Time Warner Launches Bandwidth-Capped Internet Plan

Barry Levine

Jun 3, 2008

On Thursday, Time Warner Cable will begin testing a new pricing plan that caps bandwidth usage. Kevin Leddy, Time Warner Cable's executive vice president, said the plan will be launched as a trial in Beaumont, Texas, and will consist of several tiers. The first tier, at $29.95 monthly, will be a relatively slow 768 kilobits per second with a 5GB monthly cap, while a plan at $54.90 per month will offer 15 megabits per second and a 40GB cap.

Both downloads and uploads count toward the monthly total. Overages will be charged at $1 a gigabyte.

Only New Customers

Time Warner has an estimated 90,000 customers in the area, and only new customers will be offered the tiers. With some users exchanging huge, media-based files like video, some other cable companies have also considered caps. For instance, Comcast, the largest cable company in the United States, has reportedly said it may cap usage at 250 gigabytes per month.

The experiment comes as consumers have grown used to unlimited Internet usage. But Larry Hettick, an analyst with industry research firm Current Analysis, said the current problem for Internet service providers is mostly created by five percent of users, while the rest have usage patterns within expectations. Those five percent, he added, are frequently downloading or uploading huge files.

Hettick noted that providers have previously said, in effect, that their policy is "unlimited, within reason," and then kicked off those few who go unreasonably beyond expected usage. "From a marketing point of view," he said, "it's probably a better approach."

He added that it will be interesting to see how users react to this experiment, as they have become accustomed to unlimited bandwidth, and the phone market is going the other way -- toward unlimited use for a flat price. "Personally," said Hettick, who sometimes works at home and depends on his online connection, "I would not buy a usage-sensitive data plan."

'Probably Enough'

He did note that, for the 95 percent of normal users, a 40GB cap is "probably enough." But addressing the short-term problem of dealing with the five percent of overusers, he added, will not fix the long-term problem, with high-definition home movies being uploaded to YouTube or users downloading high-definition features from iTunes.

"There has to be several parts to the solution," he said. One of these is increasing capacity in the so-called "last mile" to the home, by implementing new technologies such as DOCSIS 3.0 or reducing the number of homes on a given line. "Three years ago," Hettick noted, "a cable company might have served 100 homes in a neighborhood with one access point, but now could be serving 25."

Hettick said another part of the solution is increasing capacity at the central parts of the network. But, even with these adjustments, cable companies and other service providers will still have to come to terms eventually with those ultra-high-bandwidth users.