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By Steven Levy
Wednesday, January 30, 2008

If you are an Internet-crazy movie lover in Beaumont, Tex., life may soon take a miserable turn for you.

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Time Warner Cable, which also sells broadband via its Road Runner service, has chosen your city for a pricing experiment. If you have plans to sign up and watch lots of high-definition flicks using, say, the new iTunes digital rental program announced last month, start saving now, because Time Warner is going to tally up those gigabytes. You know that feeling that mobile phone users get when they exceed their allotted minutes and get a heart-stopping tariff for overage charges? Some Beaumont cinephiles could get the same infarction from their Road Runner bills.

The experiment doesn't necessarily mean the rest of us will soon see a dramatic change in the way we pay for our broadband Internet; cable giant Comcast says it's also evaluating the concept, but other broadband providers aren't indicating they'll adopt the scheme. (They all have their own ideas, though, about getting returns on their broadband investments.) But Time Warner's move illuminates some of the troubling issues facing the United States in the Internet era, where, in terms of penetration, we are in 24th place -- behind Estonia -- in the international broadband competition.

The news broke about Time Warner's plan from a leaked internal memo that company spokesman Alex Dudley confirms as genuine. The Beaumont trial will be a test of "consumption-based billing." The reason for the change, he says, is that some users are unfairly piling up gigabytes of goodies on their digital plates. "As few as 5 percent of our customers use 50 percent of the network," he says, adding that these bandwidth hogs are commonly denizens of seamy peer-to-peer file-sharing networks; one of these gluttons downloaded the equivalent of 1,500 high-definition movies in a month.

It sounds reasonable for Time Warner to ask big-time freeloaders to pay their way. But talking to Dudley, I get the impression that it won't just be flagrant over-indulgers who wind up paying more. Indeed, he acknowledges that TW hopes such a plan will get all its customers thinking about how much media they consume on the Net. TW envisions offering plans capped at 5, 10, 20 and 40 gigabytes. Five gigs gets you barely two movies and a couple of TV shows, not counting the normal Web surfing, music streaming and e-mail. Clearly it won't just be inductees to the LimeWire Hall of Fame who are hit with excess charges.

Those penalties could be rough. Bell Canada, which meters service in some plans, charges customers who go over the limit $7.50 per additional gigabyte. (The Canadian dollar is worth about as much as the U.S. version these days.) That would jack up the $2.99 iTunes rental fee for "The Magnificent Seven" by 10 bucks. A high-def movie, typically 4 gigs, could cost you $30 more. (Bell Canada offers an Unlimited Usage Insurance Plan for $25 a month.)

You would think that consumer activists would be lining up against this idea, but some are holding their fire, largely because the experiment will measure how many bits a customer uses but doesn't care where those bits come from. This is in contrast to behavior that violates the principle of "net neutrality," which asserts that providers shouldn't be able tilt the digital playing field to favor their favorite Internet services (i.e. their partners or those who pay them). Digital populists are more concerned with pressuring the FCC to enforce its principles that ban companies from selectively blocking Internet content. In the wake of one possible violation -- Comcast slowing traffic involving certain peer-to-peer transmissions -- several groups have petitioned the agency to adopt and enforce more specific regulations. Metering isn't seen as part of that problem.

There is, however, a net neutrality angle to the Time Warner Cable experiment. As its name implies, this operation's main interest is cable television. An increasingly important component of that business is distributing video on demand. TW's competitors in that arena are Internet companies that intend to do the same thing. The TW plan tilts the field in its own favor. Let's say I want to watch the indie film "Waitress." I may have the choice to order it on my cable box or rent it from iTunes. Each might cost me $3. But if I'm metered, renting it from iTunes might mean that I exceed my monthly limit, perhaps incurring a penalty that's more than renting the movie.

A more profound problem with the metering scheme, however, doesn't involve corporate competition but international competition. In the United States, where the Internet was born, we pay higher prices (seven times what they pay in South Korea) for slower speeds. (Japan's users surf 13 times faster.) Though President Bush promised affordable broadband for all by 2007, tens of millions are still stuck with dial-up.

Fast, cheap, abundant broadband is a fantastic economic accelerator, enabling breakout businesses and kick-starting new industries. Unless we move quickly, these will spring from foreign soil. Instead of testing systems that discourage people from vigorously using our overpriced, underpowered systems, government and industry should be working overtime to figure out how to get faster service for less money and make sure that all users, no matter where they live, have affordable access to the high-speed Net. Maybe then we'll get out of 24th place.

Steven Levy, a senior editor atNewsweek, can be reached atsteven.levy@newsweek.com.


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