The actual cost to Time Warner of additional bandwidth usage is unclear, since Net access providers do not provide a breakdown of costs, but some industry observers have said that the majority of Time Warner’s costs for Net access would be fixed regardless of how many gigabytes are downloaded.
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 Distribution of music and movies over the Net assumes unlimited downloads for consumers, but those days may be numbered if a trial from Time Warner Cable becomes common practice. According to an internal memo initially revealed on the DSL Reports Web site, Time Warner said this week it will test a new tiered-level rate plan in Beaumont, Texas, that will charge consumers for bandwidth usage that exceeds a predetermined amount.The Web site said today that Time Warner has confirmed that the memo is genuine.Specifics Not Yet SetA report yesterday quoted Time Warner spokesman Alexander Dudley as saying that the specifics of its Consumption Based Billing trial for the RoadRunner service have not been decided, but that the packages would probably have levels between 5 GB to 40 GB per month, and that the trial would begin sometime in the first half of this year.The highest level would be priced at the highest-speed service, between $50 and $60 monthly. Dudley said the pricing plan would not affect existing customers.The price for exceeding the top limit in the trial has not been set, but Dudley made a reference to Bell Canada, which charges CDN$7.50 (US$7.36) for each additional gigabyte of bandwidth used over a 30-GB plan, which has a fixed price of CDN$29.95 (US$29.18).According to Dudley, the initiative is not being undertaken because most users are bandwidth hogs, but because a few customers are. The company has said that this test is part of a strategy to reduce congestion on its network because of those few customers, who make up about 5 percent of all customers but reportedly use more than half of all bandwidth.Threatens Online MoviesThe actual cost to Time Warner of additional bandwidth usage is unclear, since Net access providers do not provide a breakdown of their costs, but some industry observers have said that the majority of Time Warner’s costs for Net access would be fixed regardless of how many gigabytes are downloaded and that incremental costs for additional bandwidth would be minor.There have also been suggestions that Time Warner, the second-largest cable company, is initiating the practice to discourage competition to its cable systems from movies and TV over the Net.If this kind of tiered pricing becomes general practice at Time Warner and other Net access providers, it could severely hamper or even kill the emerging industry of selling or renting movies online, in addition to TV programs and other possible online business models. A standard-definition movie, for instance, can be as large as 2 GB, while a high-definition one can reach 5 GB.But other observers have said that a flat-rate model cannot continue as Internet traffic increases by 50 percent per year and as consumer viewing of feature-length movies online dramatically increases. For instance, just in the past week, Apple announced an online movie-rental service through iTunes, and Netflix said most of its subscribers could watch its online-available collection without limits. |
