[Updated 1:00pm ET: Stop the Cap! reader Michael Chaney found a video interview done last fall with some Australian providers falling all over themselves to praise themselves for Internet Overcharging schemes, and suggest American providers learn from them how to get away with trying the same thing.]

The group managing director of Telstra (Australia), Justin Milne, wants you to know that the era of free love is over.  They are sick and tired of letting content producers like Ninemsn (a partnership between Australia’s Nine Network ((think ABC or CBS)) and Microsoft’s MSN) use their pipes for free to send those video clips to their customers.  It’s time to break out the checkbooks and start paying them for freeloading on their network.

In a commentary for ZDNet Australia, Milne equates Net Neutrality with greed and “economic self-interest dressed up as moral virtue.”  Pot to kettle, especially when he quotes Franklin Roosevelt:

Franklin Roosevelt said during the Great Depression that heedless self-interest reflected not only bad morals but bad economics too.  Seventy years on, his advice still rings true.

Yes it does, and Telstra is a perfect example of that in practice, offering dreadful broadband service with paltry limits on usage and heavy throttles on speed when one exceeds them, all for a substantial price.  Telstra’s own self-interest leaves a lot of Australians despising the provider and begging for alternatives.  The morality of a company that now wants content providers, with whom it has no business relationship, to pay them money to reach their customers, can be left to the reader’s determination.

This is a tune we’ve heard before.  AT&T’s former CEO Edward Whitacre was the guy who first lit the flame to the gas line of abusive provider tactics using generally the same language:

How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?  (11/07/05)

Justin Milne

After Whitacre was educated that providers already pay hosting fees, infrastructure and licensing costs, and provide the very stuff that drives consumers to sign up for AT&T’s broadband services (and pay them for it) in the first place, Whitacre did a full reversal three months later:

“Any provider that blocks access to content is inviting customers to find another provider. And that’s just bad business.” (3/21/06)

Milne follows in Whitacre’s earlier footsteps, except he wants to be paid by everyone.  His customers are already subjected to limits on usage, which have limited Australia’s multimedia online experience years behind most others, and now he wants to have the money he earns from Internet Overcharging -and- the right to limit content that reaches his customers to only those who pay Telstra for the right to deliver it:

“Some content providers such as ninemsn argue that Telstra should subsidise the cost of the ninemsn customers visiting their internet sites. We might also assume [they] would prefer petrol to be free for their cars, and Hayman Island would like air travel to the resort free,” Milne wrote.

“But Shell, Qantas and Woolworths do not give their services away for free. Just like BigPond and the rest of Australia’s ISPs, they need to charge their customers a fee so that over time their investment is recouped,” he said.

Of course, Shell, Qantas and Woolworths only charge once for their products and services.  They don’t install a toll booth on a road and claim that because a full petrol tank weighs more than a near-empty tank, there needs to be a surcharge toll.  Qantas doesn’t send people down the aisle on a flight with a collection plate demanding more money for your ticket because the plane was packed.  All of Australia’s ISPs charge their customers for providing broadband connectivity.  Telstra does as well.  The difference is that Telstra wants to charge its customers a fee and also charge the websites you choose to visit a “transport fee” on top of that.  Your bill as a customer doesn’t go down because of “cost sharing.”  Telstra’s profits simply go up.

Milne’s problem with Net Neutrality is its core principle that all legal data traveling across the net must be treated equally.  That means Telstra has no way to enforce their HissyFit.  In the absence of Net Neutrality, they can block, limit, or throttle those that refuse to pay them.

The cost of the infrastructure to support this traffic has been borne almost entirely by internet service providers, and not by the publishers. In Telstra’s case alone, the company has invested billions of dollars in the Next G mobile broadband network covering 99 per cent of Australian consumers, the HFC cable network in major cities and the extensive ADSL network.

Unfortunately there is no magic pudding, so this investment must be repaid by the beneficiaries of the internet — the users on the one hand, and the publishers who seek to make money from those users through advertising and subscriptions.

Milne almost suggests they did this out of the goodness of their heart, and their investment was not going to be paid back.  The fundamental reality is that subscribers to those services are Telstra’s customers and they pay for that service, such as it is.  That is where that investment will be recouped.  Demanding a company that has no business relationship with your company to pay up or else face the potential of being cut off is akin to extortion.

I offered Milne two alternative suggestions:

• Expand your network to create infrastructure suitable to meet the needs of your subscribers, who will sign on in greater numbers to your service.
• Create hosting platforms and services at attractive prices to content providers who will use your service to host their content (and pay you for actually doing something for them).

Barring that, this is nothing but a HissyFit from another provider looking for a payday.

