Time Warner’s pricing tiers

Posted by Dirk Avery at 12:25 pm under Internet.

Watch out, Beaumont, Texas! The 100,000+ residents of this town will soon be paying for Internet based on usage. If all goes well, expect the same type of pricing structure to spread to the rest of the country and broadband players (Comcast, AT&T).

Warner defends its position by asserting that 5% of users can account for more than 50% of its traffic. Internet users complaints about performance are also cited as justifications. But, will differential pricing solve the problem? There are several issues.

First, are we suffering from selfish, bandwidth hogs (as the companies portray them) or outdated infrastructure? If general increased usage is taxing the infrastructure built years ago by these providers, pricing tiers can only slow the congestion problem. As more people become connected and as those who are connected figure out more ways of using the Internet, such as blogging, and watching videos, TV and movies on sites such as YouTube and iTunes, we would naturally expect more traffic. As the general level of traffic puts the squeeze on, its easy to target heavy users. If you and two friends are sitting on a tree branch that’s about to give way, the fattest friend will get tossed first. Focusing on the fattest friend, though, diverts attention away from the real issue: the cracking branch! Internet providers in the US are fast falling behind the world. Japan has 8 to 30 times faster access that is cheaper. South Korea, Finland, Sweden and Canada all have faster access than we do. Telecommunications and cable companies have incentive to squeeze all they can out of their existing infrastructure, as Mark Lloyd argues. The last mile problem has not been solved except in the rare areas where fiber connections are available. Cable companies, in particular, have every incentive to avoid the competition with its main product that comes from higher bandwidth. Internet providers also built the network with very small upload pipes not anticipating peer-to-peer communication. That new technologies have emerged that challenge the anticipated model of the infrastructure isn’t necessarily a reason to condemn P2P technology or those that use it. Perhaps in the end it is the infrastructure that is the bigger problem.

Much innovation has come out of unrestricted access to increasing bandwidth. YouTube could have never flourished 1) if we were still on dial-up and 2) if YouTube’s first few users (the “bandwidth hogs”) were charged extra. If you start charging by amount used, innovation will slow down. If people have to pay to adopt, technology adoption rates for new high-bandwidth developments will decrease. Some of the high-traffic 5% of users are likely the very innovators who will help carry the Internet to the next level with new, useful capability. When the Internet was created, no one expected people would widely use blogs, Ebay, or Wikipedia. If Internet providers then charged users different rates to use any new features, they could have effectively shut down the significant developments we now enjoy. While Time Warner is only discriminating on bandwidth, it is impossible to know what new high-bandwidth technologies differential pricing will preclude.

More: http://www.internetnews.com/infra/article.php/3722516

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