Our representative from Time Warner Cable (TWC) recently "clarified" his original statement (after the "****storm of bad press he got no doubt". I analyze it here statement by statement. Get all the goods, or read it for yourself at: http://a.longreply.com/109511 . The basic summary - they just don't get it.
Statement from Landel Hobbs, Chief Operating Officer, Time Warner Cable
RE: Consumption based billing trials
4-9-09
Some recent press reports about our four consumption based billing trials planned for later this year were premature and did not tell the full story. With that said, we realize our communication to customers about these trials has been inadequate and we apologize for any frustration we caused. We’ve heard the passionate feedback and we’ve taken action to address our customers’ concerns.
[This is really the best you could come up with. A useless lower tier and an outrageous 4x increase in price for those that are your most loyal users? You do understand that's not enough right?]
With the ever-increasing flood of content on the Internet, bandwidth consumption is growing exponentially. That’s a good thing; however, there are costs associated with this increased Internet usage. Here at Time Warner Cable, consumption among our high-speed Internet subscribers is increasing by about 40% a year.
[According to THIS STUDY the cost of providing broadband Internet traffic is going down by 40% per year. So that would make us basically - break even. So as long as you don't piss off so many customers that your subscriber base shrinks you should continuously grow by about 8-10% per year (average growth based on Time Warner Cable's annual report). Past performance not a predictor of future returns, etc. etc. Sounds like a healthy growth strategy to me. And again - Verizon Fiber is in the same market you are. They are not capping Internet. I wonder why not?]
As a facilities based provider, we’ve built a network that must be maintained and upgraded. We have increasing variable costs and we have to continue to invest in the network itself.
[No. Per the study above your variable costs are actually decreasing while your subscriber base is increasing. Unless you don't have a sound business model for variable costs like customer service which is not proven out by the profits shown year over year in your Annual report - you are not increasing your variable costs any more than as a percentage of your total subscribers. Deploying Doccis 3.0 for instance automatically increases your bandwidth by 10x within your fixed infrastructure at a cost that represents 1.5 months of subscriber service if you don't even change the rates (estimate based on this study that shows that broadband DOCIS 3.0 installations average about $60/household ). While you may have increased bandwidth costs, since they are shrinking at 40% per year those should even out with the increased usage]
This is a common problem that all network providers are experiencing and must address.
[Really? Seems like Verizon Fiber is addressing it by promoting unlimited usage, and higher speed for a lower cost. You are only introducing this here because they are NOT here. You don't have the guts to introduce this in a market where FiOS is strong because you know that you would lose nearly all your subscriber base inside a year. Don't believe that's their strategy - Read on my friend.]
Several other providers have instituted consumption based billing, including all major network providers in Canada and others in the U.K., New Zealand and elsewhere. In the U.S., AT&T has begun two consumption based billing trials and other providers including Comcast, Charter and Cox are using varying methods of monitoring and managing bandwidth consumption.
[All providers have a way to monitor usage, and all have created some sort of policy saying they will let you know or limit your service if you abuse the privilege. AT&T is only doing consumption based billing because of the poor bandwidth provided by DSL. You don't have that technological issue. This is a straw man anyway. For every company you can point to with a bandwidth charge - I can point to a dozen without one. Again - if you are so confident this will work pilot it in an area with FiOS. Chicken? I think so.]
For good reason. Internet demand is rising at a rate that could out pace capacity within a few years. According to industry analysts, the infrastructure may not be able to accommodate the explosion of on line content by 2012. This could result in Internet brownouts. It will take a lot of money to fix the problem. Rather than raising prices on all customers or limiting usage, we think the fairest approach is to move to a tiered model in which users pay more if they use more.
[Name these Internet experts and random talking heads you're talking about. Because none of the studies I've seen predict any such thing. The studies mentioned above point to rapidly DECREASING costs and rapidly INCREASING bandwidth availability as new technology that packs more bits and bytes into already installed infrastructure and deploys new ways of transmitting data through technologies such as WIMAX and wireless broadband. Many experts say that Internet growth in the US is stalled because of the high cost of broadband from cable companies. Raising our rates helps that in what way? According to this University of Minnesota study the first tech bubble (2001) was caused because companies assumed exponential growth that didn't actually materialize and over invested in infrastructure.]
If we don’t act, consumers’ Internet experience will suffer. Sitting still is not an option. That’s why we’re beginning the consumption based billing trials. It’s important to stress that they are trials. The feedback we’ve received from our customers has been very helpful.
[Actually, keeping what you have and deploying DocSis 3 (not sitting still, but not too big an investment really) would allow you to remain competitive without driving our costs up by as much as 4x. In what way exactly have you been listening to feedback? To point out the folly of your policy decision? To show that you really should reconsider before taking on a highly technical community that actually understands the ramifications of what you're trying to do? Nah - you ignored all that instead we get the drivel below]
We’ve made changes to the terms in our current and upcoming trial markets as follows:
• To accommodate lighter Internet users and those who need a lower priced option, we are introducing a 1 GB per month tier offering speeds of 768 KB/128 KB for $15 per month. Overage charges will be $2 per GB per month. Our usage data show that about 30% of our customers use less than 1 GB per month.