Michael Chaney, one of our readers, discovered this video interview compilation done last fall by ZDNet.  Enjoy the Internet Overcharging excuse making, where the customer becomes the enemy, and the creativity to find new ways to charge more in without bounds.

“The attempt is being made certainly in the UK but also in the US to push that cost onto the content owner by saying, you pay, and we’ll prioritise your traffic,” he said. “[And] if you don’t pay, your traffic will be really crap.”

Beaumont, Texas

Stop the Cap! reader Mark who went to war with Time Warner Cable in the Beaumont area when they tried to impose Internet Overcharges on his account (and got his money back), found himself back with AT&T after dropping Time Warner Cable.  Mark is among many who made it clear that imposing these kinds of billing schemes is not up for discussion — he will cancel service immediately.

Before Mark returned to AT&T, he called the company’s customer service sales center and asked about usage limits and other pricing tricks and traps, and they responded, “there are no cap limits.”  That’s because for most of AT&T’s coverage area, that’s true… for now.  The company has been testing Internet Overcharging with usage allowances and overlimit fees in two cities – Beaumont, Texas and Reno, Nevada.  Unfortunately, not every AT&T sales representative seems aware of this fact, even when you provide them with an address and telephone number within the test area.

“We received the modem and before I had opened the package a certified letter arrived from AT&T,” Mark says.

“It was a letter stating that AT&T had introduced usage limits, and I called them immediately to  cancel,” he said.

When you live in a city with two broadband providers, both engaged in Internet Overcharging, you discover you run out of options very quickly.  Or do you?

“I called AT&T and talked to an upper level retention agent named Jennifer, and told her if I could not get a flat rate Internet plan from AT&T, I wanted to also cancel my two phone lines and my business Yellow Pages ads,” Mark said.

Even when providers claim to “listen to their customers” on issues like this, the one word they always truly understand is: CANCEL.

“Jennifer immediately agreed to note my account that there would be no usage overlimit charges, which effectively gave me flat rate service,” Mark said.

The AT&T representative also sent him a $75 gift card and promised to investigate getting him faster DSL service on the Elite tier he tried before, and failed to receive.  To date, Mark hasn’t been billed one cent more than his standard monthly rate, despite AT&T’s ongoing “tests” in Beaumont.  As long as that remains true, and AT&T works on getting him more reasonable speeds, Time Warner Cable has lost a customer, potentially for good.

Mark feels he’s living on the front line of a battle between consumers and providers over what is rapidly becoming a utility as important as telephone service.

“I feel the Internet is going to pass Americans by if something is not done,” Mark adds.  “I personally will not pay the kind of fees the ISP’s want to charge.”

Mark is also curious why these “tests” are being imposed on residential customers, and not business customers who are charged prices providers claim are justified considering their “higher usage.”

“Starbucks and Books a Million all have Internet service from these companies and provide it to their customers,” Mark notes.  “Were they exempt?”

Time Warner Cable’s testing, now suspended, never involved commercial accounts.  AT&T doesn’t appear to have included their business accounts in any tests either.

If you are an AT&T customer in Beaumont or Reno, you may have a shot at exiting a test you never wanted to be a part of in the first place.  Simply insist on either being exempted from Internet Overcharging schemes, or take your business elsewhere (Time Warner Cable in Beaumont, for now, may be your best option.)  Retention specialists may be the only representatives empowered to exempt you, so you may have to indicate your intent to cancel service before reaching one.

If you are under a contract with an early termination fee, ask the competitor if they’d be willing to cover your exit fee.  Time Warner Cable is doing that in some markets.  If not in full, negotiate and see how far they’ll go.

Report any results of your efforts to us.  We’ll pass the word on to others.

One of the arguments used by those who want to engage in Internet Overcharging is that people already “pay for what they use” for gas and electric service, so why shouldn’t they adopt the same attitude towards Internet service.

Historically, people did used to pay for their usage of online services, before there was a World Wide Web.  CompuServe, QuantumLink, PeopleLink, Delphi, GEnie, AOL, among many others used to provide access to dial-up users for a fee which varied depending on the amount of time spent accessing the service.  Rates during business hours were outrageous (CompuServe charged upwards of $12-16 per hour in the 1980s), but more reasonable during the evenings.

But as costs to provide the service declined, providers rapidly abandoned that type of pricing for flat rate, unlimited access for one monthly price.  Internet Service Providers worked the same way, with customers first using dial-up modems to connect for one monthly price.  Nobody worried about watching the clock or meters.  It has worked that way ever since, with highly profitable results for broadband providers.

MetroPCS Coverage Map (click to enlarge)

Now, some of these companies hunger for more of your dollars, and they are attempting to convince you their pricing should be similar to utilities like gas, electricity, and water (while conveniently not allowing themselves to be regulated like those providers).  They scrupulously avoid comparing their service with telephone companies, which are really the closest cousins to broadband service.

