Tiered Cable Pricing Coming To Your Neighborhood

I was reading an interesting article on business week discussing Time Warner, and other cable companies, testing tiered pricing for internet usage. It mentions that Time Warner specifically is going to be offering customers predefined levels at different cost points consisting of 5, 10, 20, and 40GB levels all costing from $29.95 to $54.90. To top that off they are going to charge an additional $1 per gig of overage each and every month for anyone going over their allotted limit.

I know WHY the cable companies are doing it. It’s simple really. More and more people just aren’t watching television. They’re simply becoming more immersed, by the day, in online activities and/or they’re watching television online at places like hulu. So while their overall viewership declines, so does their ad revenues, but at the same time their broadband usage is increasing exponentially and they’re not seeing a dime from it. That makes them angry… and as you can see from the above pricing you wouldn’t like them when they’re angry. It’s not that they turn green, it’s just that they want more of it.

But here’s the rub. When you have a recession, or even a depression, the first thing people do is ditch luxury items. Vacations, boats, nicer cars, fancy clothes, etc… Lastly when things get really bad (IE NOW) they start to cut out things like auto insurance, eating out, and yes Cable television, all of which has already started happening. Imagine if you now hit people strugging to pay that bill with a bill that is double or triple in size?

Now maybe, just maybe, it’s because I’m in an industry often dictated by the use of broadband, but as I was reading this article a lot of things occurred to me (as well as some of those people that commented) that apparently didn’t occur to ANYONE at Time Warner, or any of the other cable companies for that matter. What’s the first thing that occurred to me? That this is the WORST idea in the HISTORY OF IDEAS. I’m not sure if there is any possible way of honestly putting that in a more constructive way. I can think of a lot worse ways, but for the sake of argument, none more constructive. The ramifications to the cable companies will be devastating to say the least, but apparently they cant see that??

Problems with Tiered Cable Internet Pricing

• A Great exodus of consumers away from cable to more suitable alternatives
• A short term blow to the broadband development community
• A decline of user experience on sites across the web

The Great Exodus

So I get it, I really do. Cable companies are losing viewers and their costs are increasing, from that stand point it makes perfect sense to find new sources of revenue.  The problem comes from the fact that once you go to make a move such as this where you start taking more and more money from those who can barely afford it (or who can’t afford it but they are doing the monthly bill shuffle to pay for it) you are going to end up losing customers in hordes who will find a more suitable alternative or just simply go without.

Why would you pay $29.90 for 5 gigs of data transfer when you could pay $19.95/$29.95 for unlimited data transfer on DSL? Verizon FIOS is $49.95 at its low end, but it gives you speed as fast as you will ever find with cable. I’m in fact pondering their 50mbps for the home office, something cable doesn’t offer, but imagine paying the same price for that 50mpbs dl speed just because you streamed a total of say 10 movies in a month and checked your email at 2-8mpbs. To me there really is no comparison at all.

If I were a phone company, directv or any other satellite provider, I would be sitting back and smiling right about now as the cable companies would be doing all the work for me.

Broadband development / Decline of the User Experience

Imagine a world where YouTube has nothing more than 10 second videos. Facebook doesn’t allow, well anything that makes Facebook, Facebook. Hulu along with Netflix streams are ancient history. Say goodbye to online gaming.  Do you like playing WOW? Not anymore you don’t.

While I predict there will be a hefty toll that the cable companies will have to pay for this massive oversight into what the consuming public wants, it will take time. You see they are rolling out this program slowly, going from one community to the next, creeping along to see just how much usage is being used and how much they will actually end up making.

Lets take Hulu for example and Time Warner’s new $29.90 plan. Do you like Heroes? House? Any other live hour long show? You wouldn’t dare watch them now. Why? Because you will most likely go over your monthly usage in that one hour session. Watch two shows? One less meal this week. Four or five shows, or music downloads? Time for a second job. Use the internet as most families currently use it? You’ll need a second mortgage. Run a company online? You can always sell a kidney…

Now that’s bad for the consumer, but what about Hulu, and companies like them, who survive based on the very few commercial breaks that it plugs into the shows? Unfortunately it would most likely mean the end of their service and services like theirs. It could also just mean a scale back on growth (depending upon cash on hand) until more people abandon cable in favor of unlimited alternative broadband sources such as DSL, FIOS, or satellite. But can these companies survive during that time? Really only time will tell.

The user experience, at least those on cable, will definitely be altered. For example, having to pick and choose which sites you can go to based upon how much bandwidth you will use. It could severely stunt growth and development of many online communities.

When you stifle growth online you stifle the economy and creativity. Imagine all flash websites essentially being eventually banned by the cable companies because it’s too intensive to DL the file. Ok, ok, in some instances that’s not that bad of an idea, but losing freedom of choice and experience always is. It really becomes a slippery slope that we are working with when you start being controlled on where and when you can go someplace and how much time you can spend there.

It’s this kind of “thinking” and management that makes it crystal clear why we are in the mess that we are in now.  After a move like this I see “bail out” in the very near future.