IBM Cloud Video - leaderboard - 7-7-17
  • 5 Lessons from Time Warner Cable's Consumption Based Billing PR Debacle

    Last week, Time Warner Cable tried turning the page on a public relations debacle of its own making. Glenn Britt, TWC's CEO announced that it would postpone for now the company's Consumption Based Billing trials planned in 4 U.S. markets. The move came in response to a massive negative reaction in the blogosphere, at the grass-roots customer level, and in Congress.

    On the one hand, it continues to astound me that the cable industry, which has invested billions of dollars of its own capital over the last 15 years to lead the deployment of broadband Internet access across America, receives virtually no credit for this. Instead it is the constant object of derision and conspiracy theories about its uncompetitive behavior. Unfortunately, TWC's Frick and Frack handling of its planned changes to its broadband billing practices explains why this is so.

    Having observed the TWC billing melodrama play out over the last month or so, here are 5 lessons I think TWC and other broadband ISPs should learn:

    1. A trial must be legitimate, with well-understood objectives that are communicated clearly

    It may seem basic, but when a company runs a trial, it needs to have well-understood objectives that are communicated clearly to all constituencies. My sense is that TWC thought it was doing this, but in reality it wasn't. For example, were the trial's objectives to see how user behavior changes in response to the new billing practices? Or how TWC's network loads and costs are altered? Or maybe provide data to guide its strategy vis-a-vis new online video competitors? None of these things are cited. Rather TWC mentions "bandwidth consumption is growing exponentially," "increasing variable costs" and "Internet brownouts." OK, but what are the trial's objectives and how do they address these concerns?

    By definition a trial also needs to be legitimately trying something new to see how it works. Instead TWC makes its "trial" look more like the kickoff of a new pricing plan. So why even bother calling this a "trial" when in fact there's no indication the company is seeking to learn something through some kind of testing? If TWC wants to change its pricing, then just call this step what it is - the first phase of rollout of new billing practices. Whiffs of disingenuousness are easily smelled.

    2. Make changes in increments, targeting priority user segments first

    A core part of the reason TWC and other broadband ISPs want to switch to consumption-based billing is because some users' online video viewing is surging and ISPs justifiably want to get compensated extra for this heavier network burden.

    But if broadband ISPs are most worried about these heavy users, then they should address them first. TWC's mistake was to instead simultaneously also introduce lower price tiers and accompanying consumption caps and overage charges. As a result, instead of a contained minority of its users being affected by the new policy, everyone was. That type of comprehensive approach may have seemed smart in the planning process, but in the execution stage, it's very hard to pull off. Comprehensiveness dissipates the main issue - addressing heavy users - while drawing in outside advocacy groups and politicians to plead for everyone. That's a no-win position.

    3. Be prepared to justify the billing changes with specific financial information

    TWC argued vaguely that rising network costs were behind the need to change its billing practices. That may well be true, but by not disclosing more specifics, the company left itself vulnerable to naysayers. For example, in this NY Times interview, TWC COO Landel Hobbs was thrown some questions about whether in fact much of TWC's costs are fixed. He should have been prepared to respond in detail, citing specific capex or opex numbers that can be correlated with heavy video usage. Instead he ducked the questions, deferring them to a subsequent interview with an engineer. All of that leaves the reader suspicious about his arguments' legitimacy.

    If a senior executive is going to be offered up for a NY Times interview, he should use the opportunity to make the strongest case possible for the planned change. In the wake of the Wall Street financial crisis, people increasingly expect accountability and transparency from senior executives. Poorly understood corporate decisions by fiat are prime for backlash.

    4. If billing is to be metered, make sure customers have the ability to measure

    Here again is PR 101 - if you're going to change to metered billing, customers need to know how they can measure and modify their usage. But TWC offered no specifics about the availability of a useful meter, or any demo of how it would work. Instead it said it would offer a grace period of 2 months on overage charges.

    Talk about an impractical plan. I think most people understand and like the idea of variable pricing - paying just for what's used. But if they don't have to right tools to measure their usage, the model looks hollow. TWC ultimately acknowledged it is "working to make measurement tools available as quickly as possible." Hallelujah.

    5. Billing changes need to be tied to online video policy

    Simmering just below the surface of the billing change backlash is a suspicion that TWC is introducing these caps to constrain online video usage. You don't have to be a conspiracy theorist to understand that if an ISP like TWC charges more for access to 3rd party delivered video it will limit is use. TWC should have known it was prime for this allegation and been proactive about how it relates these 2 issues.

    For example, what if TWC had acknowledged that some users prefer online program access, and that if they select its top capped rate of $150/mo now they will be forever grandfathered into that rate, even as their video usage grows further? Only a minority of users would have likely taken the plan, but it would have helped TWC demonstrate acceptance of 3rd party delivery.

    Conclusion

    I'm not suggesting any of this is easy, but it is necessary. Broadband ISPs are operating under a microscope these days as online video becomes more central to more users' everyday Internet experience. Broadband ISPS like TWC which want to change their billing practices need to do so in a thoughtful and pragmatic manner. Over the past 2 weeks we saw what happens when they aren't.

    What do you think? Post a comment now.

     
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