Now we know why.  While some broadband providers want to move away from flat rate pricing, telephone companies are moving toward flat rate pricing.

In addition to unlimited local, statewide, and nationwide flat rate long distance plans, MetroPCS, a regional prepaid mobile telephone provider, has announced a new unlimited international flat rate calling plan for just $5 per month.

To be eligible for $5 Unlimited International Calling,  customers must choose an unlimited calling plan starting at $40 per month.  For an additional $5, customers get unlimited calling to 100 countries.

MetroPCS sees this new international flat rate plan as a “game changer” in the industry, drawing large numbers of new subscribers who love to call overseas.  The company may even attract tourists who sign up with a “throwaway” basic mobile phone just for the duration of their visit.  The costs for the service are dramatically lower than roaming rates, especially for international calls, even with the price of the phone.

The only downside?  MetroPCS operates in only a limited number of cities, although they maintain roaming agreements with Leap Wireless (Cricket) to extend their coverage.  Once one company offers flat rate international calling, others will certainly follow, potentially establishing a new paradigm for truly unlimited mobile phone calling, regardless of where you call.

"As you can see I'm only at 26.35% and (Cogeco's) notification says I'm at 85% (of my allowance)?" (click to enlarge)

“You can trust us, we’re the cable company!”

One major implication of Internet Overcharging schemes is putting your faith in an industry that already strains credulity when it comes to justifying rationing and price gouging your Internet access.

Back in April, we raised the issue of  “meters” and “gas gauges” being used to measure customer usage having absolutely no oversight or verification that the “readings” they were providing actually represented your usage.

Our concerns were justified.

Broadband Reports has been tracking Cogeco customers finding their own measurements completely at odds with the Canadian cable operator that often reports far different numbers.

In the end, whose “meter” will Cogeco trust?  Theirs of course.

Here are some Cogeco customers sharing their frustrations:

“Well today is Friday the 19th of June and the Monitor is still down and with this being the month that we have to pay you would think the system would be up and working properly. I have a strange feeling that come some time next month people are going to open there bills and see extra charges that shouldn’t be there and Cogeco is going to end up losing a bunch of customers.”

“I don’t understand how they can charge for overages if they can’t properly meter their services.”

“Mine is showing 0 for both upload and download for the past 4 days. Then again I am not going to complain about it not reporting my usage. I kinda hope it stays this way.”

“Here’s a direct quote from my overage email received on Friday: “You have reached 100% of your Internet usage monthly limit. You have reached the MAXIMUM of your Internet usage monthly limit. Additional usage charges will be credited this month. Charges for additional usage will not take effect until June 2009.  I also show 40GB of usage on June 1st while each day after shows normal daily habits. Good job Cogeco. Combined with the increased rate for the Pro package, your overage charges are already forcing me to consider other tv and internet providers.”

“I think what this might do is force users to suck down every byte of their Cap to use their connection to the fullest. Before you never cared, because you could always just get what you wanted, when you wanted. But now since its monitored I know I am going to make sure that take full advantage every month.”

“Not showing any bandwidth for the past 3 days – how can Cogeco prove the authenticity of the meter? Bull.”

“This is exactly what I was thinking. Three days without any change to the meter, and I am supposed to pay for this?”

“This morning, it is telling me am I at 92%… there’s no way I did almost 12 GB of transfer yesterday. What is up with this thing? At this rate, I’m going to probably have to fork over some $$ for extra bandwidth this month, but I’m really wondering how accurate this thing is.”

“I called in to see what I’m at for the month, the rep said 68GB – monitor showing 105GB with 4 blank days. Who the hell is right?”

“First time I pay an overage I’m canceling.”

“Even if these are not governed by Weights and Measurements Canada, there would be a lawsuit for billing on services not rendered.  I’m paying for 100GB, and being overbilled at 23GB. Breach of contract, fraud, take your pick.”

Cable's Fear Factor: the Online Video Threat

[Updated 12:11pm EDT: Scott McNulty from Comcast notes in our comment section that the TV Everywhere concept will count against the 250GB usage allowance Comcast grants residential broadband customers, and suggests the concept is non-exclusive and voluntary.  We debate Scott on that point -- see the Comments below the article to follow along and add your thoughts.]

The best kept secret in the broadband industry is now out.  Stop the Cap! reader Lou dropped us a note to say the New York Times has decided to let cable’s big secret out of the bag in an article published today entitled, “Cable TV’s Big Worry: Taming the Web.”  Lou writes, “finally, the mainstream media is pointing out that the real threat to Time Warner Cable and others is Hulu.”

