The Problem

Time Warner has a few problems.

The first and most important is their bandwidth capabilities.  As my good friend Brion mentioned recently, Bandwidth is a measurement of speed, it is NOT a measurement of consumption.  It’s a simple fact that the speed you get from Time Warner is shared and therefore even though you pay a premium price for 10Mbps DOWN and 384kbps UP you’ll be lucky if you get half that at prime time.

The plain and simple truth is that Time Warner has oversold the bandwidth they can provide.  At the same time they’ve been slow to react to the increasing market demand.  Rather than concentrating on decreasing the number of users per node, they’ve concentrated on improving their end user speed ratings, which is nothing more than a marketing gimmick.  This has resulted in increasing the demand and a false representation of their bandwidth capabilities. This comes at a time when they should be decreasing the burdon on their network in order prepare for the future.

And that’s only the first problem.

The second problem is that Time Warners’ primary source of revenue is dying.  Mainstream media is slowly but steadily moving online.  Hulu now provides most of the same content you can get from network television, Netflix now allows you to stream movies and television shows directly to your PC or TV and over the air HDTV is of superior quality and easy to get.  Time Warner, and cable TV companies in general, are behind.  They’ve chosen to hold on to their old business plan instead of moving into the 21st century.  The lack of progress Time Warner has shown in adapting to their new environment reminds me of Kodak’s slow progress in moving into the Digital era.  It almost killed their business entirely and it will destroy Time Warner unless they do something.

The Descision

Time Warner has made their move.  They’ve decided to put the burdon on us, the consumer, and carry on business as usual. Everyone is probably aware of their tiered bandwidth plan by now and that’s only the first step.

Time Warner is capitalizing on the direction the world is headed in.  They recognize that everything is becoming digital.  They recognize that their current business model is dying.  Getting their pricing plan in place now puts them in a perfect position to drastically increase their profit margin in the future.

In a time when bandwidth and overall networking costs are shrinking, and the cost of running the fastest network on the planet is only $20 for each household passed…Time Warner is failing to produce.  They haven’t announced Docsis 3 for any of their markets and they haven’t decreased the households per node to a reasonable level.

Time Warner Cable’s chairman and chief executive recently stated:

the Internet as it exists today – even our networks … will require an enormous investment … a tiered approach is one way to raise that additional money

It seems to me since Time Warner is posting record profits of $1.07 billion they could already be investing in improving their network, without pushing the cost on the consumer for something they should already be providing.

The Effects

The effects on your pocketbook WILL be drastic and Time Warner WILL make more money. Lots more. They’ve reported that 14% of the customers in their first test (in Beaumont Texas) went over their limit and were charged overage fees. What they’re NOT telling everyone is that the trial in Beaumont was for new customers only. So, of new customers approximately 14% received overage charges. Of those that received overage charges Time Warner has stated that the average overage was approximately 19 Gig which equates to $19/month (Business Week Article). Remember that this was Beaumont Texas which has a total 44,361 households according to the 2000 Census. Compare that community with the Communities they’re rolling the tests out to now and you’ll have a much different picture. In Rochester NY the numbers will be far higher. The High Tech community is booming here and with the number of Technology School graduates in the area the cost for consumers will go through the roof.

Innovation will be stiffled.  Once the usage of bandwidth is being tracked and billed people will think twice about networking every device in their home.  They’ll think twice about using services that keep their computers synchronized with other computers outside their network.  They’ll think twice about running new bandwidth intensive applications such as new video streaming systems.  Whether Time warner likes it or not this IS the direction the rest of the world is going.

Families with kids (especially teenagers) and small business owners will be hit the hardest.  These days some teenagers spend more than half of their life online.  Sites like Facebook & Youtube consume enormous amounts of their time and their parents bandwidth.  Lots of teenagers have turned into minor stars as a result of these sites.  If the amount of time they are allowed to spend on these sites is rationed it’s likely some of these emmergent stars would never get started.

Small business owners, specifically those who work from home, such as photographers and videographers need to download and upload hundreds of gigs of data on a monthly basis.  Will Time Warner require these people to limit the number of clients they can help in a given month, limiting the amount of income they can generate?

Other Options

Time Warner has other options they just don’t like them. 

To immediately solve the problems they could drop the speed of their average customer.  They obviously wouldn’t like this idea because it’s a marketing and public relations nightmare.  They’ll get complaints left and right and they’ll be seen as the underdog in a market they currently dominate (fictitiously).  What this would do however; is put less stress on their network and give their customers a more consistent speed rather than the rollercoaster they have now.

Rather than tiered bandwidth usage caps they could implement more bandwidth (speed) tiers.  Currently they have 2 levels in the Rochester area.  Standard (10Mbps) and Turbo (15Mbps).  Since the average customer probably wouldn’t even notice, why not place them in a lower tier, say 5Mbps or even another optional 1Mbps?  This could temporarily solve their current problems while they take the time to improve their network.

To fix the problem in the long term they need to improve their network.  They need to begin the process of rolling out DOCSIS 3.  Upgrading is a one time cost.  If their billion dollar (net) business isn’t profitable enough to do this, then give the consumers an option to foot the bill themselves.  I’d gladly spend a small amount of money to upgrade the connection to my house to the 150Mbps that japan is getting, especially if it’ll only cost me $20.   They’re already profitable now, even if they foot the bill themselves they’ll be profitable after.

What to do Now

We need compitition.

Fortunately Frontier is taking the recent announcment of tiered broadband usage caps as an opportunity to push their own unlimited connection.  This is good news.  It means there’s a chance.  The unfortunate part is they are the only competition and they have a few large downfalls.  One, you must have a landline.  Two, your speed can vary greatly, depending on your distance to the closest node.

To really give Time Warner a run for it’s money we need FIOS.  Unfortunately Verizon does not have a connection to the main Internet Pipe in Rochester.  Rochester’s telephone network is owned and operated by Frontier and in order for Verizon to setup shop they’d need to spend an extreme amount of money to setup a main hook into the Internet backbone.  Essentially Verizon has no reason to set up shop in Rochester at the moment.

One of the best ways we can combat the plan Time Warner has put into place is to get government involvement.  Write to the leaders in Rochester, call the Mayors Office ((585) 428-7045).  Tell them to sponsor infrastructure improvements, give tax breaks to new providers that come into the area, give breaks to companies that improve their abilities etc.  Anything the local government can do to improve the Internet infrastructure will be a long lasting and visible improvement which we can see a real Return on investment, unlike the Renaissance Square (which likely won’t make any more money for the city).

Call and write to Time Warner.  Tell them how you feel and that you understand that they need to improve their network, but placing a residual burdon on their customers is not a good way to go and will only hurt them and us in the long run.

Whatever you do, don’t stand for it.  If it comes to it, vote with your pocketbook and switch from Time Warner, even if you’re not hitting their highest cap you will eventually and let them know you won’t stand for it by no longer doing business with them.

Visit sites like StopTheCap and get involved!

DO IT!

Whether you think so right now or not, this is important.  Internet usage is only getting started.

Time Warner Resources

• By Phone: (585) 756-5000 or toll free 1 (800) 756-7956
• Chat Online
• By E-mail: Go here and click ‘Show E-mail Form’
• Send in your Ideas by E-mail
• Jeff Simmermon (Director, Digital Communications) by E-mail
• Jeff Simmermon on Twitter

Local (Rochester NY) Government Resources

• Mayor Duffy

UPDATE: Stop the Cap just posted a letter from Time Warners Chief Operations Officer with a lot of useful information.  I’ve harvested the contact information from this letter and added it to my list of Time Warner Rescources.