Usage-Based Billing Back on Agenda

Reuters reported on Jan. 17 that Time Warner Cable (TWC) is planning a trial in Beaumont, Texas, later this year to test usage-based, or consumption-based, billing for Internet subscribers. The cable company confirmed the report four days later, but has had little to say. That didn’t stop people from talking though.

The test is part of a strategy to help reduce congestion of its network by charging users who consume more than a typical browser. Heavy users account for only about 5 percent of the company’s broadband customer base — which stands at 7.4 million — but they consume more than 50 percent of the bandwidth, according to TWC. The company fears consumption will worsen with video downloading becoming more widespread.

Usage-based billing has been tried before, but has not worked out for technical and marketing reasons, and perhaps more important, for user-preference reasons. The all-you-can-eat broadband buffet now in place will be a hard model to break.

Many of the technical hurdles to this sort of billing have been overcome and the massive adoption of broadband video and file-sharing networks is motivating service providers in both telecom and cable to reevaluate current rating and billing strategies and technologies. Bandwidth hogs certainly have driven TWC to rethink the economics of its current billing model.

Neither this trial, nor even this concept, ties directly to the net neutrality issue that plagues some telecom ISPs, but if successful, it could serve to legitimize the use of applications that do traffic-shaping by monitoring bandwidth or conducting deep packet inspection (DPI). However, the customer has to be convinced before the overseers of the network get involved.

“This type of thing has failed in the past because customers did not understand what their usage had been up to a given point in time,” says Brian Cappellani, CTO of Sigma Systems.

That was true with voice, and will be compounded further by data services. “With voice, it was easy to list the number of minutes associated with a voice call, but with data, you can’t just throw up the bits per second on a bill and expect customers to know what it means,” Cappellani said. “You have to somehow indicate what service is tied to those bits so the user understands at a granular level what [has been] consumed, and how that compares to their [current] plan or bundle.”

That level of detail could turn an ill-advised campaign that confuses or angers customers into a campaign that helps everyday users benefit from the premiums that could be paid by high-bandwidth users.