In addition to the obsession to “monetize” content that is currently given away for free online, many in the cable industry believe the best way to tame the web is to control the content and method of distribution.  If you subscribe to a cable TV package, you’re approved.  If you don’t, no online video for you!  Once accessibility is limited to those “authenticated” to access the content, a handful of companies can determine exactly who can obtain their video programming, for how long, and at what price.  For everyone else not going along, discouraging ‘unauthorized’ viewing and disrupting underground distribution are powerful tools for providers to protect their video business model.

What is the best way to do that?  Internet Overcharging schemes of course.  By raising the alarm that online video growth will create a tsunami-like wave of Internet brownouts and traffic jams, and by trying to pit subscribers against one another based on perceptions of their usage, the message that will be part of any cable industry “education” campaign is that limits, tiers, fees, and penalties are the answer to all of these problems.  Watching Hulu every night?  Naughty. With this 20GB monthly limit, we’ll put a stop to that.  Netflix movie tonight?  Do you really want to risk going over your allowance and incurring “necessary” overlimit fees and penalties that represent more than 1,000% markup over our actual costs?  Wouldn’t it be fairer to your neighbors to watch HBO on your cable package instead?

Is it Fair for Big Trucks to Pay More On the Information Superhighway Because They’ll Wear It Out Faster?

In cities across the country, those interested in Internet Overcharging schemes are already engaged in focus group testing.  We know, because some of our readers have been stealth participants, informing us about all of their pretzel-like logic twisting games designed to convince the public that cable and telephone companies are not going to gouge you again with a higher bill.  Some want to use toll road analogies, others are using gas and electric comparisons, and one had the novel idea of putting a plate of food in the middle of the conference table and asking if it would be fair for just one person to eat 75% of it while the rest “go hungry.”

Unfortunately for them, by the end of the session, two of our readers attending two different panels derailed their efforts and had panels eating out of their hands in opposition to Internet Overcharging schemes, and collected a nice $75 (and uncapped lunch) for their efforts.

The Times piece only adds more evidence to help make the case that Internet Overcharging schemes aren’t about broadband fairness — they are part of a protection racket to protect fat profits earned from selling video packages to consumers.

Aware of how print, music and broadcast television have suffered severe business erosion, the chief executives of the major media conglomerates like Time Warner, Viacom and NBC Universal have made protecting cable TV from the ravages of the Internet perhaps their top priority.

“The majority of profits for the big entertainment companies is from cable programming,” said Stephen B. Burke, the president of Comcast, the nation’s largest cable company.

The major worry is that if cable networks do not protect the fees from paying subscribers, and offer most programming online at no cost — as newspapers have done — then customers may eventually cancel their cable subscriptions.

It’s My Cousin’s Fault

In other words, you and I are probably not the biggest threat the industry faces from the ultimate nightmare of eroding profits.  It’s really my cousin’s fault.  He, like many in their 20s, moved into his new home and didn’t do what many of us routinely did when we moved — start the newspaper service, connect the telephone line, and get the cable TV hooked up.

He did call Time Warner Cable — to only install Road Runner broadband Internet service.  He reads the news online, relies exclusively on a cell phone, and watches DVD’s and online video on his giant flat panel television.

The cable industry is horrified my cousin represents their future.

There is no sign of that happening anytime soon, but a recent poll by the Sanford C. Bernstein research group found that about 35 percent of people who watch videos online might cut their cable subscription within five years.

“We don’t think that it’s a problem now, but we do feel a sense of urgency,” Mr. Burke said.

An Urgency to Overcharge

Like most industries that have grown fat and happy on their traditional business models, the most common first response to a challenge to that model is to resist it.  The cable industry in particular has enjoyed a largesse of profits earned from years of de facto monopoly status in most communities, with the majority of its services being largely unregulated.  Cable rate increases have almost always exceeded the rate of inflation, and the public relations talking points for those rate increases has always been, “due to increased programming costs, which represent the increasing diversity and excellence of the cable channels we provide you….”

With prices for “basic/standard service” cable now approaching $60 a month, many younger customers just aren’t interested anymore.

Watching consumers abandon cable television packages for access through broadband gives executives and Wall Street analysts like Sanford C. Bernstein heartburn.  Until recently, many customers never contemplated the idea of getting rid of video packages and just keeping the broadband service they already have.  Not until Hulu.  That one website now represents a considerable amount of online video traffic from subscribers, and the cable industry isn’t in control of it, much less profiting from it.

Hulu represents a threat to be resisted.

You Use Too Much Internet, So We’ll Create Something That Will Make You Use More

To be fair to everyone, we have to get rid of the flat rate plan you’ve enjoyed for more than a decade and replace it with tiered pricing to be “fair” to subscribers because of enormous traffic growth. That what Time Warner Cable customers heard during a planned nonsensical trial of an Internet Overcharging scheme in four American cities, rapidly shelved when consumers rebelled and New York Congressman Eric Massa and Senator Charles Schumer got interested (Rochester, NY was a selected trial city).

