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04/15/2009

On Testing Consumption Based Pricing Models

By: Kyle McSlarrow, Cable Tech Talk

So, my friends at Free Press recently announced a petition to gather signatures to call on Congress to “investigate” plans by Time Warner Cable to conduct trials in four U.S. cities to test customer response to “consumption based” billing for its high-speed Internet access service.

Great. Hundreds of billions of dollars have been and continue to be invested by our industry in the deployment of broadband and now the deployment of next generation broadband; speeds have doubled or tripled in just the last few years; new and spectacular applications keep getting launched; no anti-competitive conduct has remotely occurred; and, in fact, compared to many other industries, the Internet ecosystem seems to be one of the few really healthy, growing, and creative parts of our economy with continued investment and innovation taking place every day. At a time of economic and financial challenges for our country, I for one would rather Congress spend its time on real problems, not fictional ones.

Despite Free Press’s hyperbole, the facts are these: Time Warner Cable has merely suggested that they are interested in conducting a limited set of trials of a new pricing model – in a careful and transparent manner – that may serve the vast majority of their customers better by reflecting the growing reality that some consumers utilize far more high speed bandwidth than others. They have engaged in an open conversation with their customers and other interested parties about how they are thinking through their plans, and I would expect that only after gathering input would they announce more specific plans for what, where and how such tests would be conducted.

While it is certainly appropriate for all of us and anyone interested in the deployment and use of broadband technology to monitor the results of these and similar experiments, we should recognize the Free Press petition drive as the publicity stunt it so obviously is.

Let’s not forget that Free Press previously suggested that consumption-based billing could be an appropriate pricing model for network providers in a filing on network management at the FCC:

[T]hey could also charge by usage (emphasis mine), provide more bandwidth to all users, or actually offer high symmetric broadband speeds.

As well as to the media:

“I don’t quite see [metering] as an outrage, and in fact is probably the fairest system going — though of course the psychology of knowing that you’re paying for bandwidth may change behavior,” said Tim Wu, a law professor at Columbia University and chairman of the board of public advocacy group Free Press.

And, while they have every right to change their minds, what hasn’t changed is that it is entirely appropriate for any actor in the Internet eco-system to test and examine new ideas and approaches that promote consumer choice and enhance the Internet experience for broadband users before making any permanent decisions. The right approach, as Time Warner Cable has done, is to conduct such tests in a transparent way, with full notice and explanation to their customers.

I don’t hold a brief for or against any particular pricing model. I simply do not have all the data to make an informed judgment about consumption based billing; nor, with all due respect, does anyone else. The whole point of tests, it seems to me, is to learn what works and what doesn’t, and the details matter a lot.

But the “shoot, ready, aim” mentality seems all too prevalent these days. For example, it is somewhat tiresome to have Free Press repeatedly assert that every effort by network providers to examine any new approach or idea in our or related industries is somehow designed to protect against the supposed “threat” of “Internet video.” This is so stale, and so at odds with the facts, that it really should not be necessary to point out the obvious:

Any one of these basic facts would have been evident simply by touring the Cable Show in Washington, D.C., earlier this month.

I would respectfully suggest that this is precisely the time in which we can and should test new ideas, especially when the evidence demonstrates that such tests are being planned with care and transparency.

Source: http://www.cabletechtalk.com/tech-discussions/2009/04/15/on-testing-consumption-based-pricing-models/

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