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Created 6/14/2008

Broadband Library: Two Sides to Every Story: Spring 2008 (March)

Broadband Library is distributed quarterly to all members of the Society of Cable Telecommunications Engineers (SCTE). Beginning in early 2007, our column "Two Sides to Every Story" has used opposing pages to present contrasting viewpoints on a cable/telecom industry topic.

Our column in the Spring 2008 issue discusses recent moves by the cable industry toward tiered pricing after many years of selling broadband services at a flat monthly rate.

In MSOs Are Paying the Price for "Unlimited Use", Dave says MSOs should never have promised "unlimited flat rate". He describes how Prodigy fell into the same trap and then tried to change the pricing structure: "Having started with a strong and successful 'flat rate' message, Prodigy lost the confidence of many of its early users, who felt they were doing exactly what the pricing plan encouraged them to do. They left Prodigy for other online services, and soon moved to Internet service providers offering unlimited plans . . . . MSOs now face the same dilemma as Prodigy how to limit the impact of the heaviest users without antagonizing the rest."

In Simple Pricing Kick Started the Cable Modem Market, Sandy says flat rate pricing was necessary at the birth of the broadband industry: "If MSOs had launched using usage-based pricing schemes, the uptake of cable modem service would likely have been substantially slower. The broadband market would have grown slower and MSOs would probably not have achieved their early market lead. . . . [O]perators need to get more revenue from users who impose heavy demands on network resources at peak load times. The challenge will be to develop mechanisms that give customers increased value for paying more, don't run afoul of public policy considerations, and don't chase the most loyal and profitable customers into the waiting hands of the competition."

Next: Our column in the Winter 2007 issue discusses our different views of the roles the cable and telephone industries would play in the evolution of broadband services.