Time Warner Bandwidth Cap Points Industry Toward Utility Pricing - InformationWeek

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Government // Mobile & Wireless

Time Warner Bandwidth Cap Points Industry Toward Utility Pricing

Analysts say the value of the Internet means providers can sell bandwidth much like utility companies sell electricity or municipalities sell water.

Gartner analyst Elroy Jopling believes people will eventually have to pay for the amount of bandwidth they use. "The Internet has become a utility," Jopling told InformationWeek. "You nearly can't live without it."

As such, Internet providers are in a position to sell bandwidth much like utility companies sell electricity or municipalities sell water. "If you water your lawn every day, then you have to pay for it," Jopling said. However, in imposing caps, cable and telecommunication companies need to follow the 95-5 rule. "You are going to irritate customers," Jopling said. "But hopefully only 5% that use the system and not the other 95%."

As an example of a relatively smooth transition to tiered pricing on bandwidth use, Jopling pointed to Rogers Communications in Canada. The cable company's new pricing model was easy to understand, and the company made sure to explain exactly what customers would get for their money -- that is, how many videos, songs, and e-mail they could download or send without going over their limit.

In addition, Rogers sent notices via e-mail and a browser alert when customers reached 75% of their cap. Finally, the price was reasonable by local standards: $44 a month for the maximum service of 95 GB.

In the United States, however, bandwidth caps are relatively new and the transition is just beginning. How it plays out will depend on how well network providers, which have monopolies in some areas of the country, communicate the change and impact on their customers, while charging prices that don't appear excessive to most people.

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