For those attending NetQoS Symposium 2009, we’ve got some information for you. First, check out the Symposium Agenda on the NetQoS Symposium 2009 site for a complete schedule of events.  But here are some highlights:

First, this Sunday at 6:00, the Welcome Reception will begin, as well as the Hands-on Lab, where you can get a chance to install, configure, and deploy our products in a lab environment.

Monday morning will have a welcome address by NetQoS CEO Joel Trammell, but I’m pretty sure the highlight will be astronaut Col. Mike Mullane, who will be presenting “The Normalization of Deviance.” Those expecting social commentary will be disappointed to note that Mullane is, in fact, referring to the concept where lower standards of performance are accepted so often that that lower standard becomes the norm.

Tuesday’s highlights will include a keynote by Lenny Guardino at NBC Universal, talking about his experiences with preparing NBC for the networking demands of high definition live coverage of the Olympics from Beijing.

And Warren Barkley from Microsoft and George Kurian from Cisco – and if you haven’t heard of those two companies, we invite you to Google them – will be delivering keynotes on Wednesday morning.

For live updates, you’re going to want to subscribe to our NetQoSLive twitter feed if you’re not already a subscriber.

We hope to see you there!

The cloud computing revolution continues to go full steam, the problem, of course, being the overabundance of subtle “cloud” puns that come from every analytical article covering the subject. For example, “go full steam.” “Steam clouds.” Get it?

Gah, never mind.

Anyway, while it’s true that the simplicity and lower cost of many cloud computing apps compared to the traditional in-house applications may be drawing people to the cloud, very few companies, comparatively, are taking a good, hard look at the performance of the cloud apps.

According to Information Week, 62% of all performance problems with cloud computing are network related. IW surveyed 287 business technology professionals who use, plan to use, or are considering cloud computing services, and asked them what the “biggest bottleneck for performance of cloud-based apps” is. 26% responded with their own bandwidth or connectivity, 21% with overall Internet traffic, and 15% with the cloud vendor’s Internet connectivity. 10% didn’t know, so the actual number might be anywhere from 62-72%, though where in that number is anyone’s guess.

And that’s a problem – only 20% have actually taken the time out to measure the impact of cloud performance, so quantification of cloud app performance becomes guesswork.

According to InformationWeek:

Respondents who've put monitoring tools in place and done assessments report the highest level of satisfaction with their cloud applications and had the best ratings of performance over the last year. They likely have realistic expectations and have put technologies and bandwidth in place to ensure service levels. Those who haven't done any of that? They had the lowest ratings. If you don't flesh out your data plan and establish a way to respond to issues, you're setting yourself up for a fall.

Another problem with not monitoring cloud apps is that cloud vendors can’t make a guarantee at anything like we’re used to with SLA; heck, most won’t guarantee that you’ll be able to get your data back, or that it won’t be mutilated by rabid wolverines. And without monitoring your internal traffic, it’s all too easy for a poorly performing cloud vendor to say that every problem is originating from your end – even if the problem is actually originating from theirs.

Essentially, you should treat adding a cloud app just like making any other major change to your network; create a baseline, understand what normal performance is, and monitor the changes.

Last year, we published a serious top-ten list for reasons to attend NetQoS Symposium 2008; we also published a top 10 reasons on this blog, which highlighted reasons such as my abiding love for the “Dungeons And Dragons”-based artform, and made references to Aztec mythology.

But it seems really frivolous to be making jokes about things this year for NetQoS Symposium 2009.  As we all know, the economy collapsed under the weight of what the Greeks called “Hubris.” 

“Hubris,” of course, being the term that Plato coined for over-leveraged options based on overvalued assets and an unregulated derivatives market that allowed for insurance companies to over-insure products far beyond their actual value, leading to no products actually being insured – of course, you know what they say about history repeating.

So why are we still hosting our user conference, NetQoS Symposium, while other companies are cutting back on theirs? 

There are five reasons. 

1. NetQoS products have great functional depth and are continuously becoming more integrated, which introduces new workflows, analytics and reporting. We find that our customers walk away from Symposium with greater understanding and a new trick or four about how to use our products to monitor and manage their network performance.  Basic operation is pretty straightforward, but it’s the little subtle interactions and best practice processes that you don’t often think about or that make sense only after you take yourself out of the daily grind and see them in practice.
   
   For example, if you had been to Symposium last year, you would have learned that Reporter Analyzer can be made to display graphic data in delicious cookie form.  This, however, does require a cookie printer. 
   


2. It’s a great way to pick the brains of not only NetQoS staff but also peers who may be working on the same problem as you are.  It’s not uncommon for two people to face the same problem, and for each to have independently come up with half of the solution. 
   
   For example, once my college buddy Dave and I were in a small bunker after the nuclear apocalypse, waiting for the fallout to clear, and all I had was a can of beans, and all he had was a small can opener.  We were rescued by Santa Claus.  Come to think of it, I may have technically dreamed that during my long sickness absence, so never mind. 
   


3. You ever find yourself with a “brilliant” idea in your head, only when you try explaining it out loud to your friends, family, or co-workers, that you realize it’s not really all that bright an idea?  Internal preparation for Symposium involves creating and critiquing numerous subjects over dozens of presentations. This helps us prepare for the client questions that we’ll be asked during individual customer and prospect meetings.  It helps us organize our thoughts into coherent, fluid sessions. 
   
   A side note: Those of us with permanently disorganized thoughts, like me, are rarely invited to speak at Symposium, or anywhere else out of our cage without a chaperone. 
   


4. Symposium goes far beyond talking about our products; it’s also a way for our customers to learn new skills related to all aspects of network management – not just the vendor-specific stuff.  In addition to the NetAnalyst training that’s available, attendees learn about subjects like WAN optimization, unified communications, packet-level forensics, and how to min-max a 4^th edition D&D Warlock. 
   


5. The weather is just too good this time of year in Austin to not invite people down for a visit.

Alex Dudley, VP of PR at Time Warner, mentioned something interesting in our interview with him:

“Look, I don't know why this is such - why this is foreign to folks. You know, you're either paying for consumption... I mean, the concept of paying for what you consume is not a foreign one. I understand that it's different from the way we've charged for the Internet in the past, and we admit that. But the concept that you pay for what you use is how you buy just about everything”.

It is, you know. Paying for data usage is a very simple concept. Anyone can understand it. The problem is that it’s an oversimplification of the concept. That is – consumption based billing may be how you buy gasoline and bread, but it really doesn’t accurately reflect the way that networks and communications services actually work.

Trying to explain these complex concepts without oversimplifying is one of the reasons we’ve spent – what, six posts now? – on TWC’s data caps.

For example, I’m not sure I accept at face value Time Warner’s claim that there are (or will be) congestion problems in the future. I tend to subscribe to the idea that these data caps ultimately have nothing to do with preserving Internet performance for Time Warner’s customers, but everything to do with trying to preserve the market for cable television while exploiting the existing monopoly Time Warner has in certain markets for a quick burst of short-term revenue.

Time Warner earlier used the metaphor of “going dutch on a Salad/Steak lunch” to show the relationship between light and heavy users. Ars Technica responded to it this way:

“TWC's steak/salad analogy breaks down when it's crafted more accurately. The real question is whether you would even have lunch with a friend at a restaurant that charged $45 for a salad and $200 for a steak. Certainly, in a free market, most people would go elsewhere.”

So, I’m skeptical. Time Warner charges $1/GB for something that costs them $0.10/GB, they’re only doing this in markets where they have clear monopolies and competitors do not have strong footholds, and they’re doing so despite the fact that the profitability and capacity of broadband has actually outpaced demand. In short, there’s no actual “problem” that the “solution” is going to solve.

But even so, one needs to be a devil’s advocate sometimes. We’ve constantly argued that data is not the limited resource, bandwidth is. It’s an argument which ultimately boils down to: “It’s not too much data that causes congestion, it’s too much data at once.” Therefore, prices should continue to be based on bandwidth, not data consumption.