[WOW. Just. Wow. You GENEROUSLY are going to give users what they can get with a dial-up modem (with unlimited bandwidth) for $15 per month. Since the average load for just downloading Microsoft Updates once a month uses about 2/3 of this bandwidth you are then going to take the 1GB that costs you .03-.07 to deliver mark it up 1000 times, and then charge the exorbitant rate of $2 per GB if they exceed the cap. If they download ONE GAME from steam, watch a couple dozen youtube videos from their kids, or heaven forbid look at high rez photos from their grandkids, these LIMITED INCOME (Because come on - only someone with limited income would even think about this package) will get stuck for $2/GB of overage. If grandma gets a virus, or some teen wardrives her wireless modem she's going to get a bill for up to $150 per month - with no way of controlling it or avoiding it. Wow. I'm just overwhelmed with the generosity of your offer. Who the heck are these 30% customers? I don't know a single person who pays for Internet that uses that little of it. If they really use the Internet that little then you've been overcharging them for $40 per month - I have an idea - let's just give them all a discount RIGHT NOW if you can identify them, and leave the rest of our rates alone. ]
• We are increasing the bandwidth tier sizes included in all existing packages in the trial markets to 10, 20, 40 and 60 GB for Road Runner Lite, Basic, Standard and Turbo packages, respectively. Package prices will remain the same. Overage charges will be $1 per GB per month.
[According to your original release the caps were 5, 10, 20 and 40. So you upped those to 1, 10, 20, 40 and 60. Big whoop. you included the 60 only for those already paying $75/month for turbo (not even in the last breakdown) which listed 40mb at the $54/month price point. You changed almost nothing. So for everyone else it's 10,20,40 for $25, $39 and $54 a month] You are still charging between $2/GB and $1.50 per GB, and $1/GB of overage.
• We will introduce a 100 GB Road Runner Turbo package for $75 per month (offering speeds of 10 MB/1 MB). Overage charges will be $1 per GB per month.
[Whereby you can use up your entire bandwidth allotment in about a day's worth of use. That's 24 hours folks. You do the math - do you use the Internet more then 24 hours continuously in a month? To put this in perspective it's 14 HD streamed movies.].
• Overage charges will be capped at $75 per month. That means that for $150 per month customers could have virtually unlimited usage at Turbo speeds,
[or for $100/month they can get the same service they now receive for $40/month. For clarification after the point - the $75 overcharge cap is ONLY if you're already at the $75/month range. Lower tiered members are capped at $150 a month and their overage is variable depending on the rate they subscribed at. $15/month users will reach that rate 2x as fast since they are charged $2/gb - thus truly screwing low income people who cannot afford it. And what are you doing that will provide me with 2x the service for my 3x price increase? Nothing. At. All. This statement simply muddies the waters and obscures the fact that they are inventing a situation which does not exist and providing a solution that costs you more money for less service.]
• Once we implement this trial, we will not immediately start billing customers for overage. Rather, we will first provide two months of usage data. Then we will provide a one-month grace period in which overages will be noted on customers’ bills, but they will not be charged. So, customers will have an opportunity to assess their usage and right-size their service packages before usage charges are applied.
[Oh, how generous of you. 3 whole months. Do you think ma and pa average are going to do shiznit about this until it actually costs them money? I think not. They can't even pick an energy plan with a year's notice.]
• Trials will begin in Rochester, N.Y., and Greensboro, N.C., in August. We will apply what we learn from these two markets when we launch trials in San Antonio and Austin, Texas, in October, but we will guarantee at least the same level of usage capacity in these trials.
[Here's what you will learn, if you haven't already. People will unsubscribe. They will invite competition to their town. They will ream you in the paper, the media, to the state legislature and congress, and throughout the world. Your "experiment" will become a laughingstock. We will get legislation passed that will force you to either apply caps across the entire industry (ruinous to your market) or no caps whatsoever. Don't think we can do it? Think again - we got taxpayers to foot the bill for a Fast Ferry to Toronto man we can do ANYTHING! You will have a storm of bad press and PR that is never ending.]
As we launch DOCSIS 3.0 in the trial markets, we plan to offer a 50/5 MB speed tier for $99 per month.
[So you can use up your bandwidth and pay us $1 a GB even faster 12 hours of 50mb/s speeds. 9 hours of usage to use up your entire bandwidth allotment. 1/2 hour a day. Do you think that most people who would want this speed would settle for those terms? I think not. Welcome to $175 a month for Internet access. No thanks. I'll make you a different offer - give up on caps, and distribute DocSIS 3 modems (which you make the money back on with only one month's fee and improves drastically your ability to manage your internal network bandwidth) for free and maybe we'll forget about the way you tried to ream us an NOT have you up before the FCC, Congress, the Legislature and the world press. How's that for a deal?]
Again, the Internet is dynamic and continually evolves, so our plans will evolve as well and aren’t set in stone. We appreciate the feedback we’ve received. We’ll look forward to more dialog as we progress in these trials. You can send your comments and feedback to us at realideas@twcable.com.
[No thanks. The court of public opinion is SO much more informative than sending you an email that will be ignored. Because you obviously already ignored all the other feedback you've gotten. Be prepared for a long drawn out battle ending in a significant loss of business for you, increased regulation and increased competition in a market where you're already making money hand over fist]
Landel Hobbs
COO
Time Warner Cable
For questions, etc:
Jeff Simmermon
Director, Digital Communications
Time Warner Cable
Find us on Twitter at: @jeffTWC, @MsmarTWC, @MelissaTWC_TX
Edited by Lee Drake on 4/14/2009 to be more "respectful" to Mr. Hobbs. Feel free to comment on whether you feel he has earned or deserves our respect.