Time Warner Cable and its obsession with bandwidth caps

editor's corner

Jim O'Neill

Ah, the more things change, the more they remain the same.

Time Warner Cable (NYSE: TWC) CEO Glenn Britt, at the Cable Show last week, said the company hasn't yet decided if it would use the technology, or if it would eventually lead to bandwidth caps, but confirmed that testing was underway.

There's little doubt where his heart will lead him.

In 2009, the MSO tested caps and ran into a public relations nightmare with consumers and politicians (surprise!) railing against them.

A somewhat chastened Britt that summer told attendees at the Sanford Bernstein Strategic Decisions Conference that "Clearly, we did not handle the public relations side of it very well. We had a bit of a debacle, to be honest, so we pulled back from that."

Nevertheless, he said, the company would continue to press forward with the "consumer education" process, but terminated the caps.

But even then, it was obvious caps were coming at some point as Britt told the conference, "In the last year we're starting to see from consumers the indication that the broadband part is more the anchor part of the bundle than video--that they value that more highly," Britt said. "I think we're going to see more of that in the future."

Earlier this month, Britt told an investor conference in New York that, broadband, as it becomes more central to people's lives, is becoming the company's primary product.

"People are telling us that if they were down to their last dollar, they'd drop broadband last," he said.

And that has allowed TWC to raise prices on the service.

"As broadband becomes a utility, you can charge more," he said. "So after a dozen years of not raising prices for broadband service, for the last three years we have been raising prices."

TWC isn't alone in experimenting with bandwidth caps.

In March, AT&T (NYSE:T) rolled out caps, 150 GB a month for DSL customers and 250 GB a month for U-verse customers. Overages ring up $10 for each additional 50 GB.

The caps appear to be pretty loose, but with more and more content coming in over-the-top, and more of it coming in higher quality, as viewers demand a near-TV viewing experience, those numbers could be woefully inadequate.

TWC's Britt knows that, and the MSO is doing everything it can to drive consumption, including rolling out an iPad app that streams three dozen live channels to subscribers.

Will TWC cap usage? Yes, and like AT&T it's likely to offer a cap that, by today's standards, appears liberal. Look for it as soon as it finishes "educating" its customers... then, it'll be able to really school them.--Jim