The only flaw in this argument is that, if you cram enough data down the pipe, it will lead to congestion eventually. Multiple people would have to be hitting close to the maximum of their data capacity nearly all the time during peak hours, but it is plausible.

So, if you were to assume, despite the evidence, that congestion on Time Warner’s cable service is a problem and that data overuse will lead to congestion, does that necessarily mean that Time Warner’s plan is an acceptable one?

No. There are other and better ways to handle congestion.

In fact, we can think of five separate plans that would be more effective at managing congestion, both in the near and short terms. Some of them are non-trivial, some of them non-neutral, but they would all manage congestion problems better than trying to change user behavior using exorbitant fees for consumption as a stick.

The fact that Time Warner isn’t using any of these plans – and chose to use the data cap plans – implies to me that they were either unable or unwilling to come up with better alternatives.

Plan 1: QoS-based packet prioritization for light users over heavy users.

Time Warner could, if it want to, deploy new hardware and software close to regional network routers to flip a user from the highest QoS levels to a lower one if they’ve been saturating the connection for a period of time. Comcast uses a similar system, flipping users who use more than 70% of their allotted bandwidth over a 15 minute period to a lower QoS priority over the next 15 minutes when the line is congested.

There’s no change to packet priority when the line is not congested, the system is identifying users who are using the most bandwidth at the time of congestion, and it immediately improves the relative performance of the light user while neither blocking or charging extra for the data for any user.

Tracking QoS policies on an individual IP address basis rather than by protocol would be a large rollout, perhaps even requiring new modems at the client-side to get the best results. But Time Warner was going to have to do that anyway with the rollout of DOCSIS 3.0 technology to enable faster speeds, and it was going to have to track usage anyway in order to bill for it. If congestion really is a problem, this is a practical solution considering the unique opportunity provided by the DOCSIS 3.0 rollout.

[Full disclosure: Network Performance Daily is the company blog of NetQoS, which is a enterprise network monitoring solutions vendor, many of which monitor the impact of QoS policies. On the other hand, we’ve got four more ideas below that don’t need quite as much network monitoring, and Time Warner’s welcome to use these as well.]

Plan 2: Graduated Decline of Bandwidth during Peak Hours based on usage

If the idea to manage individual QoS policies based on usage is too complex or too expensive, a less accurate but more effective solution would simply be to track data usage and slow down heavy users during peak hours.

Rather than a data cap, or billing based on data consumption, this plan would track data consumption and use it as a sort of a loose rule of thumb as to how much bandwidth the user is using, and during peak times, throttle the bandwidth down to slower, but reasonable, broadband speeds.

For example, a user on a 15Mbit down, 2Mbit up connection would always have that speed during off-peak times. But he only gets that 15Mbits during peak times if he’s downloaded less than, say, 15 gigabytes during peak hours for that billing period – or, if measuring consumption only during peak times is too difficult, say, about 50 gigabytes overall.

At that point, during times of congestion, his speed is knocked to 7Mbits. Consuming more data would knock it down to 3Mbits during congestion, and even more would knock it down to 1.5 Mbits during congestion. Again, however, off-peak times – the times without congestion problems – still retain the normal speeds.

A sudden drop in speed can be frustrating; and this plan may cut user speed far more aggressively than is actually needed. But it can be implemented rather quickly and easily compared to a QoS policy solution, while having much of the same effect.

Plan 3: Charging for extra consumption, rather than all consumption.

This plan turns the broadband consumption assumption on its head. The major problem most people have with the broadband cap is that there’s no way around it – all plans have some sort of cap. This is, perhaps, one of the reasons why the (probably true) conspiracy theory around Time Warner trying to protect their Cable TV interests keeps coming up.

But, instead of offering 15Mbit “Turbo” plans, and then complaining about “heavy users,” why not give “heavy users” a chance to pay more for extra speed instead of charging them for the data they used to get for free?

For example, you could bring everyone down to a standard 5Mbit plan, with unlimited data for a reasonable monthly rate.

However, if users require more bandwidth, they would then pay extra for a certain number of gigabytes at that higher bandwidth.

So, assuming that you charge $45 for the 5Mbit unlimited access, a Turbo plan could charge, say $65 for 15Mbit access with 60GB at that speed. When the 60GB cap is maxed, users can choose to continue along at the standard 5Mbit access until the next billing cycle, or perhaps they can buy another pack of “high-speed gigs” at a reasonable rate (say, $20 for another 60GB). Unused gigs would roll over to the next billing cycle.

This achieves exactly what Time Warner argues it is trying to achieve – making the heaviest users pay more compared to the lightest users – but doing so in a way that no one has to worry about Internet service suddenly costing more than they expected. Friday Night Lights Season 1 won’t cost $31 to download anymore, if you’re willing to wait 14&1/2 hours to get it, compared to 5 hours.

Plan 4: Lower QoS during Peak Hours based on protocol
I don’t like this plan. I thought of this plan and I don’t like it.

It’s simple and it’s brutal. During peak hours, decline the protocol associated with the highest data consumption and with the most saturation – BitTorrent. During all other times, leave it alone.

As a tool, I love BitTorrent. BitTorrent actually helps you take advantage of the capacity of the network, instead of limiting you to the slowest link along the route from server to client. It is one of the wonders of the Internet, and despite the stigma it has as a “pirate’s tool,” BitTorrent is extremely useful for any application where you have to get large amounts of data to multiple users.

This is a stupid plan, and I don’t endorse it. It opens thorny neutrality issues, creates problems for people wanting to use the torrent protocol in other applications (World of Warcraft, for example), and is unfairly scapegoating one set of Internet users.

As bad as this plan is, it’s still better than caps.

Plan 5: Reselling service and letting the free market hash it out.

It could be argued that the broadband infrastructure in this country is a natural monopoly, like many utilities. However, they are certainly not regulated like utilities.

What might be an option would be going the Canadian route – letting Time Warner handle the backbone and parcel out bits of bandwidth to the highest competing bidders, who then compete with each other. One company might differentiate itself by offering lower prices with a cap, the other, higher prices without a cap. Another company might advertise fast speeds, another low speeds, another good tech support – and if customers are unhappy with one service, it would be much easier to switch to another service.

This might require regulation, as it did in the Canadian market, but if we can’t run DSL and Cable and Fiber to every home, perhaps this is the best way to preserve the best prices for the consumer.

Part 3: Killing Your Financial Performance… and your company’s performance.

Time Warner can bring out the argument that, under data-capped plans you only pay “extra” for data “over the cap.” The problem is that every single one of Time Warner's plans require you to “buy” that cap of data with your monthly fee.

Since every single monthly fee that Time Warner has come out with (so far) costs around the same $1 per gigabyte for under-the-cap gigs. For some plans, (such as the $30 ten-gig plan, or $15 one-gig plan) it’s much more. For the “60 gigs for $55” plan, it’s slightly less. But for every gig you download, you pay, whether you go over the cap or you don't. How much will that cost?

Well, to simplify things, let’s take a look at the overage rate of $1/GB – only the top tier, at $0.91/gig , is cheaper, and even then, you’re saving maybe 5 dollars for the month over a flat $1/GB rate.

• Idling for One Month: $2.04
  
  Yep, I actually checked, when I had the computer running there, with nothing else going on, no AIM, no Skype, nothing coming in or out of my LAN other than the statistics my router was sending me, I was still using up 485kB over 10 minutes. Extrapolating this out, I get 2.04 GB. I can assume that I'm being bombarded by all sorts of neat little packets containing all sorts of things I don't want. All of which, I'd have to pay for under Time Warner's plan.
  Keep in mind, Time Warner's lowest plan is 1GB, with a $2/GB overage rate. I’m not even sure I can avoid this “usage” by turning off the cable modem when I wasn't using it, because Time Warner measures the traffic at their end.
  
  
• Downloading “Twilight” (HD) from the AppleTV store: $3.80
  
  (I thought that it was pretty appropriate to use a vampire movie to illustrate my point about Time Warner's new pricing plan.)
  