It becomes all the more ludicrous as subscribers learn Time Warner Cable’s answer to the traffic jam is to add even more traffic… their traffic… onto their broadband lines.

Evidently online video is only a crisis requiring urgent action when it isn’t their online video.

One idea, advanced most vocally by Jeffrey L. Bewkes, the chairman of Time Warner, and embraced by many executives, would be to offer cable shows online for no extra charge, provided a viewer is first authenticated as a cable or satellite subscriber.

Mr. Bewkes has called the idea “TV Everywhere,” but others in the industry refer to it by other names: “authentication,” “entitlement,” and Comcast has called its coming service “OnDemand Online.”

“If you look at TV viewing, it’s up, even though the questions and stories are all about the role of video games and Internet usage and other uses of time,” Mr. Bewkes said.

The first test of the new system, which will authenticate cable subscribers online and make available programs on the Web for no additional charge, will be announced Wednesday, between Comcast and Time Warner. The trial will involve about 5,000 Comcast subscribers, and television shows from the Time Warner networks TNT and TBS.

It will be interesting to watch whether or not “no additional charge” means such content will be exempted from Comcast’s 250GB monthly usage limit, and whether Time Warner Cable will change their Subscriber Agreement to exempt their TV Everywhere service from the existing language in their agreement permitting Internet Overcharging schemes.  Time Warner Cable already exempts their “Digital Phone” product.

Ixnay on the Coin Chatter Already

The Times piece also raises eyebrows about the potential for collusion and antitrust violations in secretive meetings among industry executives, although they deny it.

The electronic media chiefs, including Mr. Bewkes, Jeff Zucker of NBC Universal and Philippe P. Dauman of Viacom, among others, have been more careful, so as to avoid being accused of collusion: much of the discussions have been on the telephone and in private, one-on-one chats during industry events. Pricing is rarely, if ever, discussed, according to executives involved in the discussions.

“We can’t get together and talk about business terms, but we can get together to work on setting open technology standards,” said Mr. Dauman, the chief executive at Viacom, which owns cable networks like MTV, VH1, Comedy Central and BET.

Although the representations from the industry seem benign, the potential for something far worse is always there.  Control the keys to unlock the door to online video (and the tools to lock out or limit the “other guy”), and you’ve got a plan to make sure people don’t dare drop their cable video package.  Where did the online video go from your favorite cable channel website?  It’s on TV Everywhere, and you don’t get in without an invitation.

One holdout among the major chief executives appears to be Robert A. Iger of the Walt Disney Company. At an industry conference this year he warned that gambits like TV Everywhere could be “anti-consumer and anti-technology” because such a plan would place cable programming behind a pay wall.

So much for “no extra charge.”

It’s Time to Investigate

Rep. Eric Massa (D-NY), is the House of Representatives’ watchdog on this issue.  He’s already connected the dots and realizes they lead in only one direction — to consumers’ pocketbooks.  Massa has introduced HR 2902, the Broadband Internet Fairness Act, specifically to prevent broadband providers from falling all over themselves to engage in anti-competitive, anti-consumer price gouging, all to cover their bottom lines.

This legislation, and Rep. Massa, needs your immediate support.  Call Congress and ask your representative to co-sponsor this vitally important bill.  The New York congressman is protecting consumers nationwide, and deserves your thanks and support.

Stop the Cap! also now calls on Congress and the appropriate regulatory bodies to begin an immediate investigation into the industry’s “cooperation” to launch TV Everywhere, and other similar projects. Specifically, we ask that an appropriate and thorough review be conducted to ensure that no collusion or antitrust violations have, are, or will take place as a result of this project.  We also call for a review of the “authentication” model proposed by the cable industry to ensure it does not exclude any consumer that subscribes to a competing video provider (satellite, telephone company, competing independent cable company, municipally owned provider, etc.), and that no “free pass” language be permitted that exempts their project from the terms and conditions that they seek to impose on others not affiliated with this project.

Senator Schumer’s long history of consumer protection would make him an excellent choice to lead such an investigation.

Once again, Net Neutrality must be the law of America’s online land.  Only with the assurance of a level playing field can we be certain no provider will attempt to exert influence or special favor over content they own, control, or distribute.

Cogeco, following in the footsteps of Rogers, Canada’s largest cable operator, has mailed letters home to residential subscribers informing them that their new Internet Overcharging scheme and fees are real and will apply to broadband accounts that exceed their arbitrary usage allowances.  Since the spring, Cogeco has been showing the Internet Overcharges on subscriber’s bills, but not actually billing them.  That is set to change, however, and many residents in Ontario and Quebec are quite upset.

