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Marketplace Scratch Pad

Here come the broadband user fees

Scott Jagow Mar 31, 2009

The newly-spun off Time Warner Cable says it’ll introduce tiered pricing for internet users in several markets. That means the more YouTube videos you upload and Hulu TV shows you download, the more you’re gonna pay.

Here’s the TWC plan as laid out by Businessweek:

Customers will be charged from $29.95 to $54.90 a month, based on data consumption and desired connection speed. Customers will be charged $1 for each gigabyte (GB) over their plan’s cap. Time Warner Cable offers four cap levels of 5, 10, 20, and 40 GB. A download of a high-definition movie typically eats up about 8 GB.

Time-Warner says it’s trying to alleviate the “strain” on broadband because more people are downloading movies and TV shows. So far, a small percentage of people are bandwidth hogs, but that percentage is likely to grow. The company says in a trial run in Beaumont, Texas, only about 14% of customers exceeded their cap and had to pay additional fees that averaged $19 a month.

Perhaps TWC is just jumping the gun on something that’s inevitable, but there has to be a significant risk of losing customers with so much broadband competition that charges a flat rate. Not that TWC has a history of making its customers warm and fuzzy. There’s also the argument that this kind of pricing discourages innovation and experimenting in the fast-growing video segment of the web.

What do you think?

In other news, Time-Warner, the parent company, just spun off TWC in an effort to be smaller, more focused company.

Time-Warner is still huge, but it’s no longer the biggest US media company by revenue. That spot now belongs to Disney, with Rupert Murdoch’s News Corp number two, as Bloomberg points out.

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