When it comes to the future -- the future of content distribution, the future of the Internet, the future of technology -- no one is exactly sure what will work and what won't. The best way forward is experimentation: a marketplace of business models.
Hulu versus Netflix, iTunes versus Rhapsody, fiber to the home versus Docsis 3.0, LTE versus WiMax: Only time will tell which technologies work best for consumers and will thrive.
Even within a single company, experimentation is necessary for figuring out what works best. Should an ISP offer a single, flat-rate price for broadband? Should it consider double- or triple-play packages? Should a telecom company offer its own IP voice package? Should a cable company follow suit? These are just some of the many questions companies consider as they determine how best to invest, expand, and innovate. The fact that they have been relatively free to experiment with these options is part of the reason there's so much choice for consumers.
That's why it's a shame to see that Time Warner Cable Inc. (NYSE: TWC)'s recent plan to roll out usage-based broadband pricing in additional test markets was hobbled by political opposition before it was able to reach consumers. (Tests in Beaumont, Texas, underway since last year, have continued.)
Two groups opposing the plan most aggressively were Free Press, which petitioned Congress to investigate the "price-gouging scheme," and Public Knowledge, which called Time Warner's decision to shelve the plan "yet another victory for the netroots!"
But that was a change in tune for both organizations. Last year, Public Knowledge's Gigi Sohn said she was "delighted" about Time Warner's test of metered billing because "it provides both transparency and certainty" for consumers and "makes unnecessary controversial 'network management' decisions." Free Press's Tim Wu had a similar take, telling The Washington Post, "I don't quite see [metering] as an outrage, and in fact [it] is probably the fairest system going."
It's certainly the fairest system going for many Internet users.
One of the more interesting things Time Warner planned to offer in the new test markets was a 1-Gbyte consumption tier (representing speeds up to 768 kbit/s) for just $15 a month, with only a $2-per-Gbyte overage fee. For people who only use the net at home for light Web surfing or email, this would have been a far preferable option to a $50 per month all-you-can-eat buffet of Internet downloading service.
As Time Warner pointed out, nearly 30 percent of its customers download 1 Gbyte or less per month. Those customers could have saved $420 a year by only paying for the bandwidth they consume, rather than subsidizing heavier users. And for only $10 more a month, users could have had a 10-Gbyte plan, saving $300 a year over the one-size-fits-all approach.
But apparently those savings constitute "highway robbery."
Sure, there may have been kinks in the plan that needed ironing out -- such as finding the right service tiers and making sure that the pricing doesn't discourage the use of new, innovative Internet applications; under the fiery rhetoric, these were the critics' main concerns. But one of the best ways to figure out where the problems are would have been to include additional test markets, which is what Time Warner proposed.
It's unfortunate that so-called consumer advocates reflexively criticized the plan without considering its potential benefits before Time Warner could even finish figuring out how to bring the best set of options to consumers.
It may very well be that Time Warner's plan for usage-based billing wouldn't have worked out. But consumers -- not professional advocacy groups and politicians -- should be in the driver's seat picking winners and losers in the digital society.
— Mark McKinnon has worked for both Democratic and Republican political campaigns, including Texas Governors Mark White, Ann Richards, and George Bush, Louisiana Governor Buddy Roemer, and, in 2006, Senator John McCain's candidacy for President. He is a co-chairman of Arts+Labs and serves on the board of the Lance Armstrong Foundation.
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