The Case For Time Warner Cable's Tiered Pricing

Consider, however, that in the not-too-distant past, electricity and telephones were considered luxury items only for the well-heeled.

The recent experimental Internet tier pricing program by Time Warner Cable (TWC) has generated outcries from the public and from consumer advocates. TWC is testing the program in five markets, offering 5 GB of downloads for about $30 a month, with other pricing plans for smaller and larger amounts, which is a deviation from its standard flat-rate fee. Exceeding that limit will cost a user $1 per GB.

Consumer advocates are denouncing the pricing model as inequitable to the poor and working class. They have also made the case that many standard home users may not be able to accurately gauge a gigabyte of data.

Solid arguments. But the bottom line, of course, is that cable companies like TWC are looking for ways to recoup losses from the hordes of people that are moving away from cable TV and onto the Internet as their primary source of entertainment and information.

Yet, the popularity of accessing streamed content is not letting up anytime soon. Should a user downloading 17 hours of movies pay the same usage rate as someone who occasionally checks e-mail?

These cable companies are also probably watching closely the Software-As-A-Service trend. Potentially big profits can be made from businesses that do a lot of computing in the cloud if this pricing model becomes the norm for Internet providers to charge for access.

Those using the most bandwidth would pay the most. Ideally, TWC and other providers would be in a better position if they reduced even further the cost of lower-tiered plans. This way, the average home user, for whom 5 GB of download per month is pretty sufficient, would see savings, and the top 5 percent of users who consume 50 percent of the bandwidth would pay the higher rate.

Wishful thinking? Perhaps. However, this type of data plan structure is already carried out by many of the cellular companies. With Verizon, if you go over the "unlimited" limited amount of 5 GB in a cellular data plan, you are going to pay dearly for that excess.

The Internet has become a utility. It is becoming more central to the average person's life for entertainment, information and for communication. Once it became possible to deliver electricity to the masses, companies found a way to meter usage and charge for it. A portion of those charges go into keeping up the infrastructure so that the utility can keep being offered to the masses.

As with any other utility, the more you use, the more you pay. Should the case be different with Internet usage?