Get Ready to Pay More for the Web

In times like these, surfing the web might seem like one of life's cheaper entertainment options. But the next time you fire up your home computer, consider this: If some Internet service providers get their way, the meter could be running while you're shopping, emailing or reading news reports like this one.

That's because cable and telecommunications companies are forging ahead with plans to radically change their familiar flat-rate monthly Internet plans – even as new options for watching movies and TV online proliferate.

What should web surfers expect? "Usage caps" that would penalize those who send and receive too much data.

Time Warner Cable (TWC), for instance, is currently running a test in Beaumont, Texas, that offers a range of plans that allow between five gigabytes and 40 gigabytes of bandwidth for new customers. The five-gigabyte plan costs $29.95 a month, while customers pay $54.90 monthly for the 40-gigabyte plan. Go over the limit and customers have to pay $1 for every extra gigabyte. AT&T (T) is testing a similar plan in Reno, Nev., with cap ranges between 20 GB to 150 GB for its new customers.

How easy is it to run over that cap? Just a few years ago it would have been difficult. But now the rise of video and other data-heavy applications on the web means more consumers are eating up large amounts of data — downloading movies and music from Apple's (AAPL) iTunes, watching TV episodes on Hulu.com and engaging in other "bandwidth intensive" activities.

This holiday season, more services are tempting consumers all the time: Netflix (NFLX), for instance, just announced a program to let its members watch a library of 12,000 movies and TV episodes on their HD TiVo digital-video recorders, with the programming delivered over the Internet.

To put the caps in perspective, purchasing and downloading the movie "Wall-E" from iTunes would use up over one gigabyte alone. Working through the first season of TV's "Mad Men"? In total, those episodes would consume nearly seven gigabytes.

It isn't just Time Warner and AT&T. Comcast (CMCSA) and Cox (COX) are also experimenting with usage caps — though they are not currently invoking any financial penalties, they do reserve the right to suspend or terminate service. Service providers say it's necessary since there's a bandwidth shortage — in other words, their systems are overloaded by all that downloading and video watching.

Critics of the usage caps don't dispute that some service providers are struggling with booming usage. But they say the cable and telecommunications companies should have seen this coming and invested to beef up their services. Service providers, for their part, say they either will or already are improving their systems, but want the heaviest users to help pay for the upgrades – hence the extra charges for those who exceed the caps.

Some critics also say the punishment for high usage can be harsh. In some cases, if folks ignore warnings, they can be thrown off the web. For those who only have one Internet service provider available to them, especially in rural areas, such a move could leave them cut off from the web entirely.

Another problem: For the most part, monitoring bandwidth consumption would be left up to the customer. Other than AT&T and Time Warner, most companies aren't providing usage meters yet. So consumers have to download free online programs like BitMeter or SurplusMeter, onto their computers. Comcast customers can also check their bandwidth usage through the McAfee Security Suite software. Unfortunately, these programs don't tally usage on all of the computers in your home — or from other devices, for that matter. That means consumers will ultimately be responsible for tallying their usage – a formidable task for any family with web-surfing teens.

Here's how usage caps being tested right now break down:

The Cap: Comcast, which has the most generous cap, allows users 250 gigabytes of bandwidth a month. A household could download over 62,000 songs, more than 125 standard-definition movies or 62 high-definition movies a month and still not exceed the limit.

Comcast says less than 1% of its users currently bump up against the wall. "We do it because extraordinary heavy usage of our service will impair the online experience of other customers that are near that excessive user," says Charlie Douglas, a spokesman for Comcast.

The Penalty: Customers receive a warning the first time they exceed the cap. Comcast can suspend service for a year following the second offense if it occurs within six months of the first.

The Cap: Cox offers its customers plans ranging between four gigabytes and 75 gigabytes of bandwidth a month. At the lower end, households can download just two standard-definition movies or one high-definition movie a month. With the 75-gigabyte plan, users can download 20,000 digital songs, or at least 37 standard-definition movies, or at least 18 high-definition movies a month.

Cox says a number of factors go into choosing how the company sets its limits. The company also updates its bandwidth limits regularly. "We recognize that as customers use [bandwidth] for more intense purposes, we will work to increase those [caps] over time," says David Deliman, a spokesman for Cox Communications.

The Penalty: Customers receive an initial warning the first time they exceed the cap. Cox can suspend or terminate service, or require additional fees if excessive usage is not corrected, according to the user agreement on its web site. A company spokesman says Cox does not currently charge customers who exceed the cap and it only suspends or terminates service as a "last resort."