January 22, 2008 | By Fred von Lohmann

Time Warner Puts a Meter on the Internet

Time Warner Cable has confirmed that it will be rolling out metered pricing for Internet access in Beaumont, TX. Although the exact terms have apparently not been set, packages would reportedly offer between 5 gigabytes and 40 gigabytes a month, with the top plan costing roughly the same as the company’s current highest-speed service (~$50-60/month).

On balance, we think this is a fair choice among a bunch of bad options. Cable companies are struggling with an infrastructure that cannot meet the bandwidth needs of all its customers (in other words, they oversold their services). Providing transparent, metered access is certainly preferable to Comcast's arbitrary, undisclosed practice of selectively hobbling particular protocols. (Or, in the words of Harold Feld of the Media Access Project, "I think this beats outright lying about your limitations.")

Overall, business models that keep ISPs thinking of themselves as "pipe" rather than "content" are good. Better that your ISP worry about the tolls to pay for the highway, rather than scheming to force you to use their preferred offramps and eat in their preferred diners.

Transparency also encourages innovation and competition. Already, Verizon is gloating publicly, saying that its more modern FIOS fiber-optic service will not have caps ("step right up, no caps over here, folks"). This also may encourage new broadband technology providers to enter the market, as they will have another way to differentiate their offering from cable broadband ("real unlimited Internet, right this way").

But there are some serious potential drawbacks, too. First, if metered Internet access becomes widespread, it may discourage users from indulging in new, high-bandwidth activities, thereby foreclosing innovative new technologies and markets. For example, we might never have had a YouTube (or a Napster) if people were fretting about their bandwidth consumption.

Second, much will depend on the pricing of these new metered plans. The new plans could be used to bring basic broadband in at a lower price (good), or it could be used as a cover for price increases on existing customers (bad). And the pricing for "overages" should bear some relation to costs, rather than being exploited for windfall profits. (Broadband industry observer Dave Burstein has pointed out that the wholesale price to Time Warner for 40gb for a month amounts to about $3.)

Last word goes to Harold Feld: "The real solution, of course, is policies that build out more capacity so that it becomes too cheap to meter." Now if only we had a real national broadband policy to get us there.

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