  It should be noted that renting HD version of the movie itself only costs $4.99. At a total cost of $8.79, you might spend $2 on gas getting to Blockbuster and still come out ahead.
  
  Which brings me to an interesting point – Apple’s major overhead cost for the iTunes store is bandwidth. I can't imagine that Apple is paying anywhere near $3.80 in data transfer fees, as that would leave them with only $1.19 in profit before splitting it with the content distributors.
  
  
• Downloading Season 1 of Friday Night Lights (A source of Austin Pride): $30.86
  
  It should be noted that Friday Night Lights is a source of much of Austin's creative community's income and future career positioning – Austin Mayoral Candidata Brewster McCracken specifically mentioned Friday Night Lights in his statement on the data caps. The HD season costs $65.78 – this would add $30.86 to that bill.
  
  
• Watching “Young Frankenstein” on Netflix Instant: $1.26
  
  This would absolutely be one of the competitive, promising services killed off, as the cost of mailing the DVD out is certainly less than the cost of downloading it would be. Netflix Instant is free to Netflix subscribers.
  
  
• Watching an episode of “The Daily Show” from ComedyCentral.com: $0.20
  
  
• Watching an episode of “Survivor” on CBS.com: $0.49
  
  This includes the cost of the commercials that they were running, which included, ironically enough, commercials about watching March Madness Online at the Office.
  
  
• Watching a March Madness Game: $0.28
  
  Yep, it's online now. Oddly enough, the video quality for March Madness was lower than that of Survivor... but as I don't watch sports anyway, who cares.
  
  
• Downloading “Where the Wild Things Are” Trailer: $0.15
  
  Not much, but who goes to Apple's trailer site to watch ONE trailer? And if it's something cool, like “Star Trek” (2009) aren’t you going to see it more than once?
  
  
• YouTube High Definition Video (7m11s): $0.11
  
  Again, YouTube is providing a great way for people to become active creators instead of passive consumers. When a third party charges for something the first party created and the second party wants, it limits the audience and stifles growth.
  
  
• Downloading the back catalogue of a video podcast (Comedy Central's Stand Up Podcast): $1.13
  
  These video podcasts are free to download, though they serve a purpose – the idea is that you watch the podcast, want more, and tune in to Comedy Central’s programming.  Under a data cap, it severely alters the new media marketing plan of just about every company.
  
  If everyone had to pay a surcharge for the data as well as bandwidth, there wouldn’t be any demand for “new media communications specialists” because we’ll all be forced back into using the old media – the old media that we “loved” so much that we abandoned it en masse the instant a better alternative became available.  


• Watching Live Breaking News (Obama's DNC Speech used as example): $1.11
  
  
• Downloading Service Pack 1 for Vista: $0.45
  
  Hobson's choice: Skip an update and risk infection, or leave Windows updates on, and pay more for it? Oh, and if you think you’re immune to infection because you run Linux…
  
  
• BitTorrenting Ubuntu: $0.65 + ($.065 x your share ratio)
  
  A 1:1 share ratio would cost $1.30 – still cheaper than Windows, but not “free.”
  
  
• Gaming:
  
  
  
  • Downloading the latest nVidia graphics card drivers: $0.07 
  • Downloading Half Life 2 from Steam: $0.94
    
  • Patching Battlefield 2: $0.55 
  • One Hour of Team Fortress 2 gaming online w/Voice: $0.09
    
  
  
• Sending an 8GB SD card worth of digital photos to Grandma: $8.00
  
  “Yes, Mom, I'd love to send you photos of your grandson... but... it's so expensive...”
  
  
• Getting Rickrolled: $0.01…
  
  …per rickroll.
  
  Rick Astley only clocks in at 10MB... but Rick's been out there over 19 million times. It adds up. 
  
  
• Video calling my sister via Skype: $0.88
  
  I had a great 2 hour conversation with my sister on Saturday when I was sick. She showed me her fan-translations of Japanese comics and we talked about what she's going to do when she gets her certificate, her plans for her future, it was a great time. She also made fun of me gargling Chloraseptic when I had forgot to mute my headphones, and made fun of me gargling Chloraseptic when I did mute my headphones but still had the webcam on. Ah, great times.

You know, I think it's absolutely ironic that Time Warner didn't learn any lessons from the fact that they were able to storm into the telephone business because they eliminated the exorbitant fees for long distance telephone calling with “cable phone service.” Of course, that may be the idea – there's nothing technologically separating Time Warner's cable telephone service from a service like Vonage, except that you would have to pay for every gigabyte on that Vonage phone – while Time Warner's phone wouldn't have any charges associated with it.

All of a sudden, this thorny “pricing” issue becomes a thorny “Net Neutrality” issue...

Maybe some of these sub-dollar prices look reasonable to you… except that you previously got them for free.  And when people have to pay for what they previously got for free, they’ll find a way around that.

So instead of waiting until they get home to watch that March Madness game, or that YouTube clip, or that Daily Show episode, they’ll do it at work, instead.  And unlike on a Time Warner connection, there really is congestion difficulty on corporate networks. 

You think recreational traffic is bad now…

But ultimately, I think this is a case where Time Warner simply has not learned from history.  We already looked at how the last major service to charge based on usage is a shadow of its former self and eventually abandoned that business model, and how an “@aol.com” e-mail address on a business card went, in the early 90s, from being seen as a go-getting trendsetter to being a laughingstock.  And we saw how Time Warner and other cable companies were able to battle entrenched phone service monopolies by eliminating rated service for long-distance calling for a flat rate. 

But there’s more to it.  When you put a third party price on it, a “Time Warner Tax,” if you will, the thought of doing some of these things – things that have been changing our lives, our economy, and our culture, from one of passive consumers to creators and producers, well... it reminds me of a specific point in history. 

That is, there was once a time in America where every official communication, every official piece of business, every record – required that an onerous surcharge be applied, a tax levied by a distant, monolithic monopoly with no concern for those affected. It negatively affected merchants, manufacturers, printers, lawyers and anyone who needed to work with legal documents. The justifications were also similar to the arguments by Time Warner today – that is, that the tax was “the most easy and least objectionable” way of raising the money, and that alternatives were considered but rejected.

This was the “Stamp Act of 1765.” Opposition to it was so widespread and heartfelt that, well, one thing lead to another, and eventually we waved bye-bye to King George III.

And that's what it comes down to. The move by Time Warner to attempt to use this pricing scheme flies in the face of history. Anybody who legitimately needs broadband service and has the ability to switch to a different provider will do so when they get that first bill.  In short, Time Warner is getting out of the broadband business. 

They’re just doing it in the most money-draining way possible. 

There have been some updates on Time Warner’s data caps since we started covering them.

First, Wired’s Epicenter blog took a look at some of the justifications for the caps. In Ryan Singel’s “Time Warner Cable Earnings Refute Bandwidth Cap Economics,” Wired breaks down Time Warner’s economic justifications for the data caps – and call them “fuzzy math.”

A close look at Time Warner Cable's books shows no significant link between its high-speed data costs and network usage.

For 2008, the most recent period available, Time Warner Cable reported that its high-speed data costs actually declined by 12 percent to $146 million. Meanwhile subscribers increased by more than 10 percent to 8.4 million, and high-speed data revenues climbed to more than $4 billion….

In previous public statements, TWC has said that flat-rate plans are unfair to its customers and that those who just check their e-mail pay the same amount as those who watch streaming video and download movies and that the company needs the extra cash to make the network faster.

These claims, however, do not appear to stand up under scrutiny….

"The conspiracy theorists are saying it’s because they want to keep their customers captive to their video services," says Vince Vittore, a principal analyst at The Yankee Group. "I tend to fall towards the side that they are trying to keep people captive."

In addition to Singel’s article, Saul Hansell at the New York Times interviewed Landel Hobbs, COO of Time Warner Cable, and Hobbs was put into the uncomfortable position of convincing its investors what it doesn’t want to admit to its customers.

