$5 discount to give up unlimited data? Time Warner Cable customers say “no”

30GB data meters not appealing, nearly all customers reject them.

Jon Brodkin – Mar 13, 2014 1:05 pm | 203

Time Warner Cable has been offering customers $5 monthly discounts in exchange for giving up unlimited data for the last couple of years, but almost no one has taken the company up on its offer.

Time Warner Cable CEO Rob Marcus spoke at Deutsche Bank’s Annual Media, Internet & Telecom Conference yesterday, saying that only “thousands” of its 11.5 million subscribers have opted for metered billing.

“I guess about two years ago we rolled out a 5GB-a-month service. Since then, roughly six months ago, we rolled out a 30GB-a-month service across the entire footprint, and if you buy that service you can save about five bucks a month off the unlimited product,” Marcus said.

Marcus argued that the 30GB product is a good deal even though few people want it. “If you take the 30GB a month and compare that to median usage, which is high 20s, let’s say 27GB a month, that would suggest that a whole lot of customers would do well by taking the 30GB service. Notwithstanding that, very few customers, in the thousands, have taken the usage-based tier. I think that speaks to the value they place on unlimited,” he said.

Another likely reason is that $5 a month isn’t enough of a discount to justify the risk of a data meter, particularly as Internet services become more bandwidth-intensive. TWC charges $1 for every extra gigabyte, “not to exceed $25 per billing cycle,” the company says. That means three months of heavy Internet usage could more than wipe out a whole year’s worth of savings.

The good news, Marcus said, is “we plan to offer unlimited for as far out as we can possibly see. I think that the concept of ‘use more pay more, use less pay less,’ is an important principle to establish. So notwithstanding the low uptake of usage-based tiers, I think it’s a very important component of our overall pricing philosophy.”

TWC is in the process of being purchased by Comcast for $45.2 billion. Comcast has been moving aggressively toward usage-based billing, so Time Warner’s approach could change after a merger. On the other hand, US regulators could theoretically require TWC to continue offering unlimited plans as a condition of the merger.

Marcus also briefly discussed customers avoiding modem lease fees by purchasing their own equipment. About eight percent of customers are doing that. “We’re comfortable either way,” he said.

He was also asked about competition from Google Fiber. “We take them seriously. They’re a real competitor,” he said. “Although the numbers are very small, it’s an attractive product and simply by virtue of the fact that they don’t have the incumbents’ baggage and they have the Google brand. They’re real guys we have to pay attention to.”

Customers in Kansas City and Austin are lucky that TWC is paying attention to Google Fiber. Time Warner has increased speeds and deployed Wi-Fi products more aggressively in those markets to compete against Google, Marcus said.

For communities that have no competition, there isn’t as much incentive for TWC to improve service. The Comcast merger won’t change that. As Marcus noted, TWC and Comcast don’t compete against each other in any US city or town.