Professor Geist

The Canadian Radio-television Telecommunications Commission, the Canadian equivalent of the Federal Communications Commission in Washington, may be forced to consider American broadband policy before defining Net Neutrality and its role in Canadian broadband, according to an article published today in The Globe & Mail.

[FCC Chairman Julius Genachowski’s] proposal – to codify and enforce some general principles of “Net neutrality” – comes as the Canadian Radio-television and Telecommunications Commission is expected to release its own position this fall, after public consultations this summer that prompted feedback from tens of thousands of Canadians.

“The kinds of principles that the FCC is now looking to put into rules are precisely what the CRTC heard from many groups this past summer,” said Michael Geist, a University of Ottawa professor who holds the Canada Research Chair in Internet and E-commerce Law. “The kinds of concerns that Canadians have been expressing have clearly been taken to heart by the FCC.”

Many Canadian citizens have been unhappy with the CRTC after a summer of hearings and policy decisions which have almost universally-favored Canadian broadband providers’ positions.  The CRTC seemed skeptical during hearings over the urgency to enforce Net Neutrality protections and stop provider’s throttling of peer to peer networks.  But consumers were even more upset when the Commission agreed with Bell, Canada’s largest phone company and wholesale broadband provider, and allowed the company to impose “usage based billing (UBB)” (Internet Overcharging) on wholesale buyers — primarily independent Internet Service Providers.  Canadian customers attempting to avoid usage caps and consumption billing relied on more generous policies from independent providers, policies likely to be revoked with the imposition of UBB, potentially making flat rate broadband service in Canada largely extinct.

In general terms, Net neutrality refers to the concept that access to all legal content on the Internet should be equal. The concept often comes up in relation to the practice of “bandwidth throttling,” where ISPs limit the transfer speed of certain kinds of data – such as the transfer of large movie files between users – but not other kinds.

Many large Canadian ISPs have argued that network management doesn’t affect Net neutrality, and taking away an ISP’s ability to manage its network results in worse service for a large number of customers.

Currently, there is no uniform practice among large ISPs in Canada when it comes to network management. Some firms throttle bandwidth during certain times of the day, whereas other limit bandwidth all the time, or not at all. A CRTC ruling this fall could go a long way toward implementing a uniform code for all ISPs.

“In light of what we’ve seen today, [the CRTC ruling] will be particularly telling because the benchmark now isn’t just what the CRTC heard during this hearing, the benchmark now is our neighbours to the south,” Prof. Geist said. “The CRTC will in many ways be measured up against what the FCC is doing in the U.S.”

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Who dares break the most sacred Ark of the Cable Covenant?

In March 2000, two cable magnates sat down for the cable industry equivalent of My Dinner With Andre.  Fine wine, beautiful table linens, an exquisite meal, and a Monopoly board with pieces swapped back and forth representing hundreds of thousands of Canadian consumers.  Ted Rogers and Jim Shaw drew a line on the western Ontario border and agreed to stay on their respective sides of it.  Ted and Jim divvied up each others cable interests, swapping Rogers’ systems west of Ontario with Shaw’s systems east of the provincial line. Thus was born the Ark of the Cable Covenant, with its founding principle: Thou shalt not compete or intrude in my territory.

The only question left at the end of the meal was who was going to pick up the check.  You did.

And so it was.  Since 2000, Shaw Communications has kept its operations west of Ontario, Rogers stays in Ontario and points eastward.  A very nice state of affairs, as long as you are not a Canadian consumer looking for competitive relief from high prices and lousy service.

Shaw Raids Ontario

But in July there was heard a great rumbling across the prairies and into the verdant forests and rolling hills of southwestern Ontario.  What was that sound?  Who were these cowboy hat wearing hordes riding across the lands to the shores of Lake Ontario carrying saddle bags stuffed with cash?  Why look, Calgary-based Shaw is staging a $300 million dollar buyout raid on Mountain Cablevision, Ltd., a 41,000 subscriber independent cable company based in Hamilton, Ontario.

