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Time Warner Cable Considers Usage-Based Internet Billing

Time Warner Cable Inc. (TWC), the second- largest U.S. cable-television operator, is testing technology to measure consumption-based billing for broadband Internet use, said Chief Executive Officer Glenn Britt.

The New York-based company is working on installing meters in its network that calculate Internet usage, Britt said in an interview yesterday at the National Cable & Telecommunications Association’s show in Chicago. Time Warner Cable hasn’t decided if it will introduce the system, he said.

Moving from a flat fee to consumption-based billing will likely allow consumers who use the Internet for just e-mail and basic searches to pay less, he said. The service may affect companies like Netflix Inc. (NFLX) that require consumers to use large amounts of bandwith to stream video online. Heavy users of Netflix may find themselves paying more.

“It really depends on the bandwidth caps,” said Michael Pachter, an analyst with Wedbush Securities in Los Angeles. “Think of it exactly in the same terms as minutes on your cell phone.”

Time Warner likely will charge fixed amounts for specific levels of service. In that scenario, consumption-based billing probably would only affect Netflix customers who watch streamed content for more than the average of eight hours per month, he said.

Netflix doesn’t object to charges that Internet providers need to cover the cost of increasing bandwidth capacity, Chief Financial Officer David Wells said on a June 1 conference call.

“So as long as they’re doing it for network optimization and traffic shaping, and sort of the honest portions of being a network owner, it’s fine,” Wells said. “But when they’re doing it for anti-competitive purposes, I don’t think that’s in the interest of anyone.”

Time Warner Cable fell 70 cents to $73.18 at 4 p.m. in New York Stock Exchange composite trading. The shares have added 11 percent this year.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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