"Just over a year ago, Time Warner Cable rolled out an experiment in several cities: monthly data limits for Internet usage that ranged from 5GB to 40GB. Data costs money, and consumers would need to start paying their fair share; the experiment seemed to promise an end to the all-you-can-eat Internet buffet at which contented consumers had stuffed themselves for a decade. Food analogies were embraced by the company, with COO Landel Hobbs saying at the time, "When you go to lunch with a friend, do you split the bill in half if he gets the steak and you have a salad?"
In the middle of the controversy, TWC boss Glenn Britt told BusinessWeek something similar, though with less edible imagery. "We need a viable model to be able to support the infrastructure of the broadband business," he said. "We made a mistake early on by not defining our business based on the consumption dimension."
This basic argument has a compelling logic—pay for what you consume—and it came with a side order of "implied apocalypse." Unless a major shift in pricing happens in the near future, TWC's Internet business won't be "viable" and the infrastructure won't keep pace with demand.
This key assertion underlies numerous industry experiments with consumption pricing (AT&T just wrapped up a trial of its own tight data caps in a few test markets, and other ISPs have mooted the idea for years). Few consumers are in a position to judge such claims; maybe the sky is falling. Maybe home Internet use is unsustainable without far more caps or far less data. Maybe those Netflix and Hulu users really are pigs at the broadband trough.
But there's reason to doubt. Big ISPs usually rely on peered connections to other major ISPs, connections which incur no per-bit cost. As for the cables in the ground, they've been there for years. The equipment back at the headend must be installed once, after which it runs for years. Cable node splits and DOCSIS hardware upgrades are relatively cheap. Requesting one additional bit does not necessarily incur any additional charge to the ISP.
If most Internet costs are fixed (and the National Broadband Plan agrees that they are), and if bandwidth is dirt cheap, what "charges" are heavy Internet users ringing up for ISPs like Time Warner? As a New York Times writer summed it up in the middle of last year's debate:..."
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