In an article published on CRM Daily.com, I learned that Time Warner Cable will soon implement a new pricing strategy based on internet usage for their broadband customers. This pricing strategy will charge internet customers based on how much web data they consume. By charging more for their premium broadband users Time Warner CEO Glenn Britt believes they can reverse the mistake they made early on by not defining their business based on the consumption dimension.
As you can imagine there is outrage in both the consumer and business segments about this increase in broadband costs. There is talk among web site providers that the increase in cost will limit customers’ willingness to use such high-bandwidth services such as music and video. This lack of consumer demand will severely damage the growing markets of flash animation and website creativity. However the cable company defends its decisions to move forward with its tiered pricing by expressing the extensive costs associated with providing heavily used broadband networks.
“In the case of Time Warner Cable, customers will be charged from $29.95 to $54.90 a month, based on data consumption and desired connection speed. Customers will be charged $1 for each gigabyte [GB] over their plan's cap. Time Warner Cable offers four cap levels of 5, 10, 20, and 40 GB. A download of a high-definition movie typically eats up about 8 GB. A recent report from Sanford C. Bernstein suggests that a family on the 40 GB plan that streams 7.25 hours of online video a week [a fraction of the 60 hours Americans spend watching TV in a week] could end up spending $200 per month on broadband usage fees. And that's just for video viewing, before factoring in such Internet activities as music downloads and photo sharing. "To put it mildly," says Bernstein analyst Craig Moffett, "the decision to limit data consumption can be expected to have profound implications for [consumer] behavior."
So as the internet continues to promote the feeling for free pricing on many websites, Time Warner plans to move ahead and charge customers for their usage of internet broadband services. It will be interesting to see Time Warner Cables 8.4 million customers’ reaction to possible increases in their broadband bills.
Read the complete story at: http://www.crm-daily.com/story.xhtml?story_id=65685&page=1
I didn't realize they were moving to this pricing scheme. You could discuss it in terms of fixed/dynamic and try to classify it. It's a very interesting approach and one that I think will backfire on them. While it's impossible to evaluate the results of this new strategy, you might mention how successful or profitable they've been with the old approach.
ReplyDeleteGrade - 4.25
Dave:
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