Featured Bloggers - Wednesday January 23, 2008 - 3 Comments
Time Warner: metered broadband billing is not the answer!
2008 is off to the races; January is not even over yet and we’ve already seen some major announcements in the race to deliver IP video and to the living room. The combination of CES and Macworld has given us much to be excited about, including:
1) Xbox Live Video’s announcement with ABC/Disney for programming plus the announcement to bring MGM movies to Xbox LIVE. With over 10 million Xbox Live subscribers and 17 million Xbox 360’s sold, we can expect to see more programming and movie content coming soon. The smart money would be on NBC programming to Xbox, which recently announced an Olympics ’08 website built on Siverlight.
2) Netflix announced unlimited online movies as part of their $16.99 per month subscriptions for 3 physical DVD’s at a time, and has previously announced a set-top box in conjunction with LG.
3) Apple TV Take 2 launched with a reduced price ($229 down from $299) and all six major movie studios on board. Pricing will be 2.99 for old titles, $3.99 for new releases, and movies are offered are HD (720p for memory) and can be viewed within 30 seconds after purchase (assumes a broadband connection).
Right when it was starting to feel like the living room revolution was finally happening, we witnessed some news that underscores the complexities of this value chain and what could ultimately undermine and undue the promise of IP video: Time Warner announced a pilot project in Beaumont, Texas in which broadband cable customers will be charged by a metered system. In other words, you pay by the bit. While this could mean lowered bills for anyone using the Internet primarily for email and basic web surfing, the New York Times reports that those customers that want to download a movie from Apple for example could pay upwards of $30 in bandwidth fees! This is clearly not a sustainable model for consumers (or Apple, Netflix, Microsoft, etc).
For anyone wondering what Time Warner is smoking, let’s take a step back. This is a pilot project for a reason and while the press and bloggers jumped all over the announcement, we all need to better appreciate the position of the ISP in the IP video revolution – basically they’re subsidizing it for consumers. The mass market adoption of IP video in the living room means a surge in bandwidth consumption, especially when we consider the impact of HD, and do ISPs get any incremental income from this uptick in usage of their network infrastructure? Of course not. Consumers expect it as a part of their monthly service. But if usage scales to a point where the ISP’s infrastructure cannot handle, everyone loses (anyone remember the early days of broadband?).
So while many bloggers took shots at Time Warner for what looks like monopolistic greed at its finest, the flip side of the coin is that Time Warner is simply trying to figure out how to pay for the major router and switch upgrades that will be required in the coming years to meet the growing demand created by high bit rate IP video. So what is the answer? Is there a happy middle ground? I believe so, and it is not via metered billing.
What I think would be fair and what we can expect in the not-so-distant future are new tiered service plans for broadband, especially from the cable companies who will be losing share to IPTV and emerging devices like Xbox and services like IPTV that disintermediate the need for cable television. I think we’ll see an entry-level broadband service in the sub-3.0 Mbps for $10-15 per month, a 3-10 Mbps services in the $20-40 per month range, and new “premium” broadband offerings that are faster and designed to support IP (and HD) video throughout the house in the $60-100 per month range. Instead of metered billing, those consumers on the entry-level plans that are watching IP video can still try to do so, but the extra bandwidth and quality of service will specifically not be there.
Comments
3 Responses to “Time Warner: metered broadband billing is not the answer!”Ivan_PSP January 24th, 2008 12:25 pm
I will be switching from Time Warner as sooner they announce that
dumb crap coming to NY i will betting Verizon FIOS
Rob January 25th, 2008 9:54 am
From the outset, the Internet has been called a utility like water,
natural gas and electricity. Based on that observation, it seems
appropriate that consumers should pay for usage. I too would prefer
a different model - one that is driven by market forces and based
on the content the consumer is accessing. Movies are a $1, songs
$.03, etc (remember the old phone bills that charged for each
call?) There would be a smaller base fee than you propose. This
would allow for lower bandwidth tasks.
Dean Nelson January 30th, 2008 12:44 pm
Joshua, I disagree with your contention that metered bandwidth is
not the answer. I think that what TW did in Beaumont (following the
lead of Rogers and Bell Canada in Canada) is exactly what is
required to move the industry forward. The problem is the
cross-subsidization of the cable plant by the revenue generated
from video services. In the past they were synonymous, but with so
many up and coming “over the top” providers who are riding on the
cable plant without paying anything for transport, it undermines
the companies providing the transport services. I would much prefer
that all actual cost of services were embedded in the services. It
would eliminate inherently unprofitable business models and
encourage those that are valid. I would like to think that it would
also make the incumbent cable and telco carriers indifferent to
whether a subscriber took voice, video or data services from them
or just paid for data transport. The logical next step after that
would be to sever any preferential treatment the cable voice, data
or video services got from the common carrier part of the cable and
telco businesses. Then we would have a level playing field, and may
the best content win! I am reminded of a session at the CTAM
conference last year where Melinda Witmer (VP, programming TW)
chided a representative from ESPN/Disney for charging the cable
companies heavy programming rates and at the same time using the
cable Internet service to deliver content directly to consumers for
free, effectively using the revenue generated from their largest
customers (TW is their second largest customer after Comcast) to
bypass the cable companies - undermining the very transport
solution they were using to deliver their “next generation” of
content. Right now we are headed on a collision course between the
cable and telco carriers who provide the transport and the
“over-the-top” providers who are benefiting from a free ride…