Pitchforks in Austin: Time-Warner’s Bandwidth Cap

The fledgling high-tech community in the smokey little hipster ghetto called Austin is apoplectic about Time Warner’s announcement that it’s testing bandwidth caps in central Texas:

When it comes to trialing its metered broadband service, Time Warner Cable’s choice to do so in the tech-savvy city of Austin, Texas, was no accident. And residents may not be able to do much about it.

According to TWC spokesman Jeff Simmermon, Austin’s dedication to all things digital was precisely why it was chosen as one of four cities where the company plans to trial consumption-based broadband plans, which range from 5 GB to 40 GB per month (TWC says it has plans for a 100 GB-per-month tier as well). “Austin is a passionate and tech-savvy city, and the spirit that we’re approaching this (metered broadband) test with is that if it’s going to work, it has to work in a tech-savvy market where the use patterns are different,” he told me.

So far, Austin isn’t impressed, but since the local cable franchise it grants only deals with video, there may not be much it can do. Chip Rosenthal, one of seven commissioners on the City of Austin’s Technology and Telecommunications Commission (a strictly advisory body), hopes that concerned citizens will show up at the meeting it’s holding at City Hall this Wednesday and talk about metered broadband. He wants to get the metered bandwidth issue added to the agenda of the commission’s May meeting as well.

Rosenthal, a contract programmer who likes open source, has a blog where he holds forth on the issue, calling its rationale a series of “red herrings,” and complaining that the caps of the present will hurt applications of the future. This is no doubt true, but ultimately another red herring. The caps of the future won’t necessarily be the caps of the present.

The general theory is that TWC wants to stamp out web video in order to keep TV customers in the VoD fold. I don’t doubt that TWC would like to do that, but I doubt they’re dumb enough to believe they could ever get away with it. Austin is a stoner’s throw from San Antonio, the world headquarters of AT&T and the beta site for U-verse, the IPTV service that rides into the home atop VDSL. While U-verse isn’t universally available in Austin yet, it’s under construction so there are alternatives.

TWC’s CEO has issued a blog post by way of clarification that’s not entirely helpful:

With regard to consumption-based billing, we have determined that as broadband usage and penetration grow, there are increasing differences in the amount of bandwidth our customers consume. Our current pricing plans require all users to pay the same amount, whether they check email once a month or download six movies a day. As the amount of usage has dramatically diverged among users, this is becoming inherently unfair and not the way most consumers want to pay for goods they consume.

Like Rosenthal’s post, it’s true as far as it goes, but leaves runners in scoring position. Here’s the real story, as I see it: while Time Warner doesn’t have a large enough network to peer with the big boys (AT&T, Verizon, Qwest, Comcast, and L3,) it does have some peering agreements that protect it from transit charges as long as they deliver their packets to convenient locations, as well as some straight-up transit charges to pay. Their aggregation network – the links that carry data between the Internet exchange points and their CMTS’s – isn’t fat enough to support full-on DOCSIS 3 usage, and neither is its transit budget.

Consequently, they’re being hammered by the small number of high-bandwidth consumers in their network, and they’re looking to cut costs by running them off. While there are other ways to ensure fairness across user accounts, the cap is the best way to address the fraction of a percent who use something like half their available bandwidth.

TWC is betting that they can find a cap level that discourages hogs and doesn’t bother more typical users. They’re going into an area close to the heart of AT&T with the experiment to get a good sense of where that limit is.

VoD has a little bit to do with this, but not all that much. TWC customers with TiVo’s already have unlimited VoD, and the rest of the VoD they provide doesn’t cost transit dollars, it’s delivered over their local tree. DOCSIS 3 also doesn’t have much of anything to do with this, as it’s also a local service, albeit one with the potential to ring up big transit charges if not domesticated.

To a large extent, ISP’s play a marketing game where they advertise super-fast services that aren’t backed up by sufficient transit or peering to sustain a heavy duty cycle. This isn’t a bad thing, of course, as the efficient sharing of capacity is actually the Internet’s secret sauce. If we wanted peak and minimum bandwidth to be the same, we would have stuck with narrow-band modems on the PSTN. But we don’t, so we have to get hip to statistical sharing of network resources.

