Price Gouging for Internet Use: Coming To a Town Near You?

Time Warner's strategy for managing increased Internet use -- ripping off customers -- has not been very popular.

Last January, Time Warner announced the launch of a new "tiered" pricing system in several markets across the country. Internet use would be monitored and priced much like cell phone usage is now, with customers paying different rates based on how much bandwidth they consume. Those who were to exceed the usage caps for their chosen tier would be charged $1 per extra gigabyte.

On Sunday, the Greensboro News Record posted a story showing just how damn annoying these usage caps are:

When Time Warner announced the plan this week, customers blogged, called and visited the local office to complain. Many customers said they would defect to slower, phone-line based Internet service. Some even complained to city government. I’ve gotten a lot of calls about it,” said John Gribble, franchise administrator for the city of Greensboro.

The company insists that their motives are totally non-sinister, and that caps are the only way to manage the explosion of video and audio content on the web. But shockingly, many customers remain unconvinced that Time Warner is acting from necessity and goodwill.

I can watch all the high definition television I want through the same cable service, order on-demand movies and watch all day, and they have no problem with that,” said Jennifer Sanders-Melvin, a Time Warner customer who said she’s looking for other options. “But if I want to do the same thing on the Internet, through the same cable, they have to limit what I can use? Sanders-Melvin said the company’s real motivation is curbing Internet television viewing — now free on many network Web sites and video sites like Hulu and Netflix — to preserve Time Warner’s cable television business.

But the ISP is sticking to its talking points. According to PC Magazine, Time Warner Cable's chairman and chief executive Glenn Britt said:

We have to provide people with choice, which is how our economy works ... And there is a cost to consuming a lot more bits. It's not just speed, it's how you consume, and if you download movies all day, it costs more. If all you do is sign on and read e-mail, it costs less. 

This counterintuitive PR spiel raises several questions, not the least of which is: who only uses the Internet  to check email?

As far as Britt's use of consumer "choice" -- that great engine of capitalism -- to justify the policy? Shouldn't "choice" in this scenario reference a customer's option to go elsewhere? Isn’t the point of a "free-market" economy that if one seller fails to adapt to changing demand, customers can "vote with their wallets" to put them out of business?

Or, does Time Warner hope their strategy of ripping off customers (instead of, say, investing in ways to increase capacity) will be so efficacious that it will tempt competitors into adopting a similar policy? (and by competition, I obviously don’t mean competition in the classic sense of multiple companies duking it out to provide the best product — you know, that thing that exists only in econ books and conservative propaganda — I mean competition between the tiny handful of giants that monopolize broadband).

Of course, there's also the fact that many markets are entirely dominated by one ISP, so consumers don't even have the choice to switch to another corporate behemoth for their service -- Time Warner is obviously counting on that little quirk of our broadband distribution system.

Anyway, when Time Warner first announced the new policy, StopTWC! was formed to channel user rage into action by including information on the change as well as some useful Time Warner email addresses. StopTWC! has a list of reasons for "why this is bad" (the basic gist being that the whole Internet thing seems to be evolving towards people using it more, rather than using it less ... ) and "what you can do":

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