Mr. Hobbs tried to strike a balance, saying that while the company is concerned about the cost to maintain its broadband network, investors should not be worried. He said it was “absolutely not” true that Time Warner’s profits were being squeezed by the cost of heavy broadband users…

“[Average Revenue Per User] continues to grow,” [Hobbs] said. “Broadband data is such a great product. I think there will be some customers who don’t use much that will select the lower tier. But over time, they will use more and move up to the higher price plans.”

Additionally, Hansell also brings up the biggest elephant in the room – why make customers pay variable costs for data when Time Warner pays fixed costs?

I tried to explore the marginal costs with Mr. Hobbs. When someone decides to spend a day doing nothing but downloading every Jerry Lewis movie from BitTorrent, Time Warner doesn’t have to write a bigger check to anyone. Rather, as best as I can figure it, the costs are all about building the network equipment and buying long-haul bandwidth for peak capacity.

If that is true, the question of what is “fair” is somewhat more abstract than just saying someone who uses more should pay more. After all, people who watch more hours of cable television don’t pay more than those who don’t.

Mr. Hobbs declined to react to my hypothesis about how costs are almost all fixed costs. He did invite me to meet with an engineer to go over the details, an offer I want to take him up on.

What may be most frustrating is that, according to Nate Anderson at Ars Technica, in “The Price-Gouging Premiums of Time Warner Cable’s data caps,” is that those fixed costs – even to upgrade the network – are quite low.

TWC claims that the caps are needed to "make improvements to infrastructure" that are necessary for higher speed access, but it's hard to see how. Comcast is aggressively rolling out DOCSIS 3.0 upgrades across its service area. In Chicago, it already sells a 50Mbps plan for $139.95—only 56¢ per GB. [Comcast has a 250GB cap across all tiers of service. –ed]

Besides, the dirty secret of these DOCSIS 3.0 rollouts is that they're cheap. Cable companies need to upgrade hardware at the head-end and may need to send out a new cable modem, but this is hardly expensive. A New York Times piece last week quoted industry insiders who said the job could be done for between $20 and $100 (the latter figure includes a new cable modem).

Landel Hobbs also issued a statement online, talking more about the specifics of the plan for Austin and the other test areas. [We had calculated our numbers in Thursday’s article based on the Beaumont plan, however the new numbers do not change the overall results much – 60GB is not that much more than 40 when you average it over 31hrs/wk. --ed] After yesterday’s deadline, we were aware of a statement by Hobbs with more specifics.

Some recent press reports about our four consumption based billing trials planned for later this year were premature and did not tell the full story. With that said, we realize our communication to customers about these trials has been inadequate and we apologize for any frustration we caused. We’ve heard the passionate feedback and we’ve taken action to address our customers’ concerns.

To be perfectly candid, Time Warner certainly had tons of opportunities to set the record straight – including with us, when we interviewed Alex Dudley, their VP of PR, before then. Either the right hand doesn't know what the left is doing over there, or this is a bit of “slight of hand” where Time Warner seems to be changing their plans based on the backlash without admitting that they're changing the plans based on the backlash.

This is a common problem that all network providers are experiencing and must address. Several other providers have instituted consumption based billing, including all major network providers in Canada and others in the U.K., New Zealand and elsewhere.

This is true, but it ignores the fact that in Canada, major network providers, such as Bell Canada, are legally required to resell the Internet connections to smaller network providers, all of which set their own rules for usage. These small network providers, such as TekSavvy have thrived because customers flee Bell Canada for the uncapped services (TekSavvy offers 5Mbps/800kbps unlimited service for $39.95CAD/mo). Bell tried to cap wholesalers' customers as well, but failed.

Additionally, services in New Zealand (where Kiwis pay an obscene $20NZD/GB) are... complex. First, unlike the U.S., the companies there have a legitimate excuse for charging more for bandwidth; as New Zealand is two islands out in the middle of nowhere, connected only through undersea cables which New Zealand's companies have mostly had to finance. (Additionally, there are political considerations, as Telecom New Zealand, which is New Zealand's largest company, has close relationships with the conservative elements of New Zealand politics. Nothing untoward or unethical, but certainly a great deal of lobbying power.)

Internet demand is rising at a rate that could outpace capacity within a few years. According to industry analysts, the infrastructure may not be able to accommodate the explosion of online content by 2012. This could result in Internet brownouts. It will take a lot of money to fix the problem.

The most famous of these studies came out at the time the Net Neutrality debate was just beginning, and it turned out to be connected to the “Internet Innovation Alliance” which essentially was a front organization for telecommunications companies.

Rather than raising prices on all customers or limiting usage, we think the fairest approach is to move to a tiered model in which users pay more if they use more.

The problem, of course, is that this does, in fact, raise prices on all customers and limit usage. Usage limiting may be de facto – via a person's ability and willingness to pay – rather than de jure, like the Comcast cap, but it is still a limit. Or more accurately, a disincentive. As for raising prices on all customers, this is the big one – the caps proposed for the higher usage customers are too low, obviously, but the caps proposed for low usage customers are also way, way too low. Customers who were doing fine on a 728kbps line but using more than 5GB/mo will find that they have to upgrade to a higher tier of service – paying more for something they don't need – in order to get to a more reasonable cap.

This is a price hike that Time Warner desperately does not want to look like a price hike.

To accommodate lighter Internet users and those who need a lower priced option, we are introducing a 1 GB per month tier offering speeds of 768 KB/128 KB for $15 per month. Overage charges will be $2 per GB per month. Our usage data show that about 30% of our customers use less than 1 GB per month.

When the bandwidth caps were announced, I used Tomato Firmware to track 10 minutes of idling – nothing except for standard windows services – no updating software, no instant messengers, no web browsing – nothing – to see how much bandwidth was consumed idling. It came out to around 2GB a month. Simply idling. I think Time Warner's “usage data” for “30%” of their customers is incorrect. We go more into this in part 3 of the series on Monday.

We are increasing the bandwidth tier sizes included in all existing packages in the trial markets to 10, 20, 40 and 60 GB for Road Runner Lite, Basic, Standard and Turbo packages, respectively. Package prices will remain the same. Overage charges will be $1 per GB per month.

We will introduce a 100 GB Road Runner Turbo package for $75 per month (offering speeds of 10 MB/1 MB). Overage charges will be $1 per GB per month.

Again, price hikes without calling them price hikes. At the very least, they're “shrinking the size of the candy bar.”

Overage charges will be capped at $75 per month. That means that for $150 per month customers could have virtually unlimited usage at Turbo speeds.

Again, we currently get that now – at $60/mo. That's really what it comes down to – for someone paying $60/mo, $150/mo for the exact same service will simply never seem reasonable.

There really are two issues here – the first is the cultural issue of bandwidth caps stunting Internet usage and development, combined with issues of making people pay twice for online content, and what can be seen as anti-competitive maneuvers against competitors of Time Warner's cable TV and VoIP offerings.

The second issue is – will people put up with being, quite frankly, price-gouged by a monopoly? We conclude with how much these data caps will end up costing you – and costing your enterprise network in terms of performance – in the conclusion to our 3-part series on Monday.

Part 2: Killing Network Performance

So, let's take a look at what Time Warner is doing and compare it to some other offerings. First, Time Warner has four plans, at four speeds with four caps. While a TW spokesman has said that people will be able to mix-and-match data caps with bandwidth plans in Austin, we'll use the Beaumont plan as an example.

Let's make some quick assumptions. First, let's assume that no user wants to go “over” their cap – that is, that whatever they're paying now without a cap, is what they want to pay, and they don't want to pay more. Second, let's assume that TW's prices do not change significantly. Third, let's assume that Time Warner makes good on their promise to bring out a “100 GB” cap for the Austin market. Considering the rate changes in Beaumont, these are probably good assumptions to make. 

Time Warner Cable Vs. The 56.6k Modem. 

Time Warner advertises speeds of 1920kB/s, 1024kB/s, 640kB/s and 96kB/s respectively for it's four tiers of bandwidth service.