I’ll go out on a limb here and predict that the typical Austin consumer won’t switch to U-verse on account of TWC’s caps, but the heaviest users of gaming and BitTorrent will. And I’ll further predict that TWC’s bottom line will be glad to see them go.

The arguments against caps ultimately come down to the assertion that there’s some public good in making light users of Internet access capacity subsidize heavy users. Given that most of the heavy uses are either piracy or personal entertainment, I don’t happen to buy that argument, and moreover I find the alternatives to capping are generally less attractive, as they typically involve duty cycle restrictions of other types. The alternative that TWC should explore is peak/off peak handling that allows downloaders to utilize less restrictive bandwidth budgets at off hours.

I’d prefer to have a network that allowed me to label all of my traffic with the service level I expected, and scheduled and charged it appropriately. We don’t have that network yet, but we will one day as long as neutrality regulations don’t get in the way. Alternatively, a fat pipe to a Tier 1 like Verizon would be a better deal, but we can’t all buy one today either.

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23 Responses to Pitchforks in Austin: Time-Warner’s Bandwidth Cap

  1. George Ou says:

    I agree with your post, but leave the gaming out of the big usage bucket please. Games use between 30 to 150 Kbps.

    There is a new remotely-rendered gaming platform coming out which supposedly eliminates the need for gaming consoles or computers which requires 5+ Mbps. But this is still brand new and it’s not the norm.

  2. Downloading new games takes a lot of bandwidth, but playing them not so much. The Witcher: Enhanced Edition takes 13 GB to download, for example. See: Gamers with Jobs.

  3. Txhillcntry says:

    I don’t download games or movies, I don’t want to have to keep up with another usage amount like cell phone companies have. If I am paying more that’s on me, but if Time Warner implements this change I will change carriers. For a matter of fact I’ve already started my hunt.

  4. Matt says:

    What gets me is that I can watch an hour long HD show on my box — 2 at the same time actually — at about 4 or so GB for an hour of programming (based on my disk usage of the dvr) — but then If I want to instead watch the show from the tv networks website, I’m going to have to pay for it….

    Your explanation about TWC not being able to offer much in the peering arena is the most logical thing that I have heard from anyone.

    It should also be noted that the current Time Warner Road Runner agreement does state that usage may limited by either an amount transferred or by the speed. I called and spoke to someone about this 6 months ago and was told “yes we limit you by the speed we cap your modem at”. I followed up by asking if I can use it at full speed 24/7 and they said yes. Clearly that won’t be the case in the future.

  5. cmt says:

    Under this plan, can I trade the data sent to my tv for data sent to by pc?

  6. JL says:

    Good post – a few random thoughts, which may not yet be well-reasoned…

    The specifics of the TWC example aside, what I see here is natural experimentation on the part of ISPs to arrive at a more fair and sustainable economic model with users, and to do so while they are still profitable and have wide range of movement (rather than limited options near bankruptcy and asking for bailout money).

    At some point, every business has a scarcity of one resource or another. In this case, bandwidth is what is scarce and is rationed to users with differing amounts of bandwidth per second (speed) at different monthly prices. Investing in providing more capacity is a marginal cost for an ISP. So it seems that current flat pricing models do not provide a strong enough signal back to users to modify their behavior at the high end of bandwidth utilization. This TWC example seems like one experiment to try usage tiers as a method to more clearly signal to their users, and it will be interesting to see how it works out.

    Another issue I see that TWC and other ISPs are trying to combat is the perception by some people (with a strong voice and influence) that whatever the peak bandwidth of the connection is, then that bandwidth should be available for use at 100% on a 24×7 basis. I believe there is willful ignorance of statistical multiplexing models in many cases (it is often branded XYZ ISP has “oversold” their network) and that people fail to comprehend that a 10Mbps dedicated service would costs hundreds to thousands of dollars a month. This behavior may well be driven by those with an interest in more cloud-based applications and other “unattended” applications that consume bandwidth of a consistent and ever-increasing basis. It seems normal to me that ISP businesses are reacting to this and trying to arrive at a sustainable economic model that accepts that this is likely to be the norm in a few years time (for the average Joe, not just Valley Sally) – rather than wait a few years and ask for a bailout. Why this healthy, proactive pricing model experimentation/adaptation is so demonized, is beyond me. Business models do not remain fixed in time.

