Bandwidth hogs, beware: Time Warner Cable is rolling out bandwidth caps and overage charges to more cities.
The cable company has been testing ‘consumption-based’ billing in Beaumont, Texas. And they will expand the program to more cities this year, COO Landel Hobbs said on this morning’s Q4 earnings call. (Without offering details.)
This is different than how consumers are overwhelmingly used to paying for Internet access — all-you-can eat service for a flat monthly fee, whether they use the Internet a little or a lot.
Will consumers put up with this? That depends on what Time Warner Cable decides will be its monthly allotment and how much it plans to charge for overages.
In Beaumont, it’d been testing caps of 40 gigabytes per month. That’s less than it sounds, especially as companies like Apple (AAPL) and Netflix (NFLX) increasingly offer hi-def movie services. (A hi-def movie can take up about 4 gigabytes.)
We think Comcast’s (CMCSA) caps are more reasonable — about 250 gigabytes per month. But Comcast is mostly trying to manage its network and weed out pirates. Time Warner Cable seems to be looking for new revenue growth areas as subscriber growth slows.
If it works, that’s good news for shareholders. The danger: That ticked-off consumers faced with overage charges for Internet video usage will ditch Time Warner for competitors that don’t currently cap bandwidth, such as Verizon (VZ).
Or that regulators will get suspicious that the cable company is squashing competition from online video by giving subscribers an unreasonable disincentive not to use it. (Though they probably can’t do anything about it.)
The irony here: Time Warner Cable is the only major U.S. Internet service provider to back Fon, a Spanish wi-fi startup that encourages you to share (or sell) your Internet access. Yet with consumption-based billing, subscribers will have to secure their Internet connection as best as possible to avoid paying overage fees for service that others are borrowing.