Published on Save Access (

No Quarter for the Time Warner Bandwidth Rationing Plan

By saveaccess
Created 02/27/2008 - 11:23am

The leaked Time Warner memo [1] of January annoucing a Texas trial to meter cumulative bandwidth usage for new subscribers and charging a levy for excess consumption should be met with outrage and derision. If implemented nationally, such metering will result in another layer of tiered internet access and turn the web into something resembling a cable TV package, both in escalating cost and eventual loss of content diversity. Here at saveaccess we don't usually jump in to the net neutrality fray since others cover it so well, but we were a little shocked when other public interest advocates [2]were quoted as being somewhat accepting of Time warner's proposal as a means to manage the imagined network bandwidth crunch. We are much less accepting and will try to lay out the details here for our PEG supporters. In fact, we think this is a net neutrality issue (last mile), it's also a reason why the FCC and Supreme Court's 'Brand X' [3] decision was terribly misguided and yet another example of a service provider strategically managing scarcity of supply to boost costs to the consumer while increasing corporate revenue.

There is no Exaflood, only an engineered bottleneck in delivery
First, we don't buy into the "exaflood" argument and it's worth remembering that this was partly an invention by a Wall Street Journal writer [4]to attack net neutrality legislation on purely partisan terms back in early 2007. Secondly, industry insiders, particularly engineers who know about these things, [5]continue to speak discreetly about all the unused excess capacity available to today's networks. If ISPs like Time Warner have capacity problems, it's in the last mile of delivery, where their hybrid network design falls short of meeting demand (each drop serves a fixed number of homes with a limited shared bandwidth capacity). The fault lies in their choice of network switching technology based on inaccurate projections of bandwidth demand and more importantly, their reluctant delay in upgrading the network infrastructure of the 'last mile' without first extracting those costs from subscribers. But rationing bandwidth and leveraging penalities on users to generate more profit will not fix the problems in Time Warner's last mile to the home but merely force broadband users to curtail their internet usage while spending more for less.

Layering another myth on the already brimming Exaflood of Myths, Time Warner spokesman Alex Dudley claims that 5% of users account for over 50% of bandwidth usage, though statistics for these assertions are in short supply (another bottleneck it seems). This is merely corporate finger pointing, placing the blame squarely on your neighbor's teenager and away from the corporation's responsibility to provide adequate service - much less the service you contracted to buy. Time Warner currently sells bandwidth according to potential access speeds, but as indicated in the finer fine print, it can't possibly guarantee this level of speed, particularly if all users in a single 'last mile' node are connected and are active simultaneously. And since, these broadband users already pay tiered rates for fictional bandwidth speeds, Time Warner's new metering plan simply adds another tier of charges based on cumulative bandwidth consumption.

The industry will pitch this a supply and demand issue, but in reality the supply is monopolized by a handful of corporations whose bandwidth has mysteriously become as scarce as fuel oil in the winter. Charter Cable [6]has already announced they may follow Time Warner's lead and Comcast likely won't be far behind, in fact Comcast has done similar trials and already goes even further, simply cutting off service to some subscribers when they have reached the company's arbitrary limit, or by throttling certain types of 'suspect' data traffic to and from subscribers (p2p/bit torrent). As Harold Feld has pointed out, Comcast's worst transgression is that they continue to lie about engaging in any of these throttling practices at all. But since Comcast recently earned the title of the 4th largest telephone company - perhaps they've now earned their telco "lying rights".

Who Will Determine the Rationing Limit and Overage Charges?
Time Warner of course. Since broadband internet is classified as an 'information service' there is no regulatory oversight over service packages and pricing structures by any government agency. All trust is placed in the market otherwise known as the 'logic of capital'. According to MultiChannel News, [7] the Time Warner tiers for the trial in Texas will be set at 5, 10, 20 and 40 gigabytes. Pricing levels for those tiers has not yet been determined, nor the overage charges, but speculation is that going over the limit could cost $1 per additional GB (Rodgers Cable in Canada is said to be charging $1.25 per GB, but their cap is at 90GB). Cox Cable already caps bandwidth at 40 and 60GB for their standard and preferred services. Comcast issues warnings then cuts off the service, but won't identify their caps.

