Metering the InternetMetering the Internet

Well, it is finally happening. Time Warner Cable (TWC) is experimenting with an Internet charge structure that prices Internet usage by the gigabyte. The Washington Post reported in "Pay Per Gig" by Steven Levy, on January 30, about the TWC Road Runner service. Beaumont, Texas will be the first trial for this metered pricing structure. Comcast says it is also considering the metered concept. Other broadband vendors are, so far, quiet on the metered usage subject.

Well, it is finally happening. Time Warner Cable (TWC) is experimenting with an Internet charge structure that prices Internet usage by the gigabyte. The Washington Post reported in "Pay Per Gig" by Steven Levy, on January 30, about the TWC Road Runner service. Beaumont, Texas will be the first trial for this metered pricing structure. Comcast says it is also considering the metered concept. Other broadband vendors are, so far, quiet on the metered usage subject.Levy wrote, "But Time Warner's move illuminates some of the troubling issues facing the United States in the Internet era, where, in terms of penetration, we are in 24th place -- behind Estonia -- in the international broadband competition".

"The news broke about Time Warner's plan from a leaked internal memo that company spokesman Alex Dudley confirms as genuine. The Beaumont trial will be a test of "consumption-based billing." The reason for the change, he says, is that some users are unfairly piling up gigabytes of goodies on their digital plates. "As few as 5 percent of our customers use 50 percent of the network," he says, adding that these bandwidth hogs are commonly denizens of seamy peer-to-peer file-sharing networks; one of these gluttons downloaded the equivalent of 1,500 high-definition movies in a month".

Is it being a freeloader when some subscribers are heavy users? The penalty I see is that the heavy users may slow down my access, but my traffic slows down their access as well. When an ISP declares a freeloader, I think the ISP didn't do their homework on usage patterns and would rather increase revenue than increase bandwidth capacity. The ISPs now want to increase their revenue for the network investment they have made, not really protect the rest of us. This is a subject that I have written about in my blog "Comcast, the Internet and Restriction"

The proposed pricing would be for 5, 10, 20 and 40 gigabytes. Five gigabytes would probably be sufficient for two movies and some normal web traffic. Bell Canada already has some metered subscription plans charging $7.50 for every gigabyte over the subscriber limit. This is a big surcharge considering what most subscribers pay for Internet service. Bell Canada also offers an Unlimited Usage Insurance Plan for an additional $25 per month. Notice, they will still handle the traffic, not eliminate the overage traffic, so there should be no complaint about the Bell Canada network capacity becoming saturated. How would this affect the teleworking subscriber? See the table below. Assume that a teleworker has a one hour video conference every day for 20 days per month. Also assume the average bandwidth used is 384 kilobits/second. This works out to 172.8 megabytes per day and about 3.5 gigabytes per month. Add to that a movie per week and normal traffic and the subscriber will be consuming another 10 gigabytes per month. If the movies are in high definition at 4 gigabytes per movie , this would be 16 gigabytes per month for just the movies. Adding all of these up, most subscribers would have to go for the 20 or 40 gigabyte per month plans.

Is this all for our benefit or is it a way discourage the Internet access for downloading movies? Movie watchers downloading over the Internet can be a significant loss of revenue for the cable companies.

Levy continued, "TWC's competitors in that arena are Internet companies that intend to do the same thing. The TW plan tilts the field in its own favor. Let's say I want to watch the indie film "Waitress." I may have the choice to order it on my cable box or rent it from iTunes. Each might cost me $3. But if I'm metered, renting it from iTunes might mean that I exceed my monthly limit, perhaps incurring a penalty that's more than renting the movie".

"A more profound problem with the metering scheme, however, doesn't involve corporate competition but international competition. In the United States, where the Internet was born, we pay higher prices (seven times what they pay in South Korea) for slower speeds. (Japan's users surf 13 times faster.)"

Will this mean that Unified Communications will be cheaper and faster with higher gigabyte limits in countries outside the U.S.? Can the competitive use of UC be an advantage to other countries because their Internet access costs will be lower?