Metered Internet Service

Yesterday, the news broke that Time Warner cable was going to test metered Internet service in Beaumont, Texas — basically laying out plans that limit monthly usage to between 5GB for 768Kb/s service and 40GB fro 15Mb/s service. Going over that amount will result in a $1/GB overage charge.

Sound familiar? We've been living with plans like these in the mobile space for years, but the funny thing is that the mobile operators are moving to (practically) unlimited plans. What market forces are driving these service providers in different directions?

The proponents of metered IP say that they have to do this to protect the scarce network resources from P2P file sharing rapscallions who use up all of the bandwidth and kill performance for the rest of us. They say that 5% of the users consume most of the bandwidth, and that these are the people they want to control with metering.

I have to wonder if there are other forces at work.

Besides file sharing, there are a few applications that could consume large amounts of bandwidth; can you guess what they are? How about telephony and streaming audio? Maybe streaming video and movie download services? Isn't it interesting that these services compete directly with the traditional telephone and video on demand offerings offered by most broadband providers?

So if you use the provider's voice and video services, you're safe from the overage charges, but if you dare to use Skype, Vonage, AppleTV, Netflix, and XBox Live you run the risk of a massive bill. After all, if you're on a Skype call for 4 hours, how many bits did you use? How many bits were in that episode of "The Simpsons" you watched? Do you even have any way of knowing?

Beyond that, IP is a notoriously lossy protocol. There's packetization overhead, re-transmission overhead, and a lot of other things beyond the applications' control that influence exactly how many bits are transmitted. Is it fair to make customers worry about this?

Am I being overly cynical? Maybe, but I think that the last mile providers have been worrying for a long time about being bypassed by these 'external' service providers. They don't want to become just 'bit pipes' to their customers, they want to own their customers. By capping monthly bandwidth, the local broadband providers effectively create a barrier to competing services delivered by companies like Microsoft, Apple, Blockbuster, Netflix, and Google.

What do you think?