    Lastly, for years, some application developers, particularly those who have apps that use a lot of bandwidth, have decried the fact that their and ISPs’ interests are not aligned — and that this provides motivation for ISPs to block or degrade certain applications/protocols. It seems to me that a flat rate pricing model could well be at the root of this. What is interesting to consider is that variable rate pricing, whether pricing tiers with overages or purely metered, would much better align the interests of the ISPs and the application developers. In fact, the ISPs would be highly motivated to indirectly serve the application developers to an extent well beyond that made possible with current price mechanisms. The alternative to this is for ISPs to seek to charge application developers in some manner, which has been widely criticized (though the Kindle is an interesting experiment).

  7. George Ou says:

    I’ve never even heard of that game Richard, but I guess there are occasional gamers who do download games occasionally. Most of the games on Steam (the most popular gaming platform) are only a few hundred megabytes at most.

    On average, even those heavy gamers who like to experiment with a lot of new games don’t even come within 1/10th of a typical P2P video downloader, though a heavy gamer may often be a heavy P2P user as well.

  8. The Gamers with Jobs examples are all rather artificial. The author claims to enjoy a Friday Movie Night that depends on 8 GB of Hi-Def streaming from Netflix every week, for example. In the real world, this is not going to happen because there’s so little hi-def content on Netflix Watch Instantly that you’d run out of options after two weeks unless your taste in movies is very poor. So the Netflix subscriber who enjoys hi-def is going to order Blu-Ray disks through the mail, like I do.

  9. APL says:

    The problem is not bandwidth caps. The real problem is:

    There is *ZERO* competition in most places.

    Consequently, people can’t vote with their money when the local provider changes their rates or policies.

    As most places have a single provider (mysteriously, the places where good ADSL, good cable, FIOS, and U-Verse overlap seem to be very small), their rates and policies need to be subject to oversight.

  10. Wes Felter says:

    It’s not mysterious at all that the places where good ADSL, good cable, FIOS, and U-Verse overlap are very small; ADSL, FIOS, and U-Verse are all provided by ILECs and each location has exactly one ILEC, so you’ll never see them overlap.

    Given theories of natural monopoly, it’s not clear that profitable vigorous competition is possible anyway.

  11. Most American broadband consumers have several choices, albeit not all of them very satisfactory. The typical situation is one ILEC and the local cable franchise holder, plus a random assortment of wireless options. Where I live, in a semi-rural area on the Bay Area fringe, I can get 768 Kbps DSL from AT&T for $20/mo with no phone service, or up to 50 Mbps from Comcast for $45-$140 per month. There are some alleged wireless and over-the-top DSL providers in the general area, but none serve my block. The figures I’ve seen support the theory that this is a general situation.

    The additional choices are the four national 3G networks, each with a download cap of 5GB/mo and rates comparable to AT&T DSL for an average of $30/mo over the vanilla wireless phone plan. Clear claims to be coming to my area with their 4G/WiMax system but it’s not on-line yet, and I suspect I’ll have access to 4G/LTE before Clear gets running in any case.

    Competition is odd. Comcast was motivated to bump their access speed up to 50 Mbps because of the competition they face from Verizon in East Coast and Southern markets, yet I can get that service even though Vz isn’t active in most parts of California (although they do serve former GTE territories such as Santa Monica.)

    I don’t think lack of competition is really the problem, it looks to me like showing a good face to the capital markets is what it’s mainly all about.

  12. APL says:

    I, of course, was being facetious with the idea that it is “mysterious” why the good broadband options hardly overlap.

    If you people think most American’s have good choices, open your eyes.

    Even in a place like San Diego, about half the city has exactly two providers. The rest have one choice. If you are in the burbs like Poway or Santee, you have one choice. Even if you have a choice, you probably can’t beat 10Mbps down/1Mbps up (and that is only offered if another service to the area forces them to) *for any amount of money* short of a frac-T3.