But what of the sacred agreement?  Ted Rogers passed away in December, leaving Shaw to rhetorically ask, “What agreement? Do you know anything about an agreement?”

Indeed, there is no honor among thieves and cable executives seeking the spoils of a highly uncompetitive industry.  Rogers was shocked to discover an invasion on their turf, and they responded with a torrent of attorneys to block the deal, as Canwest News Service notes:

“Shaw is bound by the restrictive covenant which prohibits Shaw from building or acquiring any broadband wireline cable business in Ontario, Quebec or Atlantic Canada,” Rogers argued in court documents released Thursday.

Thankfully for Shaw, Ontario courts do not typically recognize “covenants” as sacred documents not to be broken.  Justice Frank Newbould on the Ontario Superior Court of Justice rejected the de facto non compete agreement and said Rogers had not proven any irreparable harm from the sale, dismissing Rogers’ “proof” as “speculative in the extreme.”

Of course, you realize this means war.

Tim Pinos of Cassels, Brock & Blackwell LLP is Rogers’ lead lawyer on the file. Shaw’s intentions are clear, he said Friday: “Shaw desires to re-enter Eastern Canada and acquire cable systems.”

Aside from picking a competitive fight with Rogers, an expansion east would pit Shaw against smaller but powerful players, such as Videotron, which is owned by giant Quebecor Inc., and commands a near-monopoly in Quebec.

With the agreement shattered, Rogers is likely casting its eyes westward, observers say.

Earlier this week, Edward Rogers was appointed to the role of deputy chairman of the company his father built. He moves from heading up Rogers Cable and will also oversee new operational responsibilities, including strategic acquisitions.

Unfortunately for consumers, some sacred agreements will remain unbroken.  Namely the one that keeps companies like Shaw and Rogers from competitively wiring communities already served by each other and competing head to head.  That simply wouldn’t do.  It would ruin a perfectly delightful meal.

Just like FairPoint Communications, the Towering Inferno of phone companies haunting New England, Frontier Communications is making a whole lot of promises to state regulators and consumers, if they’ll only support the deal to transfer ownership of phone service from Verizon to them.

This time, Frontier is issuing a self-serving press release touting their investment of some $4 million dollars in its broadband networks in Charles Town and Princeton, West Virginia.  But the best part was the claim the upgrades would “offer customers fast broadband speeds and near-unlimited bandwidth capacity.”

In Princeton, 44 miles of fiber-optic cable will connect all Frontier High-Speed Internet (HSI) equipment to the exchange`s main switch, and 37 additional miles of fiber cable are being installed in the Charles Town exchange. These upgrades will allow Residential HSI speeds of up to 6 Meg and Business HSI speeds of up to 12 Meg. The upgrades will allow provisioning of Metro Ethernet service of up to 100 Meg, resulting in very high data speeds for private networks among multiple business locations.

These upgrades are all well and good, and are perhaps more than urban-focused Verizon was willing to do in the state, but before West Virginians get too excited by the words “fiber cable” and “near-unlimited bandwidth capacity,” it might be wise to consider the implications of transferring an entire state’s telephone business to a company that still insists on defining an “appropriate amount of usage” on that near-unlimited network at a piddly 5GB per month.

The company also promoted their “computer giveaway” program:

Recognizing that the lack of a personal computer is a barrier for many families, since 2006 Frontier has provided more than 10,000 free computers to qualifying customers in West Virginia. A large percentage of the computers went to first time computer households, who also benefited from free on-site installation.

