By Roger Yu, USA TODAY
October 1. 2012 - Tawnie Knight's Internet diet began Monday.
With Comcast starting a new trial in her area on Oct. 1, Knight had to choose from a new lineup of its service plans that places a firm limit on the amount of data she consumes each month -- and charges she'll incur if she goes over.
The Tucson-based computer technician, whose daughter loves online video games, estimates her family uses about 350 gigabytes of data a month (a 2-hour high-definition movie can eat up 3 GB to 5 GB). "We stream a lot. I don't want to get into a situation where I have to pay $10 here and there and get nickeled-and-dimed to death," she says.
Knight is one of hundreds of thousands of customers in the Tucson region who are part of Comcast's trial of "usage-based pricing plans" that replace all-you-can-use data plans with ones that cap the amount of data a customer can download.
Wireless carriers' quick adoption of capped Internet plans have generated big headlines recently. But the practice of limiting data -- and charging customers according to use -- is gaining just as much traction on the wired side. Cablevision is one of the few large cable Internet providers in the U.S. that doesn't impose a data cap.
While Knight sees such plans as a financial headache to be endured each month, Internet providers are quietly relying on them as new revenue sources needed at a time when their TV and phone businesses are sagging.
The average household worldwide used 26.2 GB of data per month in 2011, according to a study by Cisco Systems. By 2016, more than 84 GB a month will be consumed by an average family, it predicts.
Several providers, including AT&T and Time Warner, have tried to cap broadband use in the past, only to quickly retreat from their efforts following consumer backlash. But wireless carriers have aggressively introduced capped data plans and cable companies are emboldened by the changes, says Charles Golvin, an analyst at Forrester Research.
"They're looking to increase revenue. They don't face a whole lot of rosy prospects," he says. "The wireless industry is setting the pace on what the model will look like."
The metered plans, cable operators say, are a more fair way to price data services, because heavy users will pay more. Broadband demand is skyrocketing, and additional revenue will help cable companies invest in the future, they say.
"In the wired world, there is a better path to add capacity, but it's not free," says Michael Powell, CEO of the National Cable & Telecommunications Association, a trade group of cable providers. "It's very expensive." The capped plan "ensures the capital that's necessary to make (the networks) better."
But opponents of capped plans contend that they are a product of a price discrimination strategy and charge that they have been rolled out too quickly without clear communication to customers.
Some recent changes include:
-- Data limits in tiers. In May, Comcast, the nation's largest cable company, said it would launch its trial in two markets -- Tucson and Nashville -- that offer six pricing tiers based on download speeds and data limits.
Its cheapest plan, at about $40, will carry a 300 GB limit, while the most expensive plan, about $200, comes with 600 GB. Anyone who exceeds the limit on any plan can pay $10 for each additional data bucket of 50 GB. Those who reach 90% of their limit will get an e-mail alert asking them to pay for additional data allotments or consider upgrading.
In other markets, Comcast currently offers similar pricing tiers that vary by download speeds and have a soft, mostly unenforced, cap of 300 GB.
-- Paying overage in increments. Time Warner launched a trial in Texas in February with a monthly data limit of 5 GB on its three lower-speed tiers that cost $35 to $55.
Customers who choose the option receive a $5 discount. Those who go over the cap pay $1 for each additional gigabyte up to a maximum of $25.
The trial was expanded to North Carolina and South Carolina in August, and the company plans to expand it nationally. "It's targeted to those who don't use the Internet a lot and are looking to save money during these times," says spokesman Justin Venech.
Cable One, which operates in 19 states, charges 50 cents for each additional gigabyte.
-- Simple data caps. Several companies, including Cox Communications, Charter Communications, CenturyLink and Mediacom have monthly caps that are minimally enforced -- at least for now.
"We don't currently charge overage," says Todd Smith, a spokesman for Cox, which has several price tiers based on download speeds and data limits that were introduced in 2010. Its data limits range from 30 GB to 400 GB per month.
CenturyLink's spokesman Mark Molzen says subscribers who exceed its limit - ranging from 150 GB to 250 GB -- are rare, and the company would only cancel the accounts of heavy users if they ignore three requests to curb their use or fail to upgrade to "an unlimited business-class line," says spokesman Mark Molzen.
Partly because data caps are often unenforced and the terms are spelled out in fine-print documents few bother to read, the limits go unnoticed by many customers. Tom An, a restaurant owner in Vienna, Va., says he only recently discovered that his Cox Internet account has a limit of 250 GB. "It came as a big surprise to me," he says. "I don't think they did a good job in letting me know that. I'm not that concerned now. But down the line, with more HD videos coming, it could be a problem."
That many consumers aren't aware of their data caps underscores the industry's generosity, industry executives say. Comcast says its median customer use per month is about 8 GB to 10 GB nationwide. "The reality is, a vast majority of consumers don't' go anywhere near these (limits)," he says.
While that may be true today, it's inevitable that more customers will reach the limit in coming years, counters Golvin of Forrester Research. "There's nothing unique about bandwidth that says there's a natural limit," he says.
Some critics also are demanding clearer explanation from cable providers on the urgency for new plans. Internet providers have failed to clarify how the caps are set, tiers are created and pricing is determined, says Gigi Sohn, CEO of technology consumer advocacy firm Public Knowledge. "We know nothing about how caps are set or what purpose the cap is supposed to achieve. When they're challenged on it, the cable industry runs away from it," she says.
The new plans are designed mainly to penalize heavy users, since network congestion has not been a pressing issue, she says. "It charges people who value the Internet more," she says. "It's either a price-gouging or price-discrimination strategy."
Not surprisingly, the industry doesn't quite see it that way. While conceding that new pricing plans are "not purely a congestion issue," Powell says that requiring excessive users to pay more will also help modify their data consumption. "If there's a price to your consumption, you'll govern your consumption," he says. "It's a 1% problem."
'Going to be a mess'
After setting up a new account at Comcast, Knight predicts other customers will want clearer, simpler answers as they're herded to new plans.
She says Comcast customer service agents she spoke to were confused or unable to answer detailed questions about the new data caps and prices. "I spent almost a whole day trying to figure this out and order the service. This is confusing. And I know technology fairly well. For the average consumer, this is going be a mess," she says.
Charlie Douglas, a Comcast spokesman, emphasizes that the Tucson trial is new and says its "customer agents are being trained."
In the end, Knight chose a plan that comes with a 450 GB limit, an overwhelming sum for most but not for her bandwidth-loving family. Beyond her daughter's video game habits, Knight also uses TV network apps daily to catch up on shows she misses after work.
Her previous Comcast Internet account, which costs her about $70 a month, came with a soft, unenforced monthly limit without overage charges. The new Internet access is priced at about $115, before cable TV, she says.
"My bill just shot up, and I'm still concerned about going over the limit," she says. "I'm already watching my wireless limits. I don't want to have to watch my cable Internet limit, too."