Netflix, Hulu Users: Usage-Based Internet Is On The Way… Or Not?

    December 1, 2011

The Internet sky is falling, says the Internet. But that isn’t exactly true. Not yet, at least.

An analyst with Sanford C. Bernstein & Co. in New York, Craig Moffett, was quoted in Bloomberg yesterday for predicting that at least one of the major cable operators, probably Comcast Communications or Time Warner Cable, will initiate a usage-based payment scale next year for Internet-loving customers. He anticipates the change in billing plans due to the growing number of Internet users watching more and more movies through services like Netflix and Hulu. As more cable subscribers cancel their service and defect to watching videos online, cable companies are looking for ways to minimize the attrition of customers. Through a usage-based service plan, all of those Netflix and Hulu flicks you’ve been watching online will start to be reflected in higher bills if you watch enough of them.

But don’t go updating your Netflix plan to resume receiving DVDs via mail just yet.

One, this pot has boiled once before. Time Warner had a go at testing “Consumer Based Billing” in 2009 but nixed the plan after the public made it patently clear that they disliked this idea. In their statement after the fall-out, Time Warner stated “that it is working to make measurement tools available as quickly as possible. These tools will help customers understand how much bandwidth they consume and aid in the dialog going forward.”

Yeah, because customers can’t wait to pay more to use the Internet just to find out how much bandwidth they consumed while plowing through the final three seasons of Lost.

Ultimately, it’s likely this strategy from the cable companies will be regarded as an attempt to wrest back their subscribers that have migrated to the Internet in search of their viewing pleasures. In an editorial he wrote for the Wall Street Journal earlier this year, Netflix General Counsel David Hyman said changing to usage-based billing services “is bad news for consumers and threatens to slow down the innovation powering today’s Internet economy.” Added to that, consumers have grown accustomed to free Internet since… well, since the Internet. An effort from cable companies to apply a limit on how much customers can use the Internet based on how much they pay – even if those customers could technically afford it – is likely to go over about as well as the last time a company tried this.

Despite the gloomy prediction that our land of Internet-y milk and honey may soon come to an end, the Bloomberg piece did conclude with a spell of optimism:

Cable’s best option is to find ways to profit from the online shift, said Moffett. If the companies were to lose all of their video customers, the revenue decline would be more than offset by a lower programming fees and set-top box spending, he said.

“In the end, it will be the best thing that ever happened to the cable industry,” Moffett said.

So tell us: would you be willing to pay for your Internet use based on your amount of usage?