However, remaining under the cap means that, on average, you only have an effective speed of 250bytes/sec under a 5 gig plan, 500bytes/sec under a 10 GB plan, 1.01kB/sec under a 20 gig plan, 2.02kB/sec under a 40 gig plan – the largest possible plan in Beaumont – and 5.06kB/sec under a theoretical 100GB plan.

5.06kB/s... versus an advertised 1920kB/s. Now would be the perfect time to point out that the top speed of a 56.6k modem is 7.08kB/sec.

Time Warner Cable Vs. “The Average U.K. Teen”

Now, you may argue with me that these are only averaged numbers, and that a 5.0kB/s might very well mean a burst of 50kB/s for one second, followed by 0kB/s for nine more.  Quite right. 

You may also suggest that “no one uses the Internet 24 hours a day,” and aside from 24 hour coffeeshops, work-in-shift development teams, roommates with day-shift and night-shift jobs, and professional networking bloggers, I would also agree with you. 

So, how much does the average Internet user actually use the Internet? I couldn't find that after some weak Googling. However, I was able to find out that the average U.K. Teen uses the Internet for 31 hours a week . I like using that number as a base, because it seems adequately conservative when trying to measure the amount that any particular household – perhaps filled with more than one teen – will use the Internet.

But even averaging out the numbers over 31 hours a week, rather than over a full month, it's still disappointing. The 56.6k modem still beats out the 5, 10, and 20 gigabyte plans at 1.47kB/s, 2.04kB/s, and 5.87kB/s. The 40 gig plan does not fare much better at 11.74kB/s – certainly beating out the modem, but not in any way being a speed you'd call “broadband.” The theoretical 100 GB cap results in 29.36kB/s average, which sounds good to a person just now getting off dial-up, but even the lowest Time Warner broadband speed is advertised at 96kB/s; the top tier, once again, is advertised at 1920kb/s.

Oh, remember one of the tricky things about using the “average” U.K. teen as the benchmark.  That means that about half of U.K. teens likely use more than 31 hours a week. 

Time Warner Cable vs. The Ghost of Internet Past

In fact, the speeds only start to become competitive if you use the Internet about 5.5 hours a week.

At 5.5 hours a week, you can get 66.20kB/s average without going over your 40GB cap, 165.49 for the theoretical 100GB cap. 20, 10, and 5 GB caps clock in at 33.10kB/s, 16.55kb/s, and 8.27kb/s respectively. None of these speeds are anywhere close to what we've become accustomed to from “broadband,” and none of these speeds are acceptable – the 5GB plan barely better than a 56.6k modem even at the highly reduced Internet usage of 5.5 hours a week.

You may ask yourself why I chose “5.5 hours a week,” specifically, as my benchmark. That's because 5.5 hours a week is the amount the average American or Canadian spent on the Internet in 1996!

I think that that’s a particularly revealing number.  After all, in order to stay under the cap, many (if not most) people will have to use the Internet less.  But what these caps do is limit TWC customers to the habits of the Internet’s early days, before YouTube, Hulu, Netflix, Skype or Vonage. 

What data caps actually do is take us back more than a decade in our cultural and technological development of the Internet. It is an attempt by Time Warner to stuff the genie back in the bottle – to cripple the Internet as a possible competitor to the television (and cable telephone) business by causing us to curb our habits back to the “bad old days” of the 1990s... and, of course, to grab an awful lot of money from those of us who simply can’t bear living in the past. 

Any customer who finds any of these bandwidth plans “acceptable for what they do on the Internet” should, instead, look into much cheaper, less stressful dial-up Internet service.

The counterargument for charging for consumption.

You could ask the question: that if we pay for gasoline, electricity and water based on what we consume, why shouldn’t we charge for the Internet the same way?  But this is based on a logical fallacy. 

We already pay for what we consume on the Internet.  We pay for bandwidth.  A 728kbps connection from Time Warner costs $30, while a 15Mbps connection from Time Warner costs $60.  And this is fine because bandwidth, not data, is the limited resource. 

Allow me to explain for those in our audience (Hi, Mom!) not familiar with networking technology:  When you lay down a network "pipe," that pipe can only send so many bits a second - this is called "bandwidth." When everyone wants to use the pipe at once, "congestion" occurs and not everyone can get all the bandwidth that they want. 

So what most Internet companies do is charge you based on the amount of bandwidth you consume. They do this by putting you into one of a number of "tiers," or "speeds." If you're willing to pay more for more bandwidth, then you get more bandwidth. This is how Time Warner – and practically every other broadband company in the United States – does things now. 

But data - data is not a limited resource. Unlike water, gasoline, electricity, there is literally an infinite amount of data over the Internet.

Grabbing data does not reduce the amount of data available to others - even though this is essentially the argument cable companies put forth when they try to blame "heavy users" for the need for data caps. What Time Warner is trying to do is create an artificial scarcity where none exists, and then charge for it.

The electric company, in essence, charges you, indirectly, for the limited resource of the coal, oil, uranium, etc, to fire the plant.  Even with wind power, you’re paying for the limited resource of wind that can be captured by windmills – wind may be limitless, but we can’t currently use 99.99% of it. We can only use the 00.01% that runs into the windmill. 

I didn't see “Quantum of Solace,” but if this helps you to wrap your head around it, what Quantum was trying to do with the Bolivian water supply, Time Warner is trying to do with our “data supply.” (Why yes, data caps are a move worthy of a Bond villain.

Time Warner vs. Comcast

Comcast also has a 250 GB cap.  No one is thrilled about it, but it is certainly more reasonable than a 40 or 100 GB cap, by far. At 250GB, the effective performance hit is 73.41kb/s for the 31-hour user. This is still poor compared to uncapped services, but at least, at 250 GB, most people won't have to worry about how much Internet they're using.

That is another thing – when you go over your 250GB cap on Comcast, you either get a warning notice, or you get your service cut – the latter certainly annoying, but at least you can go to another service. When you go over your Time Warner cap, you're being charged, GB by GB.

Because the caps are so low, it's pretty clear that that is exactly what Time Warner intends to have happen – that is, the system designs to place you into overages.

And in this system, you pay for every bit. Every annoying video ad that you don't want. Every zombie malware host probing your connection. Every pop-up ad. Even, dare I say it, every Rick-Roll.

We take a look at the costs that Time Warner customers will have to eat under the new plan in Part Three of this article.

Part One: Killing Economic Performance.

Last Thursday, we published an interview with the VP of PR for Time Warner Cable about plans to roll out data caps in the city of Austin and three other cities – Austin the most high-tech focused of the three.

In this three-part post, we’ll take a look at how at how data caps affect performance – economic performance, overall network performance, and the impact they have on your company’s network performance.

First, let's talk broadly about the economic aspects of it – Austin is a high-tech community. It is not the /only/ high tech community in America. Small businesses will end up paying more for broadband, large businesses will have trouble recruiting talent to live in Austin when they could be soaking up the bits in San Francisco, Seattle, or New York.

Austin also has a great number of game development companies, a large number of film and television interests, and we even host SXSW.

This is such a big issue in Austin, that two of the three mayoral candidates have come out with statements addressing the caps. Lee Leffingwell said:

“Right now, we need to be encouraging, rather than stifling economic recovery and growth in Austin. This plan moves us in the wrong direction. It potentially puts Austin at a disadvantage as we compete against other communities to attract, retrain, and grow prosperous businesses... The usage caps proposed in [TWC's] new plan are neither realistic nor reasonable... It’s easy to see how the costs associated with the ongoing, high volumes of Internet use that many businesses require be could be astronomical. ”

And Brewster McCracken said:

“By placing a tariff on the flow of information, Time Warner is also undermining the Internet’s fundamental values of openness and equality. More than virtually any city, Austin is a center of innovation and creativity. That innovation and creativity increasingly is taking place through digital media, video games, independent film and social media... When the city funded the upgrades to Austin Studios recently, we funded installation of terabytes of digital media bandwidth.... Time Warner’s approach could make it so prohibitively expensive to produce films and video games using digital technologies that filmmakers would have to return to celluloid and projectors and video game producers would abandon multiplayer online games.... It is not good for Austin. It is bad for the principle of an open Internet. It undermines the public interest.“

The other candidate, Carole Keeton Strayhorn, is a former Republican, and doesn't have a chance in the left-leaning Austin, so the real race is between Leffingwell and McCracken.

