Interviews with Digital Media Thought Leaders

Metered Pricing for Internet Access

Podcast Audio | Posted by Phil Leigh on April 16, 2009

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Timothy Karr, Campaign Director, FreePress.net

If you would like to learn about efforts by Time Warner Cable and other broadband ISPs to test metered-use pricing of Internet service in selected markets, this interview is for you.

Our guest today is Timothy Karr who is the Campaign Director at FreePress.net. His organization is about six years old and is focused on policy issues relating to media. It is funded by various private foundations and individuals and does not take donations from corporations.

Few, if any, achievements exceed Newton’s Three Laws of Physics. But Newton was also a believer in the occult. Similarly, few contributions to electronic networking surpass Bob Metcalf’s invention of Ethernet. But, Metcalf also predicted the impending collapse on the Internet in 1996 owing to characteristic exponential traffic growth. Metcalfe was wrong and modified his prediction to forecast a brownout. He was wrong about that too.

Now Time Warner Cable has updated Metcalfe’s rear-view mirror look and predicts dire consequences if it is not permitted to charge Internet customers a metered rate based upon bandwidth consumed. Their plans to test market a new tariff have sparked a heated debate.

Time Warner and allies argue on one side that higher rates are needed to encourage investment in new facilities. On the other side are those who argue that the move is nothing less than a disguised effort to strangle Internet Video in the cradle and thereby preserve the CATV business model. They note that exponential traffic growth has always been characteristic of the Internet and that adding capacity is not nearly as expensive as Time Warner implies.

In our analysis, the natural evolution of the Internet is toward intelligence at the endpoints. It enables an abundance of future Cloud Computing applications ranging telepresence to routine video phone calls and others that cannot even be predicted. In totality they are likely to become nearly indispensable to consumers and businesses alike. Steps that block such evolution will irreparably damage the United States economy.

Accordingly, it is crucial that monopolies like Time Warner and others convincingly demonstrate that their new rates are merited. The chart below from the Time Warner Cable annual report suggests that skepticism is warranted. Apparently the company’s ISP profit margins exceed 95% and their direct ISP service costs dropped 12% last year even as revenues increased 11%.