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Time Warner Cable has increased all of its Internet data caps, added some new ones, and generously offered to limit overage charges to $75/month. Perhaps that's because the company's broadband operations are actually earning more cash and have lower expenses than they did in 2007, making TWC's stated rationale for the caps less tenable.
By Nate Anderson | Last updated April 10, 2009 1:37 PM CT

[IMG]http://static.arstechnica.com/iraqi_minister.jpg[/IMG]

Time Warner Cable, stung by public reaction to the Internet data caps it is now trialing in several markets, has issued yet another public statement. Turns out, the problem here doesn't rest with the caps but with the "press reports" that "were premature and did not tell the full story."

All of which perfectly explains why Time Warner Cable has also boosted cap limits in every tier.
The messenger, we shoot him

What premature, not-full-story-telling press reports might be referenced here? Well, there was our own look at the bizarre price discrepancy between the new TWC cap system and that offered by every other major US Internet provider, for one.

The New York Times Bits blog tried to pry a few answers of out TWC Chief Operating Officer Landel Hobbs—including an explanation of how bandwidth costs TWC money when their network is peered and most costs are fixed—but got approximately nowhere.

And yesterday, Wired followed up on both pieces with a look of its own at TWC revenues, showing that broadband costs had decreased by 12 percent in 2008 even as broadband revenues had increased by 11 percent.

TWC's response to three sets of solid questions? The continued assertion that "Internet demand is rising at a rate that could outpace capacity within a few years. According to industry analysts, the infrastructure may not be able to accommodate the explosion of online content by 2012. This could result in Internet brownouts. It will take a lot of money to fix the problem."
Beware the coming Internet brownouts

This is a reference to Internet "exaflood" theories that are not currently being borne out by the data. For instance, US Internet growth has declined into the 40-60 percent per year range (which TWC's own numbers confirm), well below the 100 percent per year numbers used to generate some of the scariest predictions of doom.

Even as traffic increases, traffic costs on major Internet backbones have been decreasing by 50 percent a year—an obvious market signal that capacity is plentiful at the core and in no danger of "browning out." At the edges, network upgrades to DOCSIS 3.0 are cheap—somewhere in the neighborhood of $20-100 per subscriber.

As for the TWC network in between the headend and the backbone, of course routers, etc. will need constant upgrading; that's how the business works. But TWC's revenues are going up while its costs are going down—making it look like the tiered pricing scheme (with its quite small caps) is more about 1) squeezing cash out of broadband users and 2) keeping TWC's cable TV operation alive by making Internet video less desirable.

The "it's expensive to upgrade" argument certainly seems dubious. How dubious? Let's run a new set of numbers. TWC last night announced the pricing scheme for its new 100GB/month tier for $75/month. Comcast, using the same technology, offers a 250GB cap for $42.95.month (and some Ars users have reported lower numbers in some markets), so it's clear right from the start that the TWC plan is hardly a "good deal."

Speeds aren't great, either, topping out at 10Mbps (and it's a bad sign when a company's COO says that users will get speeds of "10MB/1MB"). Overage charges are a dollar a GB, but TWC helpfully caps these at $75. To equal the Comcast cap, therefore, a TWC user would have to spend $150/month with TWC.

AT&T DSL, meanwhile, offers an uncapped, 6Mbps connection for $35/month.

Verizon's FiOS, which has required an $18 billion infrastructure investment that makes cable modem service look like the world's best bargain for operators, offers a 50Mbps connection with no explicit cap for $144.95/month.
Upping the caps

If TWC wants to launch noncompetitive rates, that's certainly its right. But to paint these caps as "necessary," even as competitors offer way more for way less, suggests that the company is either disingenuous about its costs or bad at running a major network. Given the company's revenues vs. expenses, it's not hard to guess which option we're leaning towards.

TWC has made some positive steps in response to the feedback (all polite, no doubt) it has received from customers. It will now offer a 1GB tier with a "straight-outta-1998" 768Kbps/128Kbps connection for $15 per month, which is certainly an improvement over the company's previous plan to start its rates at $30/month. TWC says that 30 percent of its customers use less than 1GB/month.

The company is also upping all the other caps, which now range from 10GB/month to 60GB/month, while prices stay the same. For the 10GB/month tier, that means TWC has just doubled the cap without altering the price, indicating just how much room the company actually has to move before it really worries about Internet "brownouts."

Consumption-based billing has a certain inescapable logic to it—one can generally make a case that people should pay for the costs they incur. But when the prices under such a system are so obviously out of line with the actual costs, clothing the scheme in the garb of "fairness" reeks of hypocrisy.

So shame on the press for daring to peek behind the curtain at the great and terrible Oz. But while yappy dogs can be annoying, they can sometimes get results.

On the other hand, one also thinks of the time-honored budget strategy of submitting an outrageous request for cash in the upcoming year, only to pare it back to the number that you really wanted after an outcry.
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[url]http://arstechnica.com/tech-policy/news/2009/04/time-warner-cable-to-press-stop-questioning-our-caps.ars[/url]
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Love the pic!