And these caps are getting attention at the federal level as well, with Rep. Eric Massa (D-NY) railing against the plan in the U.S. House. 

Now, when a “simple billing change” inspires the politicians to rail against it, most companies should know that they've hit a nerve. Not so, with Time Warner, which continues to use various metaphors to try to explain away the problem. As Omar Gallega at the Austin American Statesman says:

[Quoting a Time Warner Spokesman] “As the amount of usage has dramatically diverged among users, this is becoming inherently unfair and not the way most consumers want to pay for goods they consume. When you go to lunch with a friend, do you split the bill in half if he gets the steak and you have a salad?”

All right, let’s talk about that for a second.

WHAT!?

Rather than trying to compare its pricing and services to the way cell phone companies sell minutes or the way that restaurants price their food, why not stick to comparing apples to apples? Why not talk about Internet pricing trends, the cost that Time Warner Cable pays to build out its network and what wholesale bandwidth costs it has to pass on.

Quite right. So, let's talk about Internet pricing trends. Let's go back to the 1990s, in fact, when it was not uncommon to have a service like AOL, Compuserve, or Prodigy charge you on an hourly basis.

My family signed onto AOL January 2nd , 1996, for the “$10, 10 hour” service. It was when dad was getting $50 bills in the mail for AOL's “$10/mo” service that we did the research and found out about dialup “mom & pop” ISPs that allowed you to use the Internet all you wanted for a $15-20/mo fee. We went with Cybernex, and when they closed down, Cyberwarrior. (They had funny names, but local call exchanges!)

AOL's model simply couldn't compete. It went from 5 hours free to 10 hours free, to 15 hours free... 50 hours free.. 700 hours free... even, at one point, 1000 hours free. (Keen eyes will observe that a 31 day month only has 744 hours.) Eventually, AOL went to an unlimited usage model as well.

This, of course, is because there were competitors.

Time Warner, in certain markets, has no competitors. The only other broadband provider with (large-scale) data caps is Comcast, which caps at 250GB a month, a policy which came out of congestion problems and which was eventually solved through QoS prioritization of low-data customers over high-data customers.

But even then we're dancing around the issue, which is that any time you place a cap on data, you are lowering an effective performance. Sure, even at a 5GB cap, you may get those five gigs pretty quickly with a Time Warner connection. But how much more than your base rate is anyone actually willing to spend before they figure that it would be cheaper and easier to switch to a competitor (if possible) or to move out of the neighborhood (if it's not?)

We'll take a look at that question in part two of this article.

By Jeff Hicks

I recently attended VoiceCon and noticed a few trends there – who knows how they'll pan out, but here are some notes from the event.

First, Video conferencing had a very large presence at the event. Many companies are either selling or deploying solutions to save on travel and enable collaboration. Management for these solutions is in it's infancy, but it's clear that it will be needed, because right now, the stop-gap solution seems to be throwing bandwidth at it. Desktop video is going to cause major network issues as it rolls out, just as VoIP caused major issues before it.

Second, there were several Voice Management sessions. It's pretty clear that there's no longer a question about the need to manage networked communications. Many companies are taking a proactive approach with planning and management ahead of the deployment, and the need for Quality of Experience and network performance management, combined, is seen as necessary for true Unified Communications management. In fact, several sessions focused on UC management – those sessions had very good attendance and interest.

Finally, I found the Microsoft keynote really interesting. Microsoft compared the desktop phone to the “Brother Word Processor” devices, and doomed to the same fate. Microsoft proposed to the audience that eventually they will have to make a choice between spending $300 on a single function desktop phone on $300 on a multifunctional computer which runs a soft-phone communicator application. Microsoft's argument is that desktop phones are archaic and outdated.

A fair point, but the one thing about multi-function computers is that one bad program can bring down the whole bunch. Considering how important the phone is to business, it may be that people are willing to pay a price premium for the reliability that comes with a single-function device. Or not. Who knows?

Jeff Hicks is principal technical staff, working primarily in Unified Communications, at NetQoS.

That sound you’re hearing is the screaming of my soul being crushed.

All great journalists can maintain complete objectivity in the most trying of circumstances. I am merely a good journalist.

Well, I’m adequate.

But I think I should disclose my biases here, as this is an issue that affects me personally.

DSLReports.com reported that Time Warner has decided that Austin will be one of four “trial cities” to test out their new “Tiered Bandwidth” plans – which are essentially paying roughly the same amount of money you were before (give or take about $5) plus $1 for each gigabyte of data you transfer, over a set cap. The highest plan will be 100GB. Omar Gallaga over at the Statesman worries that the top plan it might not be enough for him and his family – I know it certainly won’t be enough for me.

The New York Times once estimated the wholesale cost of bandwidth to Time Warner at something like $0.10 per GB. At $1/GB, that’s a markup of 1000%

So I got upset. The Internet isn’t just how I make my day-job livelihood, it’s also what I use to transfer and upload the high definition videos that I put out on the Web for my moonlighting. It’s how I send raw footage to documentary collaborators. Since YouTube is the only affordable outlet for my work at this time, a bandwidth cap will make it cost prohibitive for me to continue as an independent filmmaker.

Best estimate yesterday was that I was I was using 400GB a month, and that my Internet service would increase 650%. Since then, I’ve actually looked at my home traffic data for the past 15 days. I’m happy to report that I’m only using 300GB a month, and at $1/GB, the bill would only go up about 500%.

(I could go for go for business service, which has no caps, but the equivalent of my current “Turbo” service, which provides 15Mbps down and 2Mbps up, would cost $280/mo. There are plans at $120, which is merely a 200% markup, but the $120 business class service provides only 10Mbps down, and 512kbps up.)

But what was even more upsetting was that I couldn’t figure out what was going on at first. I first found out about the story from DSL Reports. Calling up Time Warner customer service, they told me there was no plan for tiered bandwidth in Austin. Chatting with Time Warner tech support, they said it would start this month.

The actual truth is that monitoring end-user bandwidth will begin this month in Austin, but we won’t be charged for bandwidth until a couple months down the road.

But I didn’t know that until I literally had Alex Dudley, VP of Public Relations at Time Warner Cable on the line.

Time Warner is a monopoly in my apartment complex. I have checked – AT&T, Grande, Verizon – none of them offer service to my apartment.

I like my apartment. My apartment is very close to work, it has a nice swimming pool, and there’s a 100% lack of cockroaches. Essentially, I can’t justify staying there if I’m going to be paying $300/mo (or even $120/mo) for Internet service, compared to $60/mo elsewhere. In essence, I’m being kicked out of my home by Time Warner. (If one of your bills shot up 500%, you’d move too.)

I’m just lucky that my lease ends around the same time that TWC will be instituting these caps. It would have been cheaper in the long run to break my lease otherwise.

So journalistic impartiality? Well, I give it my best shot, that’s all you can ask of me in this situation.

One last thing before we get to the interview: We’ve covered bandwidth caps from Time Warner and others before in this publication. I really hope that if you’re interested in this subject, you read “Bandwidth Caps and the Cognitive Surplus.” In short: The Internet has finally given people something better to do than watch “whatever’s on” TV, and it’s creating a more participatory culture. Bandwidth caps are an attempt to stuff the genie back into the bottle. There’s more to it, of course, which is why I suggest you take a look at the full article.

A transcript of the interview with Alex Dudley – which at times seemed more like a debate – is below.

[The following transcript is mostly verbatim. A few words have been changed (ums, some interruptions, confused & corrected technical terms such as saying “gigabyte” when meaning “megabyte” and vice versa, etc.) so that the interview reads more clearly. Reporters following up on this story who need to verify the accuracy of the transcript are welcome to contact brian.boyko@netqos.com for details.]