“Cogeco can bite me. As soon as I manage to scrounge up a second DSL modem I’m gone.”

“I’m waiting for the Cogeco trolls to come out of the woodwork so they can claim how competitive and affordable that plan is.”

“I am starting to hate Cogeco very much, I am tempted to cancel my internet and my digital TV service for spite.”

“Vote with your wallets guys, I did. And now with the increase I’m going to cancel my HD access and return the receiver – enough is enough. I’ll be down to Basic Digital Cable and if they keep increasing prices, that will go too.”

“Ditto! Price increase is THE LAST STRAW for this 10 year + customer!”

Cogeco’s limits also come with overlimit fees that are particularly harsh on casual and power users.  In Canada, many overlimit fees are currently capped at a maximum amount, and do not continue to increase beyond that maximum.  Lite users face a $2.50/GB overlimit fee (maximum $30), despite representing almost no usage impact on Cogeco’s network, and “Pro” users face a $1/GB overlimit fee, but face a maximum of $50 in overlimit penalties, despite paying a much higher up-front monthly subscription fee.

In a nutshell,

• Lite – 10GB/mo bitcap – $2.50 per GB over to a maximum of $30
• Lite Plus – 20GB/mo bitcap – $2.00 per GB over to a maximum of $30
• Standard – 60GB/mo bitcap – $1.50 per GB over to a maximum of $30
• Pro – 100GB/mo bitcap – $1.00 per GB over to a maximum of $50

Broadband providers in the United States always promise that if they are permitted to introduce Internet Overcharging schemes, it will be “fairer” for all customers, because “heavy users should pay more for what lighter users don’t do.” Providers also typically allude to network improvements and no widespread price increases.

But as Canadians have already discovered, big telecommunications firms operating with virtual duopolies can have their cake and eat it too.

Cogeco customers now face the prospects of classic Internet Overcharging — usage allowances, overlimit fees and penalties, and “fair pricing,” but after the company implemented these schemes, consumers got a reminder of what cable operators like Cogeco are also capable of — widespread rate hiking.

New Rates: We’re improving our services so you’ll continue the best today and in the future (effective July 17, 2009):

Internet Pricing

Standard – With TV or Phone…..current rate: $44.95……new rate: $45.95

Standard – Standalone……..current rate: $52.95………..new rate: $54.95

Pro – With TV or Phone……..current rate: $69.95………..new rate: $76.95

Pro – Standalone……………..current rate: $74.95………..new rate: $81.95

Internet Overchargers like Cogeco consider “fair share” to mean giving an equal amount of dollars from yourself to them.  That’s fair, right?

It’s simply more evidence to this universal truth, a fact of life every North American should already know:

Cable bills never decrease, they only increase, unless you drop services.

When a cable company tells you they have a plan to guarantee “fairness,” be sure to remember what represents “fairness” to you may mean something entirely different to them.

Canada is a victim of Internet Overcharging, with virtually every major provider limiting access to broadband, throttling speeds, and charging overlimit penalties for exceeding arbitrary limits. Now Cogeco, which itself engages in these schemes for its residential broadband service, has made a breakthrough of sorts.

Cogeco One Zone, available only to users of Apple’s iPhone and iPod Touch, provides 802.11g WiFi across the One Zone WiFi network for only $5CAD a month. One Zone, acquired last August from Toronto Hydro Telecom, operates within a six kilometre region in the downtown core of Toronto. Users discovering the service report it can achieve speeds of up to 7Mbps, and there are no data consumption limits or contracts.

Any iPhone/iPod Touch user who accesses the network within range will automatically be taken to a special sign-up page to begin service. Cogeco One Zone’s offer represents a major discount off the pricing being charged to other One Zone WiFi users:

1 Hour
60 minutes of continuous access
$4.99 + GST and PST

1 Day
24 hours of continuous access
$9.99 + GST and PST

1 Month
Continuous access to same date in following month
$29.00 + GST and PST

(All prices are in Canadian Dollars)

So why has Cogeco decided to practically give away the service?

“Our expectation is that users won’t be using it for downloading video and huge files … It’s just the nature of the device. It’s not likely they’ll be downloading gigabytes of information standing on the street,” Cogeco Data Services president Ian Collins told itWorldCanada.

One potential use Collins may not realize has been among Toronto residents who live and work within range of the network. For some of them, Cogeco One Zone is being used from work and home, and although it is unlikely to replace residential broadband accounts that connect with home computers, some users will give the network a real workout. Should customers figure out how to tether their iPhone WiFi connection to their home computer, effectively accessing the network from a home PC or laptop, that could become an entirely new challenge.

