Time Warner Steps Up to the Plate on Bandwidth Usage: UPDATED

For the past two years, we have been telling broadband Internet service providers that rather than kicking off heavy bandwidth users from their networks without notice or interfering with bandwidth-intensive traffic a la the Bit Torrent-Comcast controversy, they should instead charge consumers a flat fee for a certain amount of bandwidth, and then charge a per-bit metered rate for usage that goes beyond the limit. This would be similar to the cellphone model to which Americans have become accustomed – you pay a flat fee for a certain amount of minutes, and then a per-minute charge for every minute thereafter.

This model makes sense for several reasons. First, it provides both transparency and certainty – the customer knows what their limits are. Second, it makes unnecessary controversial “network management” decisions like Comcast’s decision to throttle Bit Torrent.

So I was delighted to see that Time Warner Cable announced yesterday that it would test an Internet usage-based billing system nationwide. I agree with the company that it will only affect a small number of customers (at first, at least), who will now be directly responsible for bearing the cost of their heavy bandwidth usage. I also think that to the extent that people are used to the cellphone billing system, this change will not result in a consumer backlash, so long as the amount of bandwidth subject to the flat fee is enough for most customers to continue to use their services in ways they normally do. Certainly, in the few places where Verizon’s FiOS or AT&T’s U-verse have rolled out, Time Warner would be ill-advised to limit the flat-fee bandwidth too much. These telco systems don’t have the nearly the same bandwidth constraints and could provide an attractive alternative.

UPDATE: Our good friends at Free Press make an excellent point with respect to Time Warner’s plans that bears repeating. Their point is this: do we really want a broadband system that forces carriers to choose between blocking and metered pricing, or do we want to build “the kind of high-capacity networks available in the world’s leading broadband nations,” which makes such a choice unnecessary? Metering could disincentivize consumers from using cutting edge (but bandwidth consuming) applications lest they get stuck with a huge broadband bill - but if customers got the type of broadband speeds one sees in Asia, Europe and elsewhere, there would be no tax on innovation.

So while we applaud Time Warner for being more transparent and steering away from the kind of network management in which Comcast has engaged, we agree with Free Press that this should be an interim step, and not the final answer. The final answer are policies and market forces that improve the quality of our broadband networks.