Sadly, the biggest story to hit Austin yesterday wasn’t an April Fool’s joke – Time Warner, the local cable provider, announced that tiered pricing and bandwidth caps would be coming into effect virtually immediately, for Austin/San Antonio TX, Rochester NY, and Greensboro NC. It’s no coincidence whatsoever that all of these markets are effectively Time Warner monopolies (AT&T just ran U-Verse, which is essentially DSL that can run at cablemodem-equivalent speeds, to our neighborhood last month, in what now seems spectacularly good timing). That sound you hear is everyone dumping Time Warner in Austin for anything remotely approaching internet service… U-Verse, Grande, DSL, carrier pigeon, whatever. Interestingly, J. talked to someone at Time Warner who insisted that Business Week was liars liars pants on fire. Guess they didn’t get the memo from their CEO.
By charging a premium to the heaviest broadband users, much the same way cell-phone providers collect fees from subscribers who exceed their allotted minutes, Time Warner would upend a longstanding pricing strategy among Internet service providers. Typically, phone and cable companies charge flat fees for unlimited access to the Web. “We need a viable model to be able to support the infrastructure of the broadband business,” Time Warner Cable CEO Glenn Britt says in an interview. “We made a mistake early on by not defining our business based on the consumption dimension.”
Which is more than a little ironic, given that the now parent company of Time Warner gave up “defining their business based on the consumption dimension” in 1996. Clearly, a lot changed in 13 years! What could it be?
Well, the announced bandwidth surcharges ($1 per gig over the limit) hold a clue to that. They are ridiculously punitive – the hosting company that I use for this blog charges me less than 10% of that. I guess those bits cost a lot more when you use them at home. Or, more to the point, if you use more than Time Warner’s top-end cap of 40GB a month, or the probably ridiculously priced supersize option of 100GB a month, or the literally ridiculous budget cap of 5GB a month – Time Warner (and other ISPs) literally do not want you as a customer. You cost them money, because you actually use what you buy. One of the longest running dark jokes among MMO live teams is that MMO publishers would make money by simply banning everyone who logged in. Once you filtered out the customers that actually *played*, your support costs of the remaining people who rarely check credit card statements would drop dramatically! Except with ISPs, it’s not dark comedy – it’s a business model.
So let’s look at typical use cases.
The MMO Player – you don’t watch much online video (unless it’s raiding strategies), you don’t download games or video, you simply play – oh, just to pick a random example, World of Warcraft AND NOTHING ELSE. The good news is that most of the proposed bandwidth caps won’t affect you, because MMO networking is written in such a way that the game is theoretically playable over a dialup modem (though this becomes more and more theoretical a proposition as time passes). So, a good reasonable estimate is that, playing WoW (or Call of Duty 4, or any other online game) 20 hours a week, you’d use about 700 MB in bandwidth. Add in Ventrilo (which is also optimized for bandwidth usage) and the occasional Youtube rickroll and you’re probably at around 2 GB a month of bandwidth usage. Congratulations! Time Warner likes you. You’re well behaved. You’re also an outlier, because outside of online gaming, almost no one uses that little bandwidth any more. And truth be told, how many MMO players do YOU know that JUST play MMOs? Be honest, you have those Naruto torrents running, don’t you.
The Entertained – you play the occasional online game, but mainly your time online is spent watching yesterday’s Daily Show snippets and the occasional program on Hulu. Well, you’re in trouble, because that whole reason you got a cablemodem to begin with – the ability to watch streaming video in something approaching high definition – will break your bandwidth bank. About 7 hours a week of online video will break the 40GB limit.
The Steam Customer – oh, you’re so, so screwed. The last game I bought from Steam – Empire: Total War – weighs in at 14.8 GB. Most AAA games today are of a similar download size. Gamestop is dancing in their used tennis shoes, because online game purchases just quit being cost-effective.
Bill Harris has a piece on his blog on what this is really all about. Money. And not even yours, really.
When in doubt, look for the deep pockets, and in this case, those pockets belong to the content providers. Video-on-demand has absolutely EXPLODED in the last two years, and new services seem to get added daily. Content providers are stampeding to get all of their content online and watchable on demand.
Particularly interesting is ESPN360, which offers an incredible amount of content, both live and via replay. Well, maybe:
ESPN360.com is available at no charge to fans who receive their high-speed internet connection from an ESPN360.com affiliated internet service provider. ESPN360.com is also available to fans that access the internet from U.S. college campuses and U.S. military bases.
Hmm. So if my ISP isn’t an “affiliate,” how do I get access?
Switch to an ESPN360.com affiliated internet service provider or to contact your internet service provider and request ESPN360.com.
Oh, and guess what–Time Warner, among others, isn’t an affiliate.
Oh, yes–it’s war.
I think Time Warner has very little interest in us. What they’re interested in is getting money from content providers who are now finding that on-demand video can be very profitable.
This is, of couse, similar to Time Warner (and every other cable company) charging its broadcasters as a business model. Why should the Internet be different? Why indeed. Like Bill Harris, I look forward to the blowback as Time Warner discovers exactly how many ways Austin is a connected town (hint: it’s not just Internet cabling). Because the alternative is fairly grim: the end of the Internet as a content delivery system.