Time Warner Backs Away From Pricing Change

Time Warner Cable caved—for now. In the face of widespread consumer outrage over its plan to change its pricing for Internet access, the company said it will shelve plans to implement the new price formula in several new markets.

The about-face comes just two weeks after BusinessWeek.com first reported that Time Warner Cable (TWC) would roll out usage-based pricing to four cities. The No. 2 U.S. cable operator hoped to begin charging high-speed data subscribers for the amount of bandwidth they used in Rochester, N.Y., Austin and San Antonio, Tex., and Greensboro, N.C.

Time Warner Cable CEO Glenn Britt said the consumption-based model was needed to maintain an expensive, burdened broadband network, citing other countries that for years have had broadband-metering models, including Canada. But the plan unleashed a firestorm among the public and politicians who say the new method is discriminatory and would stifle innovation. Some politicians called for congressional hearings.

Surprised by Backlash

Britt and his executive team appear to have been unprepared for the pushback from consumers and are putting the plan on ice. On Apr. 16, Britt issued a statement saying: "It is clear from the public response over the last two weeks that there is a great deal of misunderstanding about our plans to roll out additional tests on consumption-based billing." Time Warner won't broaden its testing of the plan "until further consultation with our customers and other interested parties, ensuring that community needs are being met," Britt said.

What's more, Time Warner Cable said it would be working to make measurement tools available as soon as possible so consumers can learn just how much bandwidth they consume on average. For Britt, the episode was not exactly an auspicious start at the helm of a newly independent Time Warner Cable, fully spun off from parent Time Warner on Mar. 30. Shares of the company rose 2.7% to 29.58 on Apr. 16.

From the moment the news broke on Mar. 31, the blogosphere was filled with vitriolic posts and e-mails from Internet users slamming Time Warner Cable's plans. Within days, hearings were being held in Rochester and Austin. Rochester Congressman Eric Massa threatened to introduce legislation aimed at bringing more broadband competition to his home city. Massa also said he wouldn't rule out imposing price limits on Time Warner Cable, which he called a "functioning monopoly."

On Apr. 16, U.S. Senator Charles Schumer (D-N.Y.) and founders of a Web site called Stop The Cap! stood on the steps of Time Warner's Rochester offices to celebrate the company's decision to abandon broadband metering for now. Among the rally cries posted on Stop The Cap! over the past two weeks: "Caps are for bottles, not broadband, in the United States of America."