  13. SBass says:

    This is about greed, pure and simple. TWC just wants more money, so they’re looking to the outdated and universally loathed cell phone style communication plans. Why not leave the current plans alone, and instead of capping users who download more, give people who don’t download very much an alternative plan that is cheaper. Not everyone who downloads files is watching movies or shows. The assumption that everyone who uses high bandwidth on a network is a pirate is pretty crass to me…

    I signed onto TWC for one of their two year locked guarantees. I’ll probably be breaking that contract and searching for a new company to provide my cable and internet access. Lord knows AT&T isnt the easiest place to deal with, but I’ll take their fussyness over a cap on my internet usage anyday. Most of my friends feel the same way.

    I hope TWC loses a big chunk of business over this. For a lot of people, this isnt even about how much the cap will really affect them. It’s more about sitting and watching your services dry up just so big wigs can report fatter earnings to their stockholders.

  14. TWC is in business to make money, and is definitely not a charitable concern. We have no argument over that, SBass. The only question on the table is whether there’s a reasonable connection between pricing models triggered by usage and the costs of running the underlying infrastructure. A number of neutralist wags have suggested that Internet access should be considered something like a utility. While that notion has some problems, if we were to adopt it we would have to concede that usage-sensitive billing is the norm for utilities; the only exception is sewage, and we don’t want to stress the Internet’s resemblance to that system.

  15. Brett Glass says:

    All Internet providers — Time-Warner included — are experimenting with ways to deal with the fact that there is a continuum of users, ranging from low bandwidth, low impact users to infinitely greedy bandwidth hogs who will break the bank and cripple the network if allowed to do so.

    The low end user fits just fine into an “all you can eat” flat rate model, while the bandwidth hog fits better into a “cost plus” model in which he or she pays the actual cost of the bandwidth that is used plus a reasonable markup. The trick is to design a pricing model that draws the right curve between these two extremes.

    A “cap plus overage” pricing model is perhaps the crudest of these; the curve is flat up to a certain usage and then takes off at a steep slope. Pretty much everyone wants the curve to be flat at the low end (the idea of paying a fixed price for a reasonable amount of usage is very appealing), but folks disagree as to what should happen at the high end. The bandwidth hogs, of course, want the price to be the same to infinity with no throttling or restrictions, no matter how economically unsustainable that is. Providers like myself, who cater to consumers who like things to be simple and clear, would much rather keep the price fixed and throttle when bandwidth is overused or abusive applications are run. But the FCC — deluged with misinformation and alarmism by lobbyists — was persuaded to condemn this pricing model, no matter how consumer-friendly it is. This leaves models in which pricing increases after a threshold is reached — and fuels endless debates about where the threshold should be set and how the curve should go after that point.

    My view is that since there is likely never to be agreement on the exact shape of the curve, providers should be allowed to experiment. The market will determine what consumers like most.

  16. James says:

    “Providers like myself, who cater to consumers who like things to be simple and clear, would much rather keep the price fixed and throttle when bandwidth is overused or abusive applications are run.”

    This sounds fine, so long as ISP’s stay out of regulating what applications are abusive. Much better than the “cap plus overage” model.

    It would also be nice if ISP’s shared some data with consumers describing why this obscene price hike is necessary, “bandwidth hogs” notwithstanding.

    Best,
    Jim

  17. JL says:

    “My view is that since there is likely never to be agreement on the exact shape of the curve, providers should be allowed to experiment. The market will determine what consumers like most.”

    I agree, and it seems as if ISPs are attempting to experiment. Unfortunately, some loud voices have been raised, which do not appear in any way to represent the majority of users. Ironically, these self-styled defenders of the common user may actually have a negative impact on these users. In the absence of an ability to fully and freely manage a network, variable pricing schemes are developed whereby heavy users carry the burden of higher costs. Should lobbying groups make that path an impossibility, then the simple result is likely across-the-board price increases on all users, is it not?