For Canadian iPhone owners, who already face higher prices for iPhone data plans (no “unlimited” plan exists in Canada as it does in the United States), the biggest savings may come from customers downgrading data plans for “phone-based” data, because they rely on the WiFi network instead. Most iPhone owners currently pay $30 per month for 1GB or $25 for 500MB. With unlimited access through WiFi, there are no worries about exceeding data allowances.

Knowledgeable iPod Touch owners could also turn their players into Voice Over IP telephone lines using Skype or Truphone, and effectively pay just a few dollars per month for unlimited long distance calling.

In the last two installments I covered the North Carolina legislators that had a hand in HB1252/S1004, legislation that would have severely curtailed municipal broadband projects in this state, and how they were involved in bringing the bills to the floor. I am now going to focus on some powerful, long term state senators, who have a very influential vote on the Senate floor.

R.C. Soles (D-Brunswick, Pender & Columbus Counties) has served for 17 terms. Soles, as he is not a co-sponsor or sponsor, does carry great influence in the Senate and can gather votes. Soles took a lot of money from the cable/telecom industry in 2008, $7500 in total. From Embarq he took $2000, Time Warner $1000, AT&T PAC $4000, and from the Sprint/Nextel PAC he took $500.

Senator Tom Apodaca (R-Buncombe, Henderson and Polk Counties) is a four term senator who also took a bundle of money from the cable/telecom industry in 2008. In total he received $12500 in contributions. Embarq gave $3000, Time Warner $2500, AT&T PAC $4000, Sprint/Nextel PAC $1000, and AT&T Mobility Employees PAC $2000. There was also a suspicious contribution from one “Jasie Barringer.” Barringer is listed as a housewife and self employed, but in reality she is more likely the chairman of RH Barringer Beverage Distributors (Anheuser-Busch), which is well known to me as it’s here in Greensboro. They also appear to have used a business address for the contribution, which is illegal in North Carolina. I will be filing a complaint with the State Board of Elections.

Senator Dan Clodfelter (D-Mecklenburg County/City of Charlotte), is the six term senator who sits with with Sen. Hoyle of the Revenue Laws Joint Sub-Committee, where they are trying to direct HB1252/S1004. Clodfelter also took a lot of money from the cable/telecom industry, $10250 in total. Embarq contributed $1500, Time Warner $2250, AT&T $2000, NC Cable PAC $2500, Sprint/Nextel PAC $500, NC Association of Broadcasters $500 and NC Broadcast PAC gave $1000.

There are a few other influential legislators in the House and Senate, but they are a little harder to track because of their positions of power. Speaker of the House, Rep. Joe Hackney and President Pro Tempore of the Senate Marc Basnight hold a considerable amount of power and influence, and receive a lot of money from everyone. This makes it a little harder to track. Basnight received $18500 in contributions from the cable/telecom industry and Speaker Hackney received $21000 in contributions.  While this is a lot of industry money, it’s not out of proportion from what they receive from every industry PAC that contributes to their campaign coffers.

If you have not read the first two installments here at Stop the Cap!, they can be found here and here. I will follow up when the first quarter reports become available for 2009.

It’s important to note that in all three articles, acceptance of political contributions in no way implies criminal activity.  It does imply that money from big donors can create a climate of influence with legislators.  This is the culture of politics, whether it is in North Carolina, Washington, or your local city council. Until we can remove the influence of industry PAC money on elected officials, the lobbies for these industries can continue to have the upper hand on the common citizen and what is good for us, unless we stand up and make our voices heard.

The information gleaned from here in North Carolina underlines this point, and I encourage you to review campaign finance reports to investigate why an elected official would be so insistent on standing against consumer and constituent interests.  Not every legislator that accepts contributions automatically means they will not stand with their constituents.  Many will.  But for those who do not, this can help explain why.  Should you require assistance locating, searching, or investigating the tricks of the campaign finance trade, feel free to contact me.

Frontier Essentially Accuses Time Warner Cable of Being a Shakedown Artist

Early indications of a more challenging second quarter of 2009 may be what’s behind the sudden speed increases and new promotions being run by providers, who are also counting on signing new customers, now that moving season is in full swing.  A roundup of promotions and service adjustments customers may find enticing them:

AT&T

U-verse Internet Max customers received free upgrades last week in most areas, boosting broadband download speeds from 10Mbps to 12Mbps.  AT&T previously announced a slowing of U-verse deployment for economic reasons.  AT&T competes with cable operators offering video, voice, and broadband service.

Cablevision

Cablevision Systems continues to offer new customers taking at least a combined broadband and phone package a $200 American Express gift card through June 30.  The company already announced major increases in premium speed levels, and promises no limits on consumption.

Comcast

Reduced pricing in highly competitive Washington, DC market for premium 50Mbps service to under $100, for customers signing up for at least two Comcast services (video, voice, and/or broadband)

Frontier

A substantial mailing offering discounts and giveaways was sent through postal mail to consumers in many Frontier service areas.  Frontier is using a cable-critical mailer depicting their cable competitor as “Rob” and “Bill.”

