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ACA claims metered pricing is the only sustainable pricing model

Consumers continue to be outraged when cable companies try and move from flat fee models for internet access to tiered pricing plans based on usage. Early dial-up ISPs tried the pay per usage plan and found across the board that unlimited usage scenarios were much more popular with customers.

Today, broadband connections around the country for the most part are unlimited and users can download as much content as they want (in theory). The reality is that most ISPs today already attempt to throttle users who use what is deemed excessive bandwidth. At the same time, many ISPs are pushing new tired pricing plans that force users to pay significant fees for each gigabyte of data downloaded or transferred after what are typically very low monthly allotments of bandwidth.

Time Warner was the most recent large ISP to announce trials of tiered pricing that would have seen customers paying $150 per month for unlimited bandwidth as opposed to the roughly $40 per month an unlimited plan costs today. The outrage from customers and lawmakers was much stronger than Time Warner had anticipated and the company announced that it would be dropping its tiered Internet pricing plans for now.

According to the American Cable Association (ACA), metered bandwidth Internet pricing is coming and will be a necessity. According to Patrick Knorr of the ACA, his company, Sunflower Broadband, is already charging customers metered rates for internet access and has been doing so for several years.

The ACA argues that metered pricing is going to be a necessity as demand for bandwidth increases with the adoption of high-bandwidth video services. According to ACA chair Steve Friedman, the metered charges are not intended to inhibit content, but to ensure quality of service for all customers using the service. Friedman says he isn’t sure that Time Warner did a good job explaining that. That rationale is the same used by cable companies when they tried to block certain types of content with the claim that it was to prevent piracy and offer quality service to all users.

ACA President Matt Polka says that while metered internet is in early development, that outcome is certain. Polka claims that there is no limit to the build-outs that ACA members have to do to meet customer demand and with new services coming ACA member simply won't be able to support all of that at $40 per month.

Polka likens internet usage to his heating bill saying that he would like to pay the same amount year round, but in the winter when he uses more, he has to pay more. If Polka's heating company suddenly decided that he was only allowed 4 cubic feet of gas before an overage charge of $2 per cubic foot was assessed to support the need to install more gas pipelines to "ensure quality service," he might feel like the majority of Internet subscribers do.

Knorr insists that bandwidth-based billing is the only way to manage infrastructure and that it is simply a case of raw math that the infrastructure to accommodate the growth in HD downloads isn’t there at this point. He continues saying that the only way to rationalize a business model is to put some of the responsibility on the subscriber.



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Utilities
By vgermax on 4/29/2009 11:21:09 AM , Rating: 2
It's curious that he would reference utilities in his argument. It shows a fundamental lack of understanding of how utilities function. The current push is actually for utilities to move away from consumption rates, to a fixed rate pricing scheme.




RE: Utilities
By djc208 on 4/29/2009 11:57:57 AM , Rating: 2
I don't know about the current push, but lots of utilities do offer plans to spread out the peak season costs over the entire year. I figure it has to benefit both groups since the company has a more consistent income through the year while the consumer gets a more consistent bill. The company still makes their profit, and the consumer doesn't have to deal with a bill that doubles or triples at certain times of the year.

It wouldn't bother me as much if you knew that the extra money from this scheme was actually going to improve or expand the infrastructure, but most of it will probably just go into investors pockets while we get less and less bandwith over an increasingly congested system.


RE: Utilities
By afkrotch on 4/29/2009 2:42:36 PM , Rating: 2
Sounds like German billing. I have a fixed bill for electricity. Whether I use more or less, doesn't matter. Then, at the end of the year, I am either in the positive or negative.

I hate this kind of billing. If I overpay, that means the money that could have been sitting in my bank acct, making interest, is now sitting in their bank acct, making interest. If I'm left in the hole, I could be left in a very huge hole. One to break ppl's pocketbook.

I'm usually the former. I'm paying 120 Euro a month. I would much rather they came out, checked my meter, and charged me for what I use. Then I at least have a vague understanding of how much electricity I am using and can adjust.

I don't think this option works for something like an ISP, as they aren't digging up the ground, burning coal, or whatever to get me bandwith to use. Also, I feel the same way about their profits. Odds are pretty low they wouldn't blow a lot of cash to improve/expand their infrastructure.

I don't ever understand why they don't. If you provide me with excellent service and support, I'm more inclined to look at your other offerings. Provide me with crap, I leave and never come back.


RE: Utilities
By mcnabney on 4/30/2009 10:52:29 AM , Rating: 2
Your meter will display a counter of KW/h. Just read your own meter and do the math. I don't know how much electricity costs in your area, but it usually ranges from $0.08 to $0.15 per KW/h.


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