Metered bandwidth pricing for Internet service is coming, said cable executives gathered for the American Cable Association's (ACA) annual summit outside Washington Tuesday.
Patrick Knorr of Sunflower Broadband, currently Ex-Officio chair of ACA, pointed out to reporters during a press conference that his company has been employing metered pricing for the past four years. Current ACA chairman Steve Friedman says his company, Wave Braodband, is gearing up for metered pricing. It has not been deployed yet, he said, while the company focuses on informing customers about it.
Both were joined by ACA President Matt Polka in arguing that such pricing will be a necessity going forward as they become broadband companies rather than just cable companies and the demands for delivering high-bandwidth-consuming video and other services increases.
Friedman emphasized that they were not out to inhibit content but to insure quality service for their customers, saying he wasn't sure Time Warner had done a very good job of explaining that. Time Warner caught grief from some lawmakers and advocacy groups over testing metered pricing, and was forced to discontinue testing, at least for now, though it also said metered pricing might need to be the model of the future.
Polka said metered pricing is in the early stages of development, but that "the outcome is certain." He said there was no limit on the build-outs that his members have to do to meet customer demand, and with new services coming down the pike, his members won't be able to provide all that at $40 per month. He said he would like to pay the same price for heating bills all year round, but that he has to pay more in those Pittsburgh winters when he uses more.
Knorr added that the grandmother who just wants to read e-mail should not have to subsidize the HD movie afficianado or the college kid who wants to download a bunch of movies to watch later. Knorr says his company currently caps low- end use at one gig, with a $2 per gig overage charge, though he says he is reviewing that, and adds that it can be as low as 50 cents per gig for blocks of extra bandwidth.
Knorr says bandwidth-based billing is the only way to manage infrastructure. He says that its simply a case of raw math that there is not enough infrastructure to accommodate the growth in HD downloads. Unlike satellite, broadcast, and cable, the Internet is not a particularly efficient way to deliver that high-res video, and there has to be a way to rationalize his business model by putting some of the responsibility on the customer. Knorr suggested that if the government stepped in to intervene in metered pricing, he could hear customers of the future complaining that they only wanted to pay for what they used. "Does that sound like an argument you have heard before?" he asked reporters.
A flat rate, he said, "is not a sustainable business model." "A la carte for the net," he said, " is consumption-based billing."
ACA members are in town for some facetime with legislators and regulators, where Polka said one of the conversations would be about metered pricing.
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