---------------

Brian Boyko, Network Performance Daily: As you know, I'm a customer of Time Warner in Austin. I have the biggest bandwidth plan, I think the Turbo...

Alex Dudley, VP of Public Relations, Time Warner Cable: Turbo, yes. You like it?

NPD: Well that entirely depends on the answers to some of the questions that I'm about to ask you!

Dudley: [Laughter] It always does, it always does.

NPD: It does, you know? We've actually covered a lot of this stuff, like for example, when Beaumont, Texas came out with the 40 gigabyte plan. I actually did a couple of back-of-the-envelope calculations, and - I can't give you an exact number, but I'm pretty sure I would probably go over the largest limit - which was 40 gigabytes - just myself personally. So, I'm wondering - let's just talk about the largest plan, 40 GB - how much after that, per gigabyte does the Beaumont plan cost?

Dudley: A dollar.

NPD: A dollar per gigabyte. Here's one of the big things. I called up Time Warner in Austin, through the [customer service] number - that's the customer service for Austin - everybody I've talked to says there are no plans to do monitored bandwidth, or metered bandwidth, or data caps, or however you want to call it - there's no plan to charge per gigabyte. I called up - or rather, I chatted online with a representative - a technical support representative for Road Runner, and he said that the plan would begin for Austin residents in April. So this is conflicting-- the first question is obviously, what is the story with regards to Austin, Texas, and I assume the other plans in Greensboro, and San Antonio - is it Richmond? Let me check my notes.

Dudley: Rochester, New York. So, the plan is a little bit different in some of those places. In Austin, we are going to begin metering usage in April. But we are - let me back up. The best way to think about this is that we kind of do it in three steps. The first is that we get our technical house in order so that we can actually do this. And we start metering bandwidth. And we give customers a three month grace period, so that they can see what they're consuming, get used to the new plan, figure out the right plan for them without being charged. After which, we begin to mail the first bills. So - we are going to be technically ready to meter usage in Austin in April, and we're going to begin doing so, but we are not going to begin the grace period for a couple more months. Probably early Summer. So the first time that people in Austin see a bill is likely to be Fall. Septemberish.

NPD: I was a little concerned about that - when I heard that metering would begin in April, I thought that you would start charging in April. And - I guess not. And that was exactly what I was hoping that you'd say, actually, and I didn't expect you to say it. Because, I called up, I tried to find out my usage over the past three months exactly. I couldn't do that.

Dudley: Yeah - that's - you know, look, that's one of the keys to this. We understand that this is basically a wholesale change in the way that people talk about the way they use the Internet. We get that, that this is hard. So, what we want to do is make it as clear as possible. So - in addition to the three month grace period, we've also created what we call a gas gauge that will rest on your RoadRunner home page, so you can get instant up-to-the-minute calculation of how we are measuring your usage. And that will launch at the same time that we begin metering.

NPD: The only problem is, and as I've said, these are all back-of-the-envelope calculations - I don't have hard numbers, but personally, I'm not only a journalist, I'm also a filmmaker. I make short documentaries for the Web. And the idea is that-- Essentially, I'm sending 250 megabyte files over and over and over, so one video could take about 2 gigabytes themselves. And I'm downloading stuff like the Prelinger archives - for stuff to use - public domain footage to use in my video, I wouldn't be surprised, if you add in things like Netflix, (I'm a Netflix subscriber,) YouTube, Hulu, things like that - I wouldn't be surprised if I ended up being one of the highest usage customers in Austin. Probably - if I had to guess, maybe 400 Gigabytes - and that would cost around $400 a month - which is about... my rent.

[Ed. Note: I’ve since checked my Internet usage over the past 15 days based on what Vista’s Network connection reported during that time. A more accurate estimate would be 300 GB/mo.]

Dudley: Yeah, I think there's a number of different things that you can do. First and foremost, we are going to introduce a 100 GB plan. Kind of as a response to the folks who feel that the caps are low - we're going to offer that. We haven't finished pricing it yet, so I don't know what it's going to cost. That said, I mean, if you are using, consistently, 400 GB a month, then clearly, you're a target of what's going on here. And basically, what we're saying is - because of consumers that are using amounts like this, what we're seeing is a need for network expansion. Basically what we figure is that the top 25% of users use 100 times more network bandwidth than the bottom 25%.

NPD: Well that's just standard bell curves.

Dudley: I’m sorry?

NPD: Well, when you put any system on a graph like that, I mean, that actually seems a little low because of the 80/20 rule or the Pareto Principle or whatever it's called. When you put something on the bell curve, of course the top 25 are going to use the most bandwidth because they're the top 25. The lowest 25 are going to use the least amount of bandwidth. It seems like - funny numbers.

Dudley: Let’s use a metaphor then. You live in a small apartment. And, you're on the same electric grid as a very fancy neighborhood with big houses. And the guy in the big house leaves every light in the place blazing all night long - has a bunch of lights outside, spotlights on his beautiful house. And you have to subsidize his electric bill, just because you happen to share the network with him.

NPD: Right... but that doesn't...

Dudley: You conserve energy; you live in a small apartment, that's what we're saying. As we need to make improvements in the network to accommodate the increased demand, we can do one of two things. Either we can just charge everybody more, and we let the smaller user subsidize the top users, or we could create a plan that has a consumption element to it that asks people to pay for what they use.

NPD: Right, but that's kind of a false choice in that-- haven't you considered using -- it's kind of a false choice because what you can do is - first of all, when you talk about something like that, with congestion, the problem with the electric grid - using that as a metaphor - is that there's a finite amount of oil in the world. There's a finite amount of output. With a cable company, what you're really talking about is bandwidth, and bandwidth is simply a measure of how much you can have over time. So when you're charging for the data, basically, to use your metaphor, I think it's particularly unfair to charge more for the person who is using 40 gigabytes after letting a download go off overnight, compared to a guy whose using, maybe, under his cap, but he's doing it the most congested part of the day. And, what I'm thinking might be a solution without caps - and I was wondering if you ever considered this - is simply tracking the high-end users, and when they're downloading a lot and the line is congested, and only when the line is congested, then perhaps, throttling back their service using QoS priorities. Giving them...

Dudley: That’s exactly what Comcast did about a year ago, and it caused a complete outrage and the FCC hauled them before the committee and told them they had to stop doing it.

NPD: Actually, I covered that. That's actually the result that Comcast applied after the FCC asked them to choose a different system. You're talking about the Sandvine stuff that was sending forged RST packets and the issue there was that the RST packets looked like they had come from the sender itself, which was essentially kind of a classic "Man In The Middle" attack. A kind of a fraudulent thing.

Dudley: So here's what I'd say about that, then. What I'd say is that there are a number of ways you can address this problem. And the way that you've mentioned is certainly a possibility. We think this one also has some merit, and we're going to test it. And we'll see what happens.

NPD: Well, I can tell you right now that it probably won't work as far as congestion is concerned, because you're not attacking congestion. You're attacking data, while data is unlimited, while bandwidth is finite. And I'm already paying, as I said, I'm a Turbo customer - I'm already paying more for more bandwidth. If you want to charge me more for that bandwidth, I can go down to a lower tier in order to have it remain affordable. But, one of the things that I really can't do is, I really can't cut back on my consumption, because I do need this for both of my jobs - both this job as a journalist and as a filmmaker.

Dudley: Then it sounds like you should be a commercial customer, then, which is also possible. You know, for $140 bucks a month, you could be a commercial customer. And then there's no cap.

NPD: And can you give commercial customer service to residences?

Dudley: Yes.

NPD: That's good. That's a little bit more reasonable. Here's what I'm wondering. If a bill for a month goes consistently over, 140 GB a month - or rather the bill ends up being more than what it would cost for a commercial customer - let me start over. Basically, will customers be notified when it seems like they're going over and maybe they should upgrade to a bigger plan? Like a lot of the cell phone companies do, if they see you have like $30 worth of overage charges in a month, they'll tell you, "If you're going to keep doing this, you really should upgrade to the higher plan?"

