Authentication

Now, Comcast and Time Warner are about to start a trial with about 5,000 cable customers that would give these households access to TV programs on the web. Of course, the real test here is not whether the cable companies can deliver online TV over their networks, but whether they can figure out a good way to 'authenticate' households that have a cable subscription.

Spin: More Choice for Customers

As Om Malik points out, this also opens up the door for possible anti-trust proceedings against the large media companies that are involved here. For now, it looks like Comcast and Time Warner will be working together on this project (Time Warner uses the name TV Everywhere, Comcast calls its system "OnDemand Online"). In this limited first test, Comcast will carry some programming from Time Warner's TNT and TBS networks.

As expected, the cable companies are spinning this as an innovative agreement that will bring "customers exponentially more free content, more choice and more HD programming online as well as on TV." In reality, of course, this project is simply a way for the cable companies and networks to protect their revenue streams.

There is, however, also some truth to the cable companies' claims. A lot of cable networks do not put any of their content on the Internet, as the networks don't want to jeopardize the lucrative income stream they currently receive from the cable companies.

Hulu, the Elephant in the Room also Wants to Play

As of now, free TV programming online isn't going to go away anytime soon, but as PaidContent reports, Hulu, the most visible online TV site, is also looking into subscription models and the executives there might not be averse to joining the cable companies' authentication schemes. At some point in the future then, your cable subscription might determine which shows you can watch on Hulu and similar online TV sites.

Earthlink to the Rescue?

Chances for a revival of AOL's dial-up business, which was once almost synonymous with 'the Internet,' are probably pretty low and the same goes for its subscription services. If anything, as Marguerite Eardon speculates, EarthLink might be interested in picking up what is left of AOL's dial-up services. On the other hand, Time Warner has already been shopping AOL around since at least February and apparently has not found any buyers yet. While there is still a sizable number of people who do not have access to broadband services, dial-up service is simply a dying business.

Time Warner will probably hold on to the advertising side of AOL, though. After all, it is still a growing business. AOL also still has a number of other profitable content and service properties like its AOL Mail and Messenger, though Time Warner also apparently decided to shutter some of AOL's less successful business like XDrive and  AOL Pictures.

The usage capped broadband, meanwhile, is going to be tested sometime in the next quarter in Beaumont, Texas. So for the time being, the two services won't overlap.

According to Time Warner, the reason for the trial of usage based billing net access, is because the growing popularity of online video is causing congestion on their network. Why, then, introduce a service at the same time that will only serve to increase the amount of online video being downloaded over your network? Of course, by tying the HBO service to the Road Runner broadband service, Time Warner is essentially passing the cost of a "free" product to consumers by raising rates elsewhere.

If Time Warner wants to encourage users to stream more video over its network, it can't also penalize users who stream more video over its network.

As Ars Technica points out, the whole thing is short-sighted. Per usage billing won't fly with consumers who have unlimited use broadband options elsewhere, and competition is only going to get stiffer for the cable industry. Verizon, for example, has no plans to try usage caps with its DSL or FiOS services, and on the horizon we can look forward to 4G wireless broadband, a possible wireless broadband service on the 700MHz spectrum being auctioned off starting this week, and Sprint's Xohm WiMAX network. Not to mention continued roll-outs and improvements of Verizon's FiOS and AT&T's U-Verse services.

"Instead of developing plans designed to discourage consumers from feeding at the bandwidth trough, cable companies would be better served in the long run by making investments in new technologies like DOCSIS 3.0 and the kind of infrastructure improvements necessary to meet bandwidth demands," writes Ars Technica's Eric Bangeman. It seems likely that in the face of competition and potential consumer distaste over proposed usage limits and practices like bandwidth throttling, cable companies may be forced to make just that type of investment, even though it might be unpopular with shareholders.

The company is expected to roll out a test of the pricing scheme sometime next quarter for new customers in Beaumont, Texas.

Even if just 5% of users are currently considered high bandwidth consumers, as Time Warner is quick to point out, activities like streaming video are growing in popularity. Charging per usage -- and effectively penalizing high bandwidth users -- may only serve to stifle the growth of rich media on the web, even as things like the new Apple TV and the unlimited Netflix streaming plan seek to push these activities into the main stream.

We expect that most users won't be happy with the idea of being charged based on usage. Even those who might actually save money may initially respond negatively -- psychologically, unlimited use sounds like a better deal than being charged by usage.

Outside of the US, in Europe and in Australia, I have many friends whose broadband plans have usage caps of a few GB of data transfer each month. They often complain to me about the inconvenience of having to plan and monitor their Internet usage to make sure they have enough data transfer left to do the activities they want to do. It is unlikely that consumers in the US, who have so long enjoyed unlimited data usage, will be open to a change to per usage billing.

But which is a better option, per usage billing where the more you use, the more you pay, or data throttling, where certain activities are just made automatically slower at the ISP level? Are there any other solutions that ISPs should be considering to keep network congestion in check and costs down? Let us know your thoughts on the subject in the comments below.