Time Warner's proposed low bandwidth tiers are increasingly common usage rates for most users, particularly those that only occasionally use online music and video services, video chat services, online backup and file storage. It should be noted that TimeWarner/AOL offers all of these bandwidth hungry services [8] including radio and TV streaming via AOL, WinAMP and HBO, several download sites for movies/films, free 5GB file storage via Xdrive [9], and video chat services via UserPlane [10]. In short, Time Warner/AOL provides users many ways to exceed bandwidth limits simply using company services. And perhaps that's really part of the strategy, to encourage all subscribers seeking online content to consume as much as the possible from TW sources, but at an increased price. Once this market goal of altering reshaping consumer behavior is achieved we imagine that the bottleneck of the last mile will magically have been alleviated as well.

Incidentally, Time Warner did another two year trial [11] (2005-07) in San Diego in which they offered 75 channels of TV through subscriber's internet connections. The result? Time Warner determined that people really didn't want to watch TV on their PC's (or perhaps they didn't want to watch the same old content on their PC). This trial is significant because it shows that Time Warner can solve the 'last mile' delivery issue - when they want to.

What happens when a traditionally vertically integrated company (Warner Brothers) is also a horizontally integrated beomouth like Time Warner/AOL?
A vertically integrated company controls the production and distribution of product all along the chain. A horizontally integrated company in turn, sells the same product (or a version of it) across several different markets that they have a controlling stake in. Time Warner is both, it produces music, film and TV through Warner Bros., and distributes it through it's own cable/broadcast TV channels and various internet outlets including AOL controlled subsidiaries. In the home, 12.8 million subscribers also pay TimeWarner for cable TV service, and many of those also pay to receive the additional services of internet access and internet telephony. What this means is that you can now pay Time Warner several times to receive the same product, especially if you're one of their internet subscribers now forced to pay additional hidden bandwidth charges.

Take a look at Truveo, [12]the YouTube lookalike gateway for online video that is also a wholly owned subsidiary of AOL/Time Warner . A search for Warner Bros on Truveo turned up over 21,000 downloadable videos, some free (music videos) but also many TV programs feature films available as downloadable rentals. I chose one recent release, the new Harry Potter film (produced by Warner Bros). From the Truveo gateway, I can buy the DVD or rent the film online by downloading a file that expires after 24 hours. If I rent from MovieLink (owned by Blockbuster) [13] the Harry Potter film is 1.3 GB, and costs $3.99 (24 hour download rental). Or I can go to Cinema Now [14](Warner Bros is a content partner), there the Harry Potter film is 1.5 GB and also $3.99 (24 hour download rental). I could also rent through the AOL gateway to Amazon Unbox [15]and the same Harry Potter film there only cost $2.99 for a 24 hour rental but now the file is 2.8GB. You see that with added bandwidth overage charges, coupled with rental fees could easily surpass the regular pricing of $4.99 for Time Warner's cable TV "Video on Demand" service.

Supposing I'm a big fan, I could jump over to the Warner Bros Harry Potter movie site [16] and download MB after MB of flash movies, screen savers, games and other ephemeral which could push me well over my Time Warner Cable bandwidth limit. Factor children in the mix and you could repeat this internet cycle several times. And if you do have children, you probably raced to the theatre to see Harry Potter when it was released, ordering tickets online for a fee through Moviefone [17] (owned by AOL/TimeWarner), then going to the theatre (1 in 9 of which are owned by Time Warner).

But what about Time Warner Cable Offerings?
You may be thinking, why would TimeWarner push up costs for their own online offerings and potentially undercut sales there? First, TW offers the same movie content via their propriatary cable and video on demand services, and they might prefer that consumers pay here instead. If you really want to watch video, wouldn't you be better off with our cable offerings - there you can watch as much as you want for a flat rate (like the internet used to be). Secondly, by forcing these bandwidth charges, the cost of accessing all other online video increases, including that of upstart competitors to TW such as Apple TV, Netflix and Microsoft - none of which have horizontally integrated and propriatary cable systems with which to market video content redundantly. And if Time Warner's cable subscribers still go to the competitors to download movie content, now Time Warner can essentially tax the transport of the goods and still turn a profit.

More significantly, what Time warner is doing here is floating an idea, that internet usage via broadband is no longer an unlimited, always on communications tool. The Time Warner bit meter will be running, counting all those bits coming and going to your computer. Now you'll even be paying to receive all that unsolicited email spam and for all those advertising banners and flash movies that appear on web pages. Many of us remember metering from the days of internet dial-up, the pay by the minute plan, perhaps AOL has been serving kool-aid to the TW executives (not likely). Today, Time Warner is saying, stay online as long as you want, but mind your consumption level and buy the appropriate plan for your household, perhaps get more to be on the safe side - or else.

