Web usage-based billing on its way - High-Def Digest Forums
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Old 12-01-2011, 10:00 AM
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Default Web usage-based billing on its way

Once one or two major cable companies do this, the rest will follow IMHO. If you are a heavy Netflix HD streamer you could be close to $30 per month vs $8 now.

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The days of watching movies on the cheap via the Web may soon be over.

Time Warner Cable and U.S. pay-TV companies, weighing how to profit from surging Internet demand spurred by Netflix and Hulu, are on the verge of instituting new fees on Web-access customers who use the most data.

At least one major cable operator will institute usage-based billing next year, predicts Craig Moffett, an analyst with Sanford C. Bernstein & Co. in New York.
He said Cox Communications, Charter Communications or Time Warner Cable may be first to charge Web-access customers for the amount of data they consume, not just transmission speed.

"As more video shifts to the Web, the cable operators will inevitably align their pricing models," Moffett said. "With the right usage-based pricing plan, they can embrace the transition instead of resisting it."

U.S. providers have weighed usage-based plans for years as a way to squeeze more profit from Web access, and to counter slowing growth and rising program costs in the TV business. While customer complaints hampered earlier attempts, pay-TV companies are testing usage caps and price structures that point to the advent of permanent fees.

According to media researcher SNL Kagan, about 12.1 million U.S. households will receive TV shows and movies from Internet services rather than a traditional pay TV provider by 2015, up from 2.5 million homes at the end of 2010.

Cable's best option is to find ways to profit from the online shift, said Moffett. If the companies were to lose all of their video customers, the revenue decline would be more than offset by a lower programming fees and set-top box spending.

"In the end, it will be the best thing that ever happened to the cable industry," Moffett said.

Web demand

While demand for Web service grows, cable operators are battling to preserve profit in the mature pay-TV business and withstand competition from satellite carrier DirecTV, Verizon Communications' FiOS and AT&T's U-Verse.

The incentives to focus on Web access are compelling. Cable's broadband gross margins are about 95 percent versus 60 percent for video, according to Moffett. As programming costs increase nearly 10 percent a year, video margins are crimped, he said.

AT&T, based in Dallas, charges digital subscriber line, or DSL, customers who exceed a monthly limit of 150 gigabytes in three consecutive months $10 extra for every additional 50 gigabytes of data they use.

Suddenlink, with about 1.4 million customers, began instituting usage caps in some markets in October. Users pay $10 for each 50 gigabytes they use over their monthly allowance.

Data usage is surging by almost 50 percent a year, Chief Executive Officer Jerry Kent said. Suddenlink's broadband revenue rose 12 percent in the third quarter, versus a 1.6 percent gain from pay TV.

"Our video business is challenged," Kent said. "My broadband margins are double my video margins."
Movie quotas

Comcast, the cable provider for much of the Bay Area, has instituted caps large enough that most customers aren't affected. Comcast does not charge overage fees, nor does it have near-term plans to charge subscribers based on consumption, according to Comcast spokeswoman Jennifer Khoury.

The standard cap for Comcast is 250 gigabytes per month. That's enough for a household to send or receive 12,000 one-page e-mails and watch 60 standard-definition movies with excess capacity for other tasks.
Netflix protests

Netflix steers customers with enough bandwidth toward high-definition movies, which soak up about double the data. Charging by Web usage, cable companies may discourage customers from dropping traditional pay-TV service and slow the growth of Netflix, Hulu and an expanding list of online alternatives, Moffett said.

The possibility of usage-based pricing has brought protests from Los Gatos-based Netflix and warnings from Charlie Ergen, chairman of rival Dish Network, which operates the Blockbuster movie-rental business. "That Netflix subscription of $7.99 could go to an extra $20 a month for bit streaming," Ergen said, making a total monthly subscription "the equivalent of $27.99."

Consumption-based pricing is anticompetitive if the goal of broadband providers is to boost revenue by diminishing the value of rivals, wrote Netflix General Counsel David Hyman in a July Wall Street Journal editorial.

The practice "is not in the consumer's best interest as consumers deserve unfettered access to a robust Internet at reasonable rates," said Steve Swasey, a Netflix spokesman.

Federal Communications Commission Chairman Julius Genachowski publicly supported usage-based pricing in December, a victory for cable companies concerned that usage-based billing would run afoul of net neutrality rules prohibiting Internet services from favoring one form of content for another.
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Old 12-01-2011, 11:23 AM
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And then there will be a price war for data usage. It's a cycle Ack. It will all adjust itself and the shift to online will be complete.
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Old 12-01-2011, 11:26 AM
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And then there will be a price war for data usage. It's a cycle Ack. It will all adjust itself and the shift to online will be complete.
Unfortunately, _IF_ the cellphone industry is any marker of what will happen, it will just become metered access for just about everyone. (Sprint I think is the last major carrier to have unlimited/nonthrottled data)
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Old 12-01-2011, 11:30 AM
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And then there will be a price war for data usage. It's a cycle Ack. It will all adjust itself and the shift to online will be complete.
The article was pretty interesting. The cable companies can actually come out ahead by losing customers for pay TV and not paying the content providers as much, while at the same time making more money via the data usage plans.

If this does happen (cable companies charging web usage) I can almost guarantee you that Netflix/Amazon/etc would be forced to get rid of their streaming plans and be forced to charge users based on each movie watched like iTunes, Vudu, etc. The studios are not going to be upset about the web usage fees either because this will bring cheap streaming to it's knees and force consumers to a more expensive model which means more money for the studios.

That said, consumers are going to be pissed. But the cable companies have monopolies in many areas and consumers can either pay for usage or not have Internet.
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Old 12-01-2011, 11:33 AM
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Originally Posted by ack_bak View Post
The article was pretty interesting. The cable companies can actually come out ahead by losing customers for pay TV and not paying the content providers as much, while at the same time making more money via the data usage plans.

If this does happen (cable companies charging web usage) I can almost guarantee you that Netflix/Amazon/etc would be forced to get rid of their streaming plans and be forced to charge users based on each movie watched like iTunes, Vudu, etc. The studios are not going to be upset about the web usage fees either because this will bring cheap streaming to it's knees and force consumers to a more expensive model which means more money for the studios.

That said, consumers are going to be pissed. But the cable companies have monopolies in many areas and consumers can either pay for usage or not have Internet.
Yup, the monopolies are pretty bad. In my area, I don't have a choice for charter or I go dial-up. DSL is over a county and the cable company changes there.
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Old 12-01-2011, 11:38 AM
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Good thing I am grandfathered in with AT&T for unlimited data on my cell plan.
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Old 12-01-2011, 11:40 AM
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Good thing I am grandfathered in with AT&T for unlimited data on my cell plan.
what, are you going to use it as an access point for your home-based internet requirements? I thought that is what the article was about.
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Old 12-01-2011, 11:43 AM
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In the future if I have to I will teather it.
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Old 12-01-2011, 11:43 AM
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In the future, that may very well be the most affordable thing to do. Until the phone companies see the dollars they can make off of it
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Old 12-01-2011, 11:51 AM
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Like I said. I am grandfatherd in, so it doesnt matter what the $ they think they can make off it.
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