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Customers who like to stream movies, TV shows may get hit with extra fees</span>
By Dan Richman
msnbc.com contributor
If Internet service providers' current experiments succeed, <span style="font-weight: bold">subscribers may end up paying for high-speed Internet based on how much material they download.</span> Trials with such metered access, rather than the traditional monthly flat fee for unlimited connection time, offer enough bandwidth that they won't affect many consumers — yet.
But as more people use the Internet to watch TV and stream movies, they could bump up against the metered rates' caps, paying expensive over-use fees. Watching a movie may then require paying two fees: one for the movie, another to the cable company.
More and more television programming and movies are available online, through sites including Hulu, Netflix Watch Instantly, YouTube and Amazon.com's Video on Demand "If you wanted to watch TV over the Internet in 2000, you had to be willing to take much less content than cable," said Bobby Tulsiani, a senor analyst with Forrester Research in New York. "Now you get much, much more. Of course, you're still watching on your PC, not your TV, so there are tradeoffs, but they are tradeoffs many people are willing to make."
Most consumers probably don't realize how much bandwidth their Internet usage consumes, because they've never had to care. Time Warner, the nation's third-largest Internet service provider, in its five experimental markets if offering five gigabytes of downloaded Internet content for $29.95 per month. That translates to 15 hours of viewing standard-definition video, or 350,000 e-mails, or 170 hours of online gaming, or some combination of those activities, according to the company. A high-definition movie consumes about 7 GB of bandwidth.
In addition to compelling consumers to monitor their Internet usage, metering could have broad societal effects, including disenfranchising the poor, retarding network growth and discouraging innovation, some experts say.
"Our use of bandwidth is growing smoothly every year, with more people using more all the time," said David Isenberg, a Cos Cob, Conn.-based independent telecom analyst. "One of the main nutrients on the Internet is low price. If you start stomping on that or putting in the wrong kind of price signals, my fear is you will inhibit all kinds of innovation."
Time Warner Cable, which operates under the Road Runner brand, said it has been offering tiered, capped service in Beaumont, Texas for some time and in March began testing that pricing in four new markets: Austin and San Antonio, Texas; Rochester, New York; and Greensboro, N.C. Still unpriced is Time Warner's maximum available offering: 100 GB per month, said Time Warner Cable spokesman Alex Dudley. Usage exceeding those caps is charged at $1 per gigabyte.
Others among the nation's largest ISPs are also experimenting with caps and tiers.
The largest ISP, AT&T Inc., says it started similar trials Nov. 1 in Beaumont, Texas, and in Reno, offering between 20 GB ($19.95) and 150 GB ($65) per month depending on connection speed, with excess usage charged at $1 per gigabyte.
No. 2 ISP Comcast Corp. allows up to 250 GB per month for a flat fee, calling the one percent of its users who exceed that limit and "asking them to moderate their usage" but not charging them more, said spokesman Charlie Douglas. Verizon, at No. 4, said it has no caps or tiers, while No. 5 AOL offers no broadband service and in any case said it's not considering consumption-based plans.
Both AT&T and Comcast say the reason they're experimenting with caps is to preserve network quality. In an e-mailed statement, AT&T said half its bandwidth is used by 5 percent of its customers, which "has an impact on all of our customers."
But that 5 percent could substantially expand as more and more people consume TV, movies, music and news over the Internet rather than on cable TV. The Internet is not yet a utility, defined as a vital service or substance like electricity, water, and heating gas or oil. In a tough economy, it can be eliminated or cut back. Yet for many, a connected computer receives utility status.
Cable companies are getting worried that more people are watching TV over the Internet. Glenn Britt, chief executive of Time Warner Cable, voiced his concern in February during a quarterly earnings discussion with analysts.
Discuss on Newsvine
Should ISPs be allowed to meter Internet usage?
"We are starting to see the beginning of cord cutting," he said. "People will choose not to buy subscription video if they can get the same stuff for free."
It's tough to pin down how many people actually have given up cable — most of the evidence remains anecdotal — and which customers moved to a competitor. Still, Time Warner Cable lost 119,000 basic video customers in the fourth quarter, even after excluding subscribers it gave up from the sale of some cable systems.
Time Warner spokesman Dudley said his company is experimenting "to accommodate growth and anticipated growth, to better fund that growth." He said consumption-based billing is more equitable.
Click for related content
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"Some of the population for whom the Internet buffet has been a very filling proposition are concerned," he said. "We could charge everyone more, or create a plan that charges more to those who use more. The concept of paying for consumption is fair."
Both Time Warner and AT&T stressed that the trials, though they have no announced end dates, are just that: experiments. They'll be modified, or even abandoned, if they meet too much hostility, Dudley said.
"Overwhelmingly we've seen positive results, but we'll see what happens. Presumably we'd retract it if there were enough outrage over it," he said.
Dudley denied the plan is designed to increase revenue in an era when growth of the broadband customer base has slowed. He said it's solely intended to grow the network and improve its quality.
But others wonder whether metering is designed to thwart the spread of movies and TV over the Internet by making it unafforable, thus preserving that business for cable. Onlookers also questioned whether profits gleaned from metering will really be plowed back into network growth.