Dudley: In the early parts of the trial, we are going to try to do that - try and alert folks when they're getting close, get them into a proper plan. But look, someone in your scenario, if you're really consuming 400GB a month, then that's not - we'll work with you on ways to curb your consumption, but clearly, if you're dependent upon it for work, you're not going to be happy with any of those discussions. So I think that for someone like yourself, a commercial account is probably the best option.

NPD: What about families that perhaps have multiple users. For me, I understand that I'm a high user, because I do videos. But the thing is, especially with services like Hulu and Netflix, and things like that - a lot of families could end up paying for one account, and everybody thinks that they're fine because they are only downloading 20 gigabytes which is half their cap, but if there's four people in the family, downloading 20 gigabytes - you start to have a problem. Will this negatively impact those larger families that need the Internet more?

Dudley: Well, I think that what you're failing to account for is that even in Beaumont, where the trial is active, 86% of our customers are unaffected.

NPD: Right, but 14% are!

Dudley: And by customers, I mean households, I don't mean individual people. So, the assumption is that the family may need more, but we haven't found that. Basically, we're targeting the highest end-users, to pay their share. So, I think that what we found is that for the majority of customers - for the overwhelming majority of customers, it's not even an issue.

NPD: Right, but 14% is a significant minority, and, I mean, my publication's called "Network Performance Daily," Chances are that my readers fall into that 14 percent. A great deal - and as time goes on, more users use the Internet for different services, and people get more Internet savvy, that 14% is just going to keep on growing. I mean, to me...

Dudley: But there's nothing to say that the plan couldn't grow with it, either.

NPD: Well, can I get your promise on that? That the plan will grow over time as Internet consumption increases overall?

Dudley: [long pause] That's a tricky spot for me. No. You can't. I don't make that decision. But what I'm saying is that there's nothing inherent in the capped levels that prevents us from doing that from an engineering perspective.

NPD: Alright. I just have to ask this stuff, and I'm sorry for putting you on the spot like that, but you know...

Dudley: Nah, this is okay. This is what I do. I'm happy to have a debate, so, it's not - no big deal.

NPD: Well, there is another aspect to this, and that is - Time Warner is a cable company that not only sells Internet service but also sells cable service - and I've mentioned services like Hulu, YouTube, AppleTV - those services - couldn't this be seen as anti-competitive? That all of a sudden it costs - you not only have to pay a dollar for a movie rental, but you also have to pay Time Warner a dollar and a half on top of that, for the extra bandwidth to make the movie rental - can't that be seen as anticompetitive?

Dudley: [pause] Only as much as it's anticompetitive for ExxonMobil to charge you the gas to drive down to Blockbuster to rent your video.

NPD: Right, but if you walk to Blockbuster, you're fine. I mean...

Dudley: That’s right, and if you stay under your cap, you're fine.

NPD: I - well you're still, if you stay under your cap, you're still charging per gigabyte - it's like... if you

Dudley: No we're not. We're charging for an allotment of gigabytes. We're charging for a monthly plan.

NPD: Right, but what I'm trying to say is...

Dudley: It has a limit. Much like you're - look, I don't know why this is such - why this is foreign to folks. You know, you're either paying for consumption... I mean, the concept of paying for what you consume is not a foreign one. I understand that it's different from the way we've charged for the Internet in the past, and we admit that. But the concept that you pay for what you use is how you buy just about everything.

NPD: Yeah, what I'm trying to say is that there's a way to pay for what you use and tackle consumption, without a data cap which has all these other side-effects.

Dudley: It's not a cap - you're thinking about it wrong. I mean we're calling it a cap, but it's not a cap. We don't stop you from consuming after you go over that cap, we just charge you differently. It's the same thing with a cell phone plan.

NPD: Yes, but it's effectively - it's a de facto cap. The argument is entirely that you are doing this entirely to get users to change their behavior. And what I'm--

Dudley: No we're not. We don't care - use as much as you want. All we're asking is that you pay for what you use. We're happy when you use - I mean, if you want to use 400 GB a month, and pay for it, we love you.

NPD: So this isn't a congestion solving problem?

Dudley: It is in -- it's a congestion solving problem in one of two ways. Either it will provide us with the revenue stream needed to beef up the network, or folks will change their consumption habits, which is entirely possible. But - it's not - that's not to say that-- it's completely content and protocol agnostic. We don't care what you download from where.

NPD: And that's great. I love that.

Dudley: I'm sorry?

NPD: I love protocol agnostic solutions - I think they're great - I just think that there are other protocol agnostic solutions that, perhaps, would be better than what you're doing.

Dudley: And if there are, and we will certainly look at all of them, then we will naturally be incorporated into this. And again, this is just a trial, so... I understand that as a heavy user, you're concerned - and your readership maybe heavy users too, and they're concerned about their personal skin in this game, and that's understandable. But I think that basically, it would be hard for anyone who consumes 400 GB a month to say that that doesn't cost us as your network provider a lot to service you. And it doesn't impact the levels of service on those with whom you share your bandwidth.

NPD: Right, but the point that I'm trying to say is that I'm perfectly fine for you charging me more, but charge me more based on the bandwidth I use, not on the data I download. You can use QoS policies - because I can't filter how congested the lines are on my end. You guys have to do that on your end. I'm just - what I'm trying to say is - yes, I'm a heavy user, but the heavy user isn't making problems for his neighbors if he's doing it when none of his neighbors are using the Internet.

Dudley: Hmm - and I don't disagree with that point, that that doesn't impact... I mean, you can't impact service on someone who is not online. And I don't disagree with that. But it still costs us money - the increased usage still costs us money to make the network able to accommodate that. And that's just a fact of business.

NPD: But you've already charged me more for my Turbo plan... You've already established, that "if you want this level of service, if you want this level of bandwidth, you're charging me for that Turbo plan." Now you're also saying, "In addition to that, you're going to also charge me for consumption?"

Dudley: That's exactly what we're saying.

NPD: Alright. No disagreement here. I know. I'm being rough. I don't like to be rough.

Dudley: No, it's okay. Look, I understand. This is a very passionate issue. It's very close to people like yourself that are heavy users. I get it. It's fine.

NPD: This corporate plan that you're talking about, how is it different from a personal plan? So, let's say that I do decide to go to the $140 a month plan.

Dudley: Just call us and ask for a business class account. And basically we come and hook up a corporate connection. It's a different customer service queue too. There are other advantages for you.

NPD: This is interesting - can we resell that? I know that residential services, you are not allowed to resell that, there was an article about someone who was trying to pull a fast one and resell 35 cable modems - with business class, am I restricted? Because I'm thinking - if it's going to be like $140 a month - that's still a pretty penny, and if I can get my neighbor to go with me on it, if he's got a Wi-Fi - if we can work out some sort of sharing deal, I have the landline so I'll maybe pay a little bit more - sort of like, "Internet Roomies."

Dudley: I don't know if that's possible or not. I'm not familiar with the service agreement on that. But they'll - just give us a call and the people that sell that service can answer that question. I mean, look, we're not interested in folks reselling our services, so I think that's what we're trying to prevent, but whether you guys could link as one business account, I don't know. I don't think it's outside the realm of possibility, but I could be wrong.

NPD: Well, thank you very much for talking - I know that I talked a lot - is there anything else you'd like to add?

Dudley: No, I think - for your readers it's different, but for the vast majority of our customers, they won't even notice a difference, and I think that - and I know that's probably not music to your ears, but at the same time, what we're doing is trying to ensure that we're maintaining a level of service that folks are happy to pay for, and if we don't make some sort of investment in this, or if we don't at least acknowledge that there's an issue here that needs to be addressed, then by the time we need to do it, it'll be too late. So this is an experiment. One of the things we're going to measure is customer reaction, so, you know, it's an important part of the process and we're happy to listen to our customers. But, you know, so far, the reaction has been what we've expected, fairly even across the board. So we'll see what happens and we'll make decisions based on what we see.

NPD: Alright, well again, thank you for your time.