TWC Defends Tiers, Plans Speed- and Consumption-Based Plans

When Time Warner Cable (s twc) rolls out its new pricing plans, it won’t base its tiers simply on consumption, but will also consider broadband speed as part of the equation, according to a statement released this afternoon by TWC Chief Operating Officer Landel Hobbs. As it deals with the backlash generated by its expansion of tiered broadband trials to four new cities, among them San Antonio and Austin, Texas, the cable company is getting its messaging together. From the statement:

Our current pricing plans require all users to pay the same amount, whether they check email once a month or download six movies a day. As the amount of usage has dramatically diverged among users, this is becoming inherently unfair and not the way most consumers want to pay for goods they consume.

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?

This metaphor is unfortunate, since prior to this, broadband has been compared to an all-you-can-eat buffet, and the point is that everyone pays the same price and eats what they want. Changing the rules of the game now does a disservice to everyone, from consumers to innovation to companies such as Amazon (s AMZN), Google (s GOOG) and Microsoft (s MSFT), which stand to lose if consumption-based broadband forces people to reconsider certain of their online services. If your favorite buffet changed to a standard, entree-based menu, you probably wouldn’t eat there as often, especially if you had other options. Luckily for Time Warner, being an ISP isn’t as fraught with competition as the restaurant business.

However, Time Warner may add a wrinkle to the debate over consumption-based broadband by mixing speed- and consumption-based plans. It also could make this more interesting if it rolls such plans out with its DOCSIS 3.0, super-fast broadband upgrades, that are affirmed in the statement.

Furthermore, I am convening a series of meetings this week to develop plans that will allow customers to choose among tiers that provide tradeoffs between speed and consumption. If one family prefers to have lower download speeds but a higher data tier, or vice-versa, we want them to be able to make that choice.

We’d like to make enough speed and data tiers available so that it’s possible for customers to reduce their monthly Internet bill based on the choices they make. Obviously this is still in the planning stages and details are fuzzy, but this is a priority for me this week.

Currently many ISPs charge based on the different speeds of service, but in the U.S., I only know of  one: Charter Communications, which mixes speed and capacity limits and plans to cap capacity based on the level of speed a customer chooses. Its smallest cap is 150 GB and is tied to customers who sign up for its 15 Mbps-and-under service. That’s a far cry from Time Warner’s smallest cap of 5 GB, which is currently tied to speeds of about 7 Mbps. If Time Warner is now operating restaurant with a menu, the options aren’t between steaks and salads — they’re between overpriced dishes of greasy burgers and iceberg lettuce topped with a few soggy tomatoes.