Time Warner just doesn’t get it. Recently, the cable and internet provider announced it’s tiered data plans. The base price on which bandwidth you want. For $15 you get a 1GB bandwidth. If stream more than 3 hours of video a month, you will quickly reach that limit. Ultimately, you will be paying $150 a month to get “unlimited” use of the internet. Ridiculous, right? You’re not alone, even the government is scratching its head.

Time Warner Cable 2008 Broadband Stats, source Wired.com
Thankfully, the government is starting to take notice. New York Rep. Eric Massa is attacking Time Warner’s tiered data plan calling it ‘AIG-style Greed.’ Massa points out that they can’t justify this cascading plans on the grounds that it is needed to remain profitable, it shows in their SEC filings. To me there are only a few reasons in my mind to consider regulating an industry, and one of them is a monopoly. Time Warner’s business model is still profitable for them, and the decreasing cost in providing internet connections means that it is under no danger. As Wired points out, Time Warner’s costs are going down by 12% this year, and subscribers are up 10%. What this is, is pure unfettered greed on Time Warners part. These tactics are nothing short of stupid. It’s another example of how big media corporations fail on developing innovative solutions to a changing market.
If you’re thinking about switching internet service providers, more power to you. However, it might not be an option for a lot of consumers in out lying areas who only get high speed service through Time Warner. Even if you have the option think about what it means for business. If you stream video, you essentially pay for it with ad revenue. That is, ABC, NBC, CBS, etc are making money off of you by justifying higher price ads. This is not uncommon to how regular TV ads work. The more viewers of a show, the more money it is to buy an ad.
So what happens when people stop watching streaming video? They go back to cable, where Time Warner gets a better share of profits by being able to up-sell you on DVR’s and cable packages, not to mention make profit from the networks. So if you’re a network executive you should be really ticked off that Time Warner is going to start killing off your internet viewers. Whether or not you realize it, TV’s future is on the internet. Networks are able to control the entire channel, there’s no distribution costs to providers like Time Warner.
You can see where this is going. Time Warner can’t make a profit off streaming video as its business model is. So like print media it has decided to pass the cost to the consumer instead of trying to innovate to match the times. The difference is that given how needed the internet is, and the ubiquitous-ness of it, Time Warner knows it has the consumer by the short hairs.
This just echos everything we have seen from big business over at least the past decade. Companies need to understand that consumers control the market. It is no longer the case of “you buy what we make.” Give the consumer what they want! With social media, web analytics and the plethora of data available companies hsould have a much better idea of what will work than they ever have. Just in case they don’t get it, start with this simple rule: Pushing the cost to the consumer to make obscene profits doesn’t work! It might work in the short-term, but in the long-term you are doomed. If you don’t believe me ask: AIG, Chrysler, GM, OPEC, and about 75% of Wall Street. Truly innovative solutions are enormously successful. Capping bandwidth isn’t innovative, it’s an archaic reworking of the AOL-model of charging by the hour for internet use.
Read : Wired – Congressman Wants to Ban Download Caps