Time Warner faces backlash on broadband caps

Time Warner Cable's plans to cap broadband speeds and charge $150 a month for unlimited broadband downloads has caused quite a stir among consumers and politicians.

U.S. Rep. Eric Massa of New York is promising to introduce in Congress that will curb the use of tiered broadband services in areas where there is only one service provider. And angry consumers have taken to the blogosphere to express their outrage at a new plan that would theoretically charge them more on a per Gigabyte basis for downloads than they'd et from other services.

Last week, Time Warner Cable, the nation's second largest cable operator, said that it plans to expand its test of using bandwidth caps for its broadband data service. Last year, the company began testing broadband services in Beaumont, Texas that allowed 5 to 40 gigabytes of uploading and downloading a month. Now the company is planning to expand the test to other cities this year including Austin, San Antonio, Rochester, NY and Greensboro, NC. The company also has plans to increase the caps to between 10 GB to 60 GB a month with prices ranging from $25 to $65 per month, depending on the region.

Time Warner also said that it would introduce a new plan that offers 100 GB of downloads for $75 a month. Additional downloads would be charged $1 a GB with a cap of $75 on the extra fee, essentially making an unlimited plan cost $150 per month.

By comparison, Comcast's service, which costs $43 a month, has a bandwidth cap of about 250 GB per month. And Verizon Communications' cheapest broadband package with its fiber-to-the home Fios service costs $45 a month and has no download limit.

Time Warner's plans ignited a firestorm of protest among consumers and consumer advocates, who believe the company is unfairly hiking prices on broadband services for some subscribers. And Congressman Massa has called the plan, "nothing more than a large corporation making a move to force customers into paying more money."

Time Warner's Chief Operating Officer Landel Hobbs, tried to explain the company's position in a letter posted on April 9. Hobbs said that the reaction to reports of the new tiered offering are overblown. But he said the company has heard the "passionate feedback" and is taking steps to address the concerns. And he outlined some minor changes.

For example, the company will also offer a new $15-a-month plan that is suitable for light e-mailers. The service offers download speeds of 768 kilobits per second and a 1 gigabyte monthly cap. And it will offer a new 50Mbps download and 5Mbps upload service over its new DOCSIS 3.0 infrastructure in some trial markets for $99 a month.

Hobbs explained that bandwidth usage is growing about 40 percent a year on Time Warner's network and the company has to come up with a new business model to handle the added cost of handling so much traffic.

"As a facilities based provider, we've built a network that must be maintained and upgraded," he said. "We have increasing variable costs and we have to continue to invest in the network itself. "

Indeed, managing bandwidth has become a big deal for broadband providers over the last couple of years. Comcast got into hot water two years ago when it was caught slowing down BitTorrent traffic on its network. The Federal Communications Commission said that Comcast's actions were illegal, and the cable company has reformed its practices.

Time Warner believes the metered approach will help it better manage traffic on its network, and control bandwidth bogs who use an inordinate amount of bandwidth on the network.

But the truth is that today Time Warner's customers aren't using that much bandwidth anyway, according to an article published a couple of weeks ago by Business Week. Of the 10,000 subscribers in the Beaumont, Texas trial, only about 14 percent exceeded the cap and had to pay the additional fees, which totaled on average about $19. The company also learned that the top 25 percent of users consumed 100 times more data than the bottom 25 percent of users, which suggests a pretty big gap in how consumers are using broadband.

For now, the trials appear to be angering consumers, who likely aren't breaking these caps anyway. But the very idea that the company could meter its traffic may be enough to cause some subscribers to cancel their service and sign up with a competitor that offers no caps. And for those customers who don't have a choice of another provider, Time Warner's trials may spur a more aggressive eye from lawmakers, who would want to curb the use of these caps.