You know that image you have of the Internet as a free-flowing river of information delivered swiftly, like a mighty rapids of 1s and 0s that erode firewalls and corporate filters? Forget it. According to The New York Times, broadband service providers are testing usage-based pricing models that would act like dams forcing the heaviest users to pay much more than they do now.
Called metering, the idea is to charge users for the data they consume in the same way that electric and water utilities charge by the watt or the gallon. Spend your days online, and you'll pay more than your neighbor who likes to run trails.
When did Ma Bell get here?
We've seen this before. AT&T and Verizon
Consider the case of Time Warner Cable, which is already testing usage meters in South Texas, the Times reports. Customers who sign up for a "light" plan get $5 back on their bill if they don't exceed 5 gigabytes of usage per month -- great for anyone who doesn't download more than two high-definition movies during the billing period. Everyone else can expect to pay an additional $1 per extra gig used.
Or maybe regulators are to blame. In May, FCC Chairman Julius Genachowski spoke out in favor of usage-based pricing, saying it would "help drive efficiency in the networks," with more efficiency implying more competition and lower prices. All of which sounds great until you realize that consumers pay wireless carriers more today because of tiered data plans that look better than they are.
Stuffing the pipe
At first blush, usage-based pricing seems fair. Pay for what you use, period, just as you would any other service delivered on demand. The problem is with who sets the pricing and what else they control.
See, cable and satellite companies supply most of the piping for Internet service. Pricing broadband that carries Amazon.com's Instant Video, Skype, or the like below or even at the same price as their own competing network offerings -- all of which were custom-designed to deliver similar communications and entertainment programming -- could threaten profits. Adopting usage-based billing would be a blunt-instrument response, making it harder for customers to cut costs by cutting traditional cable service in favor of Internet alternatives.
This, in a nutshell, is why Google's
3 potential losers of the metered Internet
How big a problem this gets to be is unknown at this point, but if you're trying to assess the fallout as an investor, I'd start with three of the biggest broadband consumers operating on the Web today:
1. Google. An obvious choice, I know. Google's market is the world, and the world is growing in its desire for Internet access. The good news? Web searches don't require much wire space. The bad? Google is about much more than search these days, thanks to YouTube and a growing number of Chromebooks using sophisticated Web-based apps that will build up a big broadband appetite.
Breaking bad rules
And those are just three. Which businesses did I miss? Or, conversely, am I overreacting to what looks like a wholesale switchover to usage-based Internet pricing? Either way, it pays attention to study potential disruptions like this one since, over time, the market rewards those that lead the rebellions. It's these sorts of companies that we look for in our Motley Fool Rule Breakers newsletter service. Want in? Check out a 30-day trial subscription. If that's not up your alley just yet, you can still check out a free special report detailing the next trillion-dollar revolution.
Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google, Netflix, and Salesforce.com at the time of publication. He also had a long-term call position in Netflix. Check out Tim's Web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
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