Rogers (Canada)

Rogers, which earlier increased rates for subscribers, announced a “free speed increase” to its “Hi Speed Internet Express” package, from 7Mbps to 10Mbps, and “Internet Lite” from 1Mbps to 3Mbps.  Rogers limits its customers typically to 60GB of consumption per month for standard levels of service.  Much lower limits are placed on economy packages.

Time Warner Cable

Time Warner Cable is continuing to mail customer postcards and other mailings promoting its existing service packages, but this week also attempts to pick up customers trapped in Frontier term contracts by agreeing to cover early contract termination penalties, up to $200.  Time Warner Cable is also hinting that cable customers will soon be able to use Tivo software for their Digital Video Recorder (DVR) boxes, which permit customers to record programming.

Verizon

Verizon announced substantial speed increases throughout their service area. The company also has engaged in a price war with Cablevision over gift cards. Verizon offered $150 gift cards to new customers signing up for a service bundle (although Cablevison beat their offer by $50).  The company also began promotional giveaways to customers signing a contract agreement.

To date, AT&T continues tests limiting consumption to as low as 20GB per month in Beaumont, Texas and Reno, Nevada.  Comcast has a straight limit of 250GB of consumption per month for residential customers nationwide.  Frontier defines “acceptable use” at 5GB consumption per month, but does not enforce it at this time.  Rogers limits consumption based on the level of speed selected by the customer.  Most customers face a 60GB monthly limit.  Time Warner Cable tested, but temporarily shelved, tiered pricing and consumption limits.  Other providers not listed have no Internet Overcharging schemes in place.

The NoChokePoints Coalition has a point.  They are a coalition of public interest groups and providers like British Telecom and Sprint-Nextel that are upset with monopolistic pricing for high speed broadband lines.  Verizon and AT&T “control the broadband lines of almost every business in the United States” the coalition states, and “generates a profit margin of more than 100% for the controlling phone companies.”

“Releasing the broadband economy from the chokehold these huge phone companies have on the special access market will be a catalyst for innovation and investment in the broadband marketplace, something we desperately need,” said Maura Corbett, spokeswoman for the NoChokePoints coalition.

“Every time you send an email, withdraw money from an ATM, or use your wireless phone, your information travels on these high-capacity lines. Excessive pricing and other market abuses by these companies have long been an issue of concern at the Federal Communications Commission (FCC). Nearly five years ago, after many complaints by broadband customers in several FCC proceedings, the Commission began a review of the high-capacity broadband market to determine the changes needed to ensure reasonable prices. Despite ample evidence of excessive pricing, the Commission inexplicably has yet to take any action.”

“The Obama administration, Congress, and the FCC repeatedly emphasize the importance of broadband to our economic recovery and, frankly, it defies explanation that we are still fighting this market abuse,” Corbett continued. “Huge companies like Verizon and AT&T control the broadband lines of almost every business in the United States. The virtually unchallenged, exclusive control of these lines costs businesses and consumers more than $10 billion annually and generates a profit margin of more than 100 percent for the controlling phone companies, according to their own data provided to the FCC. This hidden broadband tax results in enormous losses for consumers and the economy, and this country cannot afford it; especially now.”

NoChokePoints cited four central principles of its campaign to reform the special access market: (1) the special access market is broken; (2) the outgoing Federal Communications Commission made a bad situation worse by failing to address obvious market abuse by these huge phone companies; (3) this unchecked market control continues to slow broadband deployment, compromise innovation and harm our national information economy; and (4) the resulting market failure must be corrected now.

Yes, when one or two providers get together and establish pricing for a product that is way out of line for what it costs to provide, and uses that control to further squeeze every last penny they can from customers, something should be done.

As consumers, we should agree to join the NoChokePoints coalition struggle.  There are several very credible pro-consumer organizations that support the Coalition and its goals.  And consumers like myself shall, mere seconds after:

Member BT (British Telecom) stops throttling UK customer’s broadband connections, and imposing Internet Overcharging schemes on customers through limits on their data consumption.

Member Sprint-Nextel agrees that consumers should be able to request temporary suspension of their wireless data account, currently limited to 5GB of consumption per month, the moment the limit is reached to avoid the potential of paying overlimit fees, if/when applicable.

TW Telecom gets a pass here as they are entirely independent from Time Warner Cable.

Internet Overcharging schemes, monopolistic control, abuse of market pricing, and other anti-competitive behavior should be confronted.  But companies engaged in problematic behavior themselves should not anticipate a great deal of consumer compassion towards their plight, when those consumers often are on the receiving end of that problematic behavior themselves.