly expanding its usage caps. Time Warner argues it needs these caps to pay for expanding capacity. As Ars Technica notes this doesn't really bear up under close scrutiny. Indeed, “we need to do this to pay for all the infrastructure you want” has become the sort of all purpose excuse that covers just about anything. As I've said since Time Warner first announced their plans to test this approach last year, this is probably the least offensive short term way to handle the fact that Time Warner and other cable operators built crappy systems, but it has very unfortunate results in the long term. Notably, it screws up our national broadband policy. Metered pricing is about discouraging use. But we are trying to increase everyone's economic opportunity, civic engagement, and overall quality of life by expanding broadband use.
Time Warner started with a single pilot project in Beaumont, Texas. After deciding that folks in Beaumont were happy (or at least not unhappy) with paying $1 for each additional gigabit over their aloted cap (which varies according to package), TW decided to expand out to certain markets in NY and North Carolina.
Apparently, folks in North Carolina use their broadband a little more often. Perhaps they use it to follow the Tar Heels. For whatever reason, folks in North Carolina have been complaining about the new usage caps. As a number of folks in the article observe, if you are using your broadband in the way our national broadband policy envisions using it — for everything from watching a fascinating University of MD lecture on modern film and pirates to telecommuting and telehealth — a single person can suck up a lot of bandwidth. No doubt it is cynical of me to observe that watching TV online (legally), a current focus of anxiety for Time Warner's CEO Jeff Bewkes, is a major bandwidth hog and would eat up the usage cap rather quickly.
So far, Time Warner has been able to coast on the claim that it's customers are fine with usage caps — and who could use up all that bandwidth anyway unless they were downloading pirated videos or child pornography? As these tests expand, it will be interesting to see what happens. Despite the general problems with competition in the wireless market, the existence of even modest competitive pressures ended up pushing wireless companies to “all you can eat” plans to address the growing insatiable desire for high bandwidth applications (AT&T Wireless' recent effort to tamp down streaming video not withstanding). But how many customers in the Time Warner test markets have any competitive choice, let alone 2-4 possible alternatives as in cellular (which, as I noted, is not exactly a nirvana of competition)? Is there any place where Time Warner is testing this where FIOS is available?
As always, one of the biggest problem in evaluating whether this is a case where we should just let the market sort it out or whether this goes to critical national infrastructure we can't ignore is that we know diddly/squat about Time Warner's actual network constraints and about the level of real competition available in the test markets. “All the market will bear” works when the people in question have real choices. As I will observe at my Passover celebration tomorrow, my ancestors took a rather substantial pay cut when Pharaoh unilaterally renegotiated their construction contracts to build Pithom and Ramses — nor were they terribly happy with his alternate day care arrangements. Their staying on to complete the project was not a sign of a functioning market.
The FCC starts the process of developing a national broadband plan tomorrow. I hope one of the questions it asks is whether usage caps should be part of that — and whether customers are quite as oblivious to them as the cable companies claim.