  18. Pierre says:

    Don’t agree with you–it gives no explanation for the huge jump in fees for the “40 gig” tier, which is fairly average usage. Nor for the ridiculous $25 for a measly 5 gigs–if there’s anyone using that little, they should just use dialup! No, this is more the price-gouging that always happens with monopolies.

    After the insult of cutting so much service without a corresponding reduction in rates — remember the gratuitous removal of KLRU2 and replacement with a blue vacant screen? They told me it was necessary for the bandwidth, yeh, right.

    They tried the prioritizing, lost out when everyone wrote Congress yelling net neutrality. Now they’re trying this. We need to nix that, too.

    But when I think of their CEO getting 25.8 million this past year I become positively apoplectic! I’m not a big-time user, but I’m looking seriously into how to cut all ties with this rotten company.

    As for the disabled whose only connection to the outside world is the internet, congratulations TWC for totally isolating those people.

    What goes around comes around.

  19. Brett Glass says:

    @James: ISPs don’t want to get involved in “regulating” specific applications. However, some behaviors on the network — regardless of what software exhibits them — are abusive. An example: attempting to circumvent the fairness mechanisms of TCP by opening dozens of sessions, and thus seizing priority over other traffic, is an abusive behavior. While BitTorrent happens to be the “poster child” for this sort of abuse, any other application that exhibits this behavior is likewise being abusive. So is maintaining a duty cycle on an oversold connection which is more than 90% of the oversale ratio. The latter is harmful because it runs up expenses which exceed the cost of service (preventing the service from being economically sustainable). And if it is practiced by more than a few users of the network, it can harm quality of service.

    It’s also worth noting that for most users, Time-Warner’s new pricing scheme constitutes a price reduction, not a price increase. It’s giving users who do not use excessive bandwidth more bandwidth for their flat rate.

    @JL: Jason, you’re absolutely correct. ISPs don’t know what the fairest pricing scheme is, because there’s a “Heisenberg uncertainty principle” at work here. Once they set a new pricing scheme, it influences user’s behavior (most likely over several months) and only after that can they tell whether it’s working or whether there’s some unfairness left in it. But hopefully, over time, they can interpolate on the best one. (This is a problem in the field of “operations research,” in which one studies how to optimize systems by exploring a complex “solution space.”)

  20. Pale says:

    How do you account for the incredible fiber speeds seen in Japan and South Korea straight to home at 40USD/month.

    American telecos have taken so many tax breaks to modernize the network and yet here we are at these 1990s style caps.

    All I know is my friend who lives on an ISLAND in a very rural part of Japan pays less than I do for TW and gets 5x the speed and that is messed up.

  21. mathew says:

    If Time Warner are having to pay for transit, why don’t they pass those costs on, instead of charging a ludicrous $1/GB?

  22. JL says:

    @Pale “How do you account for the incredible fiber speeds seen in Japan and South Korea straight to home at 40USD/month. ”

    POPULATION DENSITY!! It’s cheap and easy to build fiber into densely populated areas, not the country we live in.

  23. Brett Glass says:

    @matthew: Time-Warner (or any ISP) isn’t just paying for transit, though that is an expensive component of their costs. They’re also paying a backbone provider. And since the Internet has “rush hours” (the busiest time of day is “prime time,” when people all seem to want to start streaming video or browsing at once), they have to buy and provision enough capacity to keep up with the peaks in demand.

    $1/GB is actually pretty close to the incremental cost of pumping another gig of data through the system during “rush hour.” Think about it: you have an hour and a half to get that gigabyte through the pipe to the user who’s streaming the movie. That’s 8 billion bits in 90 minutes. That means that you have to add another 1.48 Mbps — about another T1 — of capacity.

    What does this cost? On a monthly basis, this much bandwidth costs $5.50 if you are co-located at an Internet peering point. The cost is about $30 if you’re a well connected cable provider with a leased line into that peering point. It costs you$148 if (like me) you’re a rural ISP paying $100 per Mbps for bandwidth; and $450 if you’re a rural ISP in some other areas of America where the only way to get bandwidth is via expensive bonded T1 lines.

    But back to Time Warner’s case: the $30 divided by 30 days is $1 per GB — exactly what Time Warner is charging.

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