Tiered pricing takes aim at bandwidth hogs

By BRIAN STELTER
New York Times

Posted: June 14, 2008

Some people use the Internet simply to check e-mail and look up phone numbers. Others are online all day, downloading big video and music files.

Should they pay the same price for access?

For years they have, with subscribers sharing a buffet of all-you-can-download Internet access, regardless of how much they consumed.

But now three of the countrys largest Internet service providers are threatening to clamp down on their most active subscribers by placing monthly limits on their online activity.

One of them, Time Warner Cable, began a trial of Internet metering in one Texas city this month, asking customers to select a monthly plan and pay surcharges when they exceed their bandwidth limit.

The idea is that people who use the network more heavily should pay more, the way they do for water, electricity, or, in many cases, cell phone minutes.

That same week, Comcast said that it would expand on a strategy it uses to manage Internet traffic: slowing down the connections of the heaviest users, so-called bandwidth hogs, at peak times.

AT&T also said Thursday that limits on heavy use were inevitable and that it was considering pricing based on data volume.

Based on current trends, total bandwidth in the AT&T network will increase by four times over the next three years, the company said in a statement.

All three companies say that placing caps on broadband use will ensure fair access for all users.

Internet metering is a throwback to the days of dial-up service, but at a time when video and interactive games are becoming popular, the experiments could have huge implications for the Web.

Millions of people are moving online to watch movies and television shows, play multiplayer video games and talk via videoconference with family and friends. And media companies are trying to get people to spend more time online: The Disneys and NBCs of the world keep adding television shows and movies to their Web sites, giving consumers convenient entertainment that soaks up a lot of bandwidth.

Moreover, companies with physical storefronts, such as Blockbuster, are moving toward digital delivery of entertainment. And new distributors of online content think YouTube are relying on an open data spigot to make their business plans work.

Critics of the bandwidth limits say that metering and capping network use could hold back the inevitable convergence of television, computers and the Internet.

The Internet is how we deliver our shows, said Jim Louderback, chief executive of Revision3, a three-year-old media company that runs what it calls a television network on the Web. If all of a sudden our viewers are worried about some sort of a broadband cap, they may think twice about downloading or watching our shows.

Question of fairness

Even if the caps are far above the average users consumption, their mere existence could cause users to reduce their time online. Just ask people who carefully monitor their monthly allotments of cell phone minutes and text messages.

As soon as you put serious uncertainty as to cost on the table, peoples feeling of freedom to predict cost dries up and so does innovation and trying new applications, Vint Cerf, the chief Internet evangelist for Google who is often called the father of the Internet, said in an e-mail message.

But the companies imposing the caps say that their actions are only fair. People who use more network capacity should pay more, Time Warner argues. And Comcast says that people who use too much such as those who engage in file-sharing should be forced to slow down.

Time Warner also frames the issue in financial terms: The broadband infrastructure needs to be improved, it says, and maybe metering could pay for the upgrades. So far its trial is limited to new subscribers in Beaumont, Texas, a city of roughly 110,000.

In that trial, new customers can buy plans with a 5-gigabyte cap, a 20-gigabyte cap or a 40-gigabyte cap. Prices for those plans range from $30 to $50. Above the cap, customers pay $1 a gigabyte. Plans with higher caps come with faster service.

Average customers are way below the caps, said Kevin Leddy, executive vice president for advanced technology at Time Warner Cable. These caps give them years worth of growth before theyd ever pay any surcharges.

Casual Internet users who merely send e-mail messages, check movie times and read the news are not likely to exceed the caps. But people who watch television shows on Hulu.com, rent movies on iTunes or play the multiplayer game Halo on Xbox may start to exceed the limits and millions of people are already doing those things.

Streaming an hour of video on Hulu, which shows programs such as Saturday Night Live, Family Guy and The Daily Show With Jon Stewart, consumes about 200 megabytes, or one-fifth of a gigabyte. A higher-quality hour of the same content bought through Apples iTunes store can use about 500 megabytes, or half a gigabyte.

A high-definition episode of Survivor on CBS.com can use up to a gigabyte, and a DVD-quality movie through Netflixs new online service can eat up about 5 gigabytes. One Netflix download alone, in fact, could bring a user to the limit on the cheapest plan in Time Warners trial in Beaumont.

Even services such as Skype and Vonage that use the Internet to transmit phone calls could help put users over the monthly limits.

Time Warner would not reveal how many gigabytes an average customer uses, saying only that 95% of customers use under 40 gigabytes each in a month.

That means that 5% of customers use more than 50% of the networks overall capacity, the company said, and many of those people are assumed to be sharing copyrighted video and music files illegally.

Just like old times

The Time Warner plan has the potential to bring Internet use full circle, back to the days when pay-as-you-go pricing held back the Webs popularity.

In the early days of dial-up access, America Online and other providers offered tiered pricing, in part because audio and video were barely viable online. Consumers feared going over their allotted time and bristled at the idea that access to cyberspace was billed by the hour.

In 1996, when AOL started offering unlimited access plans, Internet use took off and the online world started moving to the center of peoples daily lives. Today most Internet packages provide a seemingly unlimited amount of capacity, at least from the consumers perspective.

But like water and electricity, even digital resources are finite.

How much is too much?

Last year Comcast disclosed that it was temporarily turning off the connections of customers who used file-sharing services such as BitTorrent, arguing that they were slowing things down for everyone else.

The people who got cut off complained and asked how much broadband use was too much; the company did not have a ready answer.

Thus, like Time Warner, Comcast is considering a form of Internet metering that would apply to all online activity.

The goal, says Mitch Bowling, a senior vice president at Comcast, is ensuring that a small number of users dont impact the experience for everyone else.

Last year Comcast was sued when it was disclosed that the company had singled out BitTorrent users.

In February, Comcast departed from that approach and started collaborating with the company that runs BitTorrent. Now it has shifted to what it calls a platform agnostic approach to managing its network, meaning that it slows down the connection of any customer who uses too much bandwidth at congested times.

Bowling said that typical Internet usage would not be affected. But on the Internet, typical use is constantly being redefined.

The definitions of low and high usage today are meaningless, because the Internets going to grow, and nothings going to stop that, said Eric Klinker, the chief technology officer of BitTorrent.

As the technology company Cisco Systems put it in a recent report, todays bandwidth hog is tomorrows average user.

One result of these experiments is a tug-of-war between the Internet providers and media companies, which are monitoring the Time Warner experiment with trepidation.

We hate it, said a senior executive at a major media company, who requested anonymity because his company, like all broadcasters, must play nice with the same cable operators that are imposing the limits. Now that some television shows are viewed millions of times online, the executive said, any impediment would hurt the advertising model for online video streaming.

Leddy of Time Warner said that the media companies fears were overblown. If the company were to try to stop Web video, we would not succeed, he said.