I recognize that the Time Warner broadband capping issue has been settled for now. But this will continue to come up. If not here, elsewhere. If not Time Warner, then some other company. So yes, I think this is still important.

A letter to the editor in the paper this week reflected a view that I’ve seen a few times now. The point was essentially that Road Runner customers should stop griping and pay their fair share. People hogging data should not be depriving others and should be paying more. It’s tempting to just dismiss these assertions as counter-rants from people who aren’t using much data and or people who are buying the Time Warner company line. But I think the larger issue here is a lack of understanding about how the cable based data network functions.

I really don’t disagree with the idea that data network service should be usage based. In fact it already is. Dial-up is cheaper than DSL. DSL is cheaper than Road Runner basic. Road Runner Turbo is more expensive still. In fact, I’d be happy to pay a premium to get the 50mbps service enabled by the DOCSIS 3.0 upgrades TWC is promising. The difference here is that you are paying for speed, which is a far better metric than data volume for what taxes the network.

In some senses, the Road Runner connection into your neighborhood and to your house is a bit like water delivery. There is a pipe that’s only so big that feeds the neighborhood. There are then smaller pipes that bring water to each house. However, when they design the system, they don’t do it such that the neighborhood feed can handle every house in the neighborhood opening every faucet all at once. If that happened, then the water pressure would fall for everyone, as the system is saturated.

The cable data network is similar. The feed to the neighborhood can only carry so much data at once. If the whole neighborhood decides to download a movie at once, then the data feed slows down for everyone. But the key here is that it is the speed that suffers. Everyone still gets all the data they requested, it just takes longer to get it all through the “pipe”.

On the other hand, if you’re up at 3am and decide to download the entire 1st season of Battlestar Gallactica, likely none of your neighbors will even notice. They’re all asleep and the network is otherwise idle. Now this is where the water analogy breaks down. Water is a finite resource. It costs some amount of money to filter and pump each gallon of water. But data has no such finite constraint. The network equipment is there and working whether you are using it or not. It doesn’t even draw noticeably more electricity when it’s active. The volume of data is essentially free. It is enabling the simultaneous bandwidth that costs money, and this is most closely linked to speed, not volume.

More specifically, the issue is speed during peak usage hours. That is, if the network’s bandwidth hogs are doing most of their downloading in the evenings, then their usage is crimping their neighbor’s service. But if, like me, most of their usage is during the business day and overnight, they very likely aren’t hurting anyone, service-wise or financially. So again, simple volume is a bad metric. I suppose an even more fair plan would be to charge more for usage during peak hours, but that would be a real pain to measure and bill.

Now TWC is also claiming that one of the reasons they need to impose these additional usage fees is that they need money to upgrade their network to DOCSIS 3.0. They are absolutely right that this will require additional funds, although as it’s a “head-end” upgrade (doesn’t involve laying new wires or cables), it’s not nearly as expensive as they would have us believe. But the larger problem is that business simply doesn’t work this way.

If I think people will pay a premium for being able to get milk and bread on the corner rather than running out to Wegmans, then I need to build a store and stock it, and get my money back through sales. I don’t collect money from the neighborhood in order to build the store. In a similar way, if TWC thinks DOCSIS 3.0 service will sell at a premium (and I’m sure it will), they pony up the initial investment, and then charge those of us who want the service.

Bottom line, we already pay for data service on a usage (speed) tier. If TWC wants to further tier their service with lots of speed options, both higher and lower than basic service, then great. They should do that. But their current proposal of going to volume based tiers would be like the Postal Service deciding that postage will be charged based on the size of the letter or package. While size is not wholly unrelated to delivery cost, it’s not as good a measure as weight. Likewise, data volume is not wholly unrelated to usage cost, but it’s not nearly as correlated with it as speed.

All of which brings us back to asking why TWC is opting for a less correlated pricing model. And the answer again comes back to the reality that scaring people out of using online video and 3rd party digital phone service is a great way to assure that they can sell those same scared customers TWC’s TV and phone service. And therein lies the unethical rub.

UPDATE:
In related news, I ran across these two articles dealing with broadband service in general and TWC in particular after the above was written. Read about how the UK is dealing with a similar issue. Also read about TWC telling the FCC to shut up about net neutrality when discussing the federal stimulus package’s broadband money.