Over on austin360.com, Omar Gallaga is reporting that Time Warner Cable have annolunced the tiers they are going to use for capping and overage-charging for their broadband cable offering. For the last couple of weeks this has been a hot topic on the interweb thingy, and has generated piles of bile, some useful analysis but much of it missing the point.

There is no doubt, there are out there amongst us interweb users, some leaches and obsessive, compulsive overachievers. In opposition to the TWC changes people are marching out all sorts of claims and justifications for being big-data users, why they are the “bleeding edge”. What they do today, will be the norm’ in a few years time. Well, that maybe, but probably not.

Time Warner Cables business model is under attack on all fronts. They are doing what all nascent monopolies do when under attack, they push the boundaries of what can get away with. This usually more broad in America than in Europe, because America is the great defender of free enterprise, freedom of choice, and commercial innovation. No amount of facebook pages is going to change that.

Only, we just don’t have any of those things really when it comes to digital communication. Cellphones here in the US are restrictive, expensive, fragmented and fine examples of monopolistic practices. Some of the best cellphones in the world are now crippled when sold outside the US, so that when they are used in the US, they don’t get full network, 3G speeds, meaning the “network” operators can charge and tie you to multi-year contracts, oh and it’s OK coz we get “free” phones.

Cable TV here in the US has hardly changed in 30-years. The addition of HD has been done in a haphazard, fragmented way with no real innovation. Unlike Europe where broadcast, often free to air, HD offers many more channels and multi-screen viewing, interactive services etc. See for example what Sky and the BBC have done with that little red-button in the UK. Why is it for example, that when watching a “home shopping channel” you have to dial 1-800 and wait, press buttons and speak to a person? Broadband, is bi-directional you know…

When the cutover to broadcast HDTV happens here in the US, it will be a pure swap, no new advance services, just the same old channels, mostly showing repeat programs(not in HD) and thats about it. What most Americans will find is that the signal will break up frequently during rain storms and other bad weather thats affects b roadcast quality. Unlike conventional TV(non-digital) though, you won’t get a degraded picture, you’ll get nothing at all.

And so, back to Time Warner Cable. I’m a triple play subscriber. I don’t watch much TV, mostly I record a few shows per week and only watch them on Sunday evenings. I have my home phone service through TWC, although heaven knows why. No one has the number, and I don’t use it for outgoing calls, especially now I don’t work from home. Many people don’t have “home” phones now, they use their Cellphones, I should join them, except my cellphone has no docking station and really isn’t suitable for a 2-hour conference call using any kind of headset.

Here is another example of lack of innovation in the US. When was the last time you saw a phone in the US that was your cellphone when outside the home, and when inside the home, used the broadband service to connect rather than wireless, and allowed you to switch seamlessly between the two as you walk out of the house, without dropping the call?

I think that in the 2.5 years I’ve had my TWC service, I’ve watched maybe 5 on-demand movies. This is an area that most people focus on when analyzing the effects of broadand usage capping by TWC. It’s clear, isn’t it?

TWC have every reason to stop you downloading legally or otherwise, movies from the Internet or watching them online. If they can stop or price that to discourage, THEY can charge you for the same movies, either through subscription channels, or on-demand.

So, lets recap. TWC offers four services:

– Basic cable inc. subscription channels
– Basic internet cable broadband connectivity, soon to be tiered by usage
– Landline telephone service(wired)
– On-demand movies(chargeable)

The threats to their business are:
– Declining use of basic cable, subscription channels and on-demand movies because people get their entertainment elsewhere.
– Telephone service is under attack from cellphones and VOIP, Vonage, Skype etc.
– Basic broadband is underattack from “unlimited” subscription and pre-pay cellphone data plans, 802.11 wireles in coffee shops, down at Austin City hall etc.
– Basic cable is stagnent, uninteresting, overloaded with cheap promotional shows and home shopping networks and 24-hour news channels that basically make the news up as they go along.
– Consumers are also increasingly savy, well you’d hope so. What many realize is that it’s all data. The cable you watch, the telephone calls you make, the on-demand movies, even if you do everything the TWC way, it all arrives and leaves your house as data.

So, here we have a high-noon showdown. The customers don’t understand why part of their data service should be metered and priced seperately from the other parts of the same data connection. The cable company, in this case, TWC, is playing the typical, dumb, fat and happy monopoly that can and will charge as it sees fit, easy things first and trying to paint a small section of their customers as the problem.

TWC should be forced to compete for my business, not get it on a plate. After all, if I don’t subscribe, I can’t get anything back for the ugly, 1920’s style cabling and poles that litter my street, having to have the trees cut back to protect their golden-egg.

First, TWC should be forced to unbundle it’s TV service. The cable channel selections should be offered in more flexible groupings or by individual channels. It is simply way past time this should have been done. I’d pay a premium for about 8-channels total and would prefer more bandwidth than more channels.

Second, the broadband service offered by TWC should be split into two. A bulk data backbone service and a last-mile service. The bulk data backbone service has to be sold, on a tiered/metered service to companies that handle the last-mile service. TWC is more than welcome to compete as a last-mile provider. Yep, this is effectively turning TWC backbone into a “utility” by the back door.

Third, irrespective of the first two, the home telephone service offered by TWC should be unbunlded. If the first two recommendations are adopted, this becomes largely irrelevant as the last-mile providers will need to provide advanced services, or just compete in race-to-the-bottom cheap pricing. If race-to-the-bottom pricing is the only innovation, then overtime TWC will just rebuild it’s monopoly through acquisition. This is exactly what allowed AT&T to come back from near death to semi-monopolist(and yes, I know it’s not the same AT&T and it didn’t really come back, it’s just branding, but the point remains.)

Fourth, again irrespective of the first three, TWC needs to design, develop and deliver REAL digital cable offerings. This isn’t just the same old channels and a 1980’s style programming guide sent down a digital channel. It’s interactive TV; it’s online HD games delivered without a PC or gaming system; it’s an interactive YouTube channel; it’s interactive news; it’s bidirectional video calling; it’s something that America and especially here in Austin we could be proud of.

Arguing about broadband caps/tiering, overage pricing is just missing the point, and will end up in tears in 10-years time, TWC will be the next GM looking for bailouts to subsidize it’s “essential” services. And please Omar, suggesting stimulus money now for TWC is just rubbing salt in.