Customers who like to stream movies, TV shows may get hit with extra fees</span>
By Dan Richman
msnbc.com contributor
If Internet service providers' current experiments succeed, <span style="font-weight: bold">subscribers may end up paying for high-speed Internet based on how much material they download.</span> Trials with such metered access, rather than the traditional monthly flat fee for unlimited connection time, offer enough bandwidth that they won't affect many consumers — yet.
But as more people use the Internet to watch TV and stream movies, they could bump up against the metered rates' caps, paying expensive over-use fees. Watching a movie may then require paying two fees: one for the movie, another to the cable company.
More and more television programming and movies are available online, through sites including Hulu, Netflix Watch Instantly, YouTube and Amazon.com's Video on Demand "If you wanted to watch TV over the Internet in 2000, you had to be willing to take much less content than cable," said Bobby Tulsiani, a senor analyst with Forrester Research in New York. "Now you get much, much more. Of course, you're still watching on your PC, not your TV, so there are tradeoffs, but they are tradeoffs many people are willing to make."
Most consumers probably don't realize how much bandwidth their Internet usage consumes, because they've never had to care. Time Warner, the nation's third-largest Internet service provider, in its five experimental markets if offering five gigabytes of downloaded Internet content for $29.95 per month. That translates to 15 hours of viewing standard-definition video, or 350,000 e-mails, or 170 hours of online gaming, or some combination of those activities, according to the company. A high-definition movie consumes about 7 GB of bandwidth.
In addition to compelling consumers to monitor their Internet usage, metering could have broad societal effects, including disenfranchising the poor, retarding network growth and discouraging innovation, some experts say.
"Our use of bandwidth is growing smoothly every year, with more people using more all the time," said David Isenberg, a Cos Cob, Conn.-based independent telecom analyst. "One of the main nutrients on the Internet is low price. If you start stomping on that or putting in the wrong kind of price signals, my fear is you will inhibit all kinds of innovation."
Time Warner Cable, which operates under the Road Runner brand, said it has been offering tiered, capped service in Beaumont, Texas for some time and in March began testing that pricing in four new markets: Austin and San Antonio, Texas; Rochester, New York; and Greensboro, N.C. Still unpriced is Time Warner's maximum available offering: 100 GB per month, said Time Warner Cable spokesman Alex Dudley. Usage exceeding those caps is charged at $1 per gigabyte.
Others among the nation's largest ISPs are also experimenting with caps and tiers.
The largest ISP, AT&T Inc., says it started similar trials Nov. 1 in Beaumont, Texas, and in Reno, offering between 20 GB ($19.95) and 150 GB ($65) per month depending on connection speed, with excess usage charged at $1 per gigabyte.
No. 2 ISP Comcast Corp. allows up to 250 GB per month for a flat fee, calling the one percent of its users who exceed that limit and "asking them to moderate their usage" but not charging them more, said spokesman Charlie Douglas. Verizon, at No. 4, said it has no caps or tiers, while No. 5 AOL offers no broadband service and in any case said it's not considering consumption-based plans.
Both AT&T and Comcast say the reason they're experimenting with caps is to preserve network quality. In an e-mailed statement, AT&T said half its bandwidth is used by 5 percent of its customers, which "has an impact on all of our customers."
But that 5 percent could substantially expand as more and more people consume TV, movies, music and news over the Internet rather than on cable TV. The Internet is not yet a utility, defined as a vital service or substance like electricity, water, and heating gas or oil. In a tough economy, it can be eliminated or cut back. Yet for many, a connected computer receives utility status.
Cable companies are getting worried that more people are watching TV over the Internet. Glenn Britt, chief executive of Time Warner Cable, voiced his concern in February during a quarterly earnings discussion with analysts.
Discuss on Newsvine
Should ISPs be allowed to meter Internet usage?
"We are starting to see the beginning of cord cutting," he said. "People will choose not to buy subscription video if they can get the same stuff for free."
It's tough to pin down how many people actually have given up cable — most of the evidence remains anecdotal — and which customers moved to a competitor. Still, Time Warner Cable lost 119,000 basic video customers in the fourth quarter, even after excluding subscribers it gave up from the sale of some cable systems.
Time Warner spokesman Dudley said his company is experimenting "to accommodate growth and anticipated growth, to better fund that growth." He said consumption-based billing is more equitable.
Click for related content
Time Warner tries out metered Internet access
Phone company shelves Internet cap plan
AOL: You've got irrelevancy?
"Some of the population for whom the Internet buffet has been a very filling proposition are concerned," he said. "We could charge everyone more, or create a plan that charges more to those who use more. The concept of paying for consumption is fair."
Both Time Warner and AT&T stressed that the trials, though they have no announced end dates, are just that: experiments. They'll be modified, or even abandoned, if they meet too much hostility, Dudley said.
"Overwhelmingly we've seen positive results, but we'll see what happens. Presumably we'd retract it if there were enough outrage over it," he said.
Dudley denied the plan is designed to increase revenue in an era when growth of the broadband customer base has slowed. He said it's solely intended to grow the network and improve its quality.
But others wonder whether metering is designed to thwart the spread of movies and TV over the Internet by making it unafforable, thus preserving that business for cable. Onlookers also questioned whether profits gleaned from metering will really be plowed back into network growth.
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