Time Warner could go one step further, offering users a discounted or free bit rates for content downloaded from within their network of servers. This would be similar to the "friends and families' plans of cell operators who don't count minutes on calls made within the providers network. But to do so would mire Time Warner even deeper in the net neutrality muck, favoring ones own content over a competitors within in the same service would be a clear regulatory violation.

This is sounding ridiculous, surely Federal regulations don't allow such crass corporate behavior
Well, actually yes. Communications Policy in the U.S. has historically only adapted to new technologies without ever evolving the 'big picture'. As a result, broadcast media (radio, TV) operate under one set of regulations, telephone companies under another (common carrier), cables companies under still another (the cable act), satellite TV under yet another and finally broadband or internet communications operate under, well, actually, very little since the Brand X decision. It's more complicated of course, but the point is that a horizontally integrated company like Time Warner (or a phone company) can play each regulatory environment off the other to edge out competitors who are less horizontally endowed. By way of analogy, it's like a poker table where some players are dealt from one deck, while others have access to two or three decks - the later have more aces in the hole.

For Time Warner, this means they can brazenly engage in anti-net neutrality behavior because they are able to play one regulatory schema off another without violating either. Time Warner's 'pay per GB quota system' that discourages users from downloading online video content (rather than just paying Time Warner's Cable for 'video on demand') isn't 'really' a net neutrality issue within the confines of broadband definitions (current ones anyway). Why? Because Time Warner's 'video on demand' is served from 'different' servers to the home on a frequency of bandwidth set aside for cable services, not broadband services. Of course it's the same coax cable, and both may deliver the same content in digital bits, but each are classified as different communications services. Why? Well, because the FCC has determined that Time Warner can charge you twice, once for a cable service and again for an internet service.

Won't other broadband providers use this to compete against Time Warner for subscribers?
Broadband suppliers (cable/DSL) are a duopoly that don't compete so much as they fix prices. If your local cable provider is Time Warner, you're likely to have only one other alternative, the telephone company (AT&T, Verizon or Qwest). You've probably already noticed that cable and DSL internet packages have very similar pricing structure. Should the Time Warner trial go as planned and meet little resistance, the telco's will likely follow suit as well (especially AT&T). Verizon could be the exception, their current FIOS network is based on sounder technology (fiber to the home) and has fewer of the limitations of current hybrid cable systems and an abundance of bandwidth capacity.

What's clear is that Time Warner's trial and the implications is poses, only lead the country further and further away from ubiquitous and affordable high speed broadband. Rather than testing consumer willingness to be swindled, Time Warner and other broadband/dsl providers need to start delivering what they advertise.

What's at Stake for PEG?
Many Public, Educational and Governmental Channels and stations have adopted internet based video as a secondary delivery model. Internet video can be well suited as a low-cost locally based 'video on demand', making essential local content (city council meetings, etc) available to community members at any time. But this is a 'secondary' delivery model, as PEG seeks to meet it's public mandate in as many ways as possible through all available media. PEG is also committed to providing local communities essential local programming at the lowest cost possible (one reason analog carriage for 'basic cable' rates are important - and why Comcast attempt to bump PEG [18] to more expensive digital tiers is also reprehensible).

Many independent producers of public access programming have also used internet video as another means of reaching audiences beyond the local reach of PEG channels. This can create larger audiences for programming that may otherwise not be possible. A number of internet projects have also aggregated these online efforts, Miro [19] for example, now lists nearly 3000 channels of independent video content covering a myriad of issues and subject areas. Audiences are changing too, more and more youth are turning away from traditional commercial media (cable/TV/Radio) and toward more diverse internet sources of content. The significance of these independent channels and new viewing habits to companies like Time Warner are quite troublesome. As a content owner, Time Warner gleans no advertising revenue, VOD charges, royalties or other profit from these internet upstarts - for TW it's a lose-lose scenario.

But this isn't a compelling enough reason to justify metering the internet to conform to 'old media mogul' models. In fact, the opposite is true, we need to encourage and foster this new growth of democratic media and protect it from the handful of media moguls (telcos/cablecos) whose current monopoly on carriage enables them to shut it down. Stringent net neutrality definitions need to be adopted to prevent such behavior, the real competition provided by smaller broadband providers and ISP's needs to protected, and finally, municipal networks should be a mandate and not a public vision perpetually stalled in the courts by cableco/telco lawsuits.

- Michael

Source URL: