Time Warner to Try Tiered Cable Pricing

Time Warner Cable will try selling consumers broadband service based on how much bandwidth they use, a move that could turn the home broadband pricing model in the U.S. on its head.

In a trial planned for later this year in Beaumont, Texas, the service provider will offer four tiers of service at different prices. Customers who used more bandwidth would pay more.

The details of the tiered pricing plan haven't yet been set, according to Time Warner spokesman Alex Dudley. The offer will only go out to new customers, he said.

Some service providers charge different rates based on the speed of a service, but in the U.S. they typically allow each customer to send and download as many bits as they like in a month. Under that model, some subscribers who exchanged large files through peer-to-peer services reportedly have been cut off. Comcast, the biggest U.S. cable operator, has said it sometimes slows peer-to-peer traffic during peak demand periods.

In some other countries, Internet users have long endured bandwidth caps. And Web hosting companies typically charge site owners based on how much data they exchange with visitors.

Tiered pricing could help settle the ongoing argument over the fairness of certain subscribers and online content providers using up more network capacity than others, according to Ovum analyst Mark Seery. In fact, he thinks the whole industry will go down this path eventually.

"It's difficult to charge, appropriately, different customers if they have such widely divergent uses of bandwidth," Seery said. And trying to target one type of application, such as illegal peer-to-peer file sharing, raises political issues, he added.

"There's no justification for blocking legitimate uses of peer-to-peer," Seery said. "The right focus is on who's using what (bandwidth) and what they should be charged for it."

Many other transport industries, such as shipping, rail and courier services, charge different rates based on how much the customer uses, Seery said. Some have shifted to that system over time. For example, toll bridge operators once charged trucks based on the value of what they wanted to carry over, and U.S. railroads could arbitrarily carry goods from one customer and not from another, according to Seery. Neither model lasted.

Time Warner operates in 33 states but is a relative underdog in the U.S. broadband industry, with 7.4 million high-speed data customers. Comcast has 12.9 million.