To the uninitiated, that may suggest a benevolent phone company handing out free computers to the needy with no strings attached.  In fact, this was a Frontier customer acquisition promotion.  Customers signing up for a bundle of telephone and broadband and/or satellite service could qualify for a free basic Dell Netbook (valued at under $400), if they are in good standing with the company, agree to a “price protection agreement” holding them to the company for two years (or facing a nasty early termination fee running several hundred dollars), and also pay a handling fee:

Customer pays handling charges and taxes totaling $45. Customers must subscribe to a new package of Frontier residential local service with features, Unlimited Nationwide or Statewide Long Distance voice-calling and qualifying High-Speed Internet service. Requires a two-year Price Protection Plan on Frontier services (excludes satellite TV) with a $300 early termination fee. Offer available while supplies last. Frontier reserves the right to substitute a comparable Mini Laptop. Other offers available for existing High-Speed Internet customers. Applicable taxes and surcharges apply. Electronic or other written contract signature for Frontier services is required. Some Frontier services are subject to availability. Installation charges may apply. Unlimited U.S. Long Distance minutes are for residential voice usage and exclude 900, international, directory assistance and dial-up Internet calls.

For a whole lot of West Virginia, broadband service means one thing – DSL from the phone company.  Satellite broadband is costly, capped, and has terrible customer satisfaction ratings.  Cable television is a dream for significant parts of the mountainous state.  Do West Virginians want to risk their broadband future on a company that insists on an Acceptable Use Policy with a 5GB usage limit in it?

Residents of Rochester, New York know Frontier Communications all too well.  They’ve been our local telephone company since being absorbed by Citizens Communications after the colossal downfall of Global Crossing, which took ownership of the formerly independent Rochester Telephone Corporation.

Don’t let dreams of fiber dance too much in your head.  Frontier routinely installs fiber, but only between their central offices and remote equipment that helps reduce the distance between telephone switch equipment and the copper wiring out on the telephone poles.  It does help provide the potential of speed increases for DSL service by reducing the length of copper wire DSL travels on, but by no means should imply West Virginia will see fiber to the home in their near future.

If Frontier Communications lacks the means and the will to wire New York’s second largest economy and third largest metropolitan area with more than 1,000,000 residents with fiber to the home, don’t think for a moment they’re going to be any hurry to light up the state of West Virginia.

Indeed, for many residents of the Flower City, the bloom is well off Frontier’s rose, trapping this community in a broadband backwater with a telephone company unwilling and/or unable to provide the kind of 21st century broadband service that is presently being provided in several other upstate cities as Verizon installs its FiOS fiber network.  For Rochester, and for too many other cities, the broadband superhighway from the phone company has little more than tumbleweeds blowing across.

This site was founded last year when Frontier introduced its 5GB usage cap, and we coordinated a consumer response which forced the company to pull back from its enforcement.  But the threat still looms over the heads of their customers from coast to coast as long as it remains a part of their Acceptable Use Policy.

The time has come for Frontier to banish the 5GB language from its Acceptable Use Policy once and for all and stop toying with Internet Overcharging schemes altogether, especially as it seeks to bring the threat of those schemes to millions of Americans that may find their only realistic broadband option coming from this provider.  Otherwise, it’s time for consumers to get on the phones and tell their elected officials and public utility commissions how they feel about getting broadband service from a phone company that tells them:

Frontier may suspend, terminate or apply additional charges to the Service if such usage exceeds a reasonable amount of usage. A reasonable amount of usage is defined as 5GB combined upload and download consumption during the course of a 30-day billing period. The Company has made no decision about potential charges for monthly usage in excess of 5GB.

Phillip "Doesn't Derive a Paycheck From Writing This" Dampier

I see it took all of five minutes for George Ou and his friends at Digital Society to be swayed by the tunnel vision myopia of last week’s latest effort to justify Internet Overcharging schemes.

Until recently, I’ve always rationalized my distain for smaller usage caps by ignoring the fact that I’m being subsidized by the majority of broadband consumers.  However, a new study from Robert Shapiro and Kevin Hassett at Georgetown University is forcing me to reexamine my personal bias against usage caps.

There’s a shock, especially after telling your readers caps “were needed.”

As I predicted, our astroturfing and industry friends would have a field day over this narrowly focused report that demands readers consider their data, their defined problem, and their single proposed solution.  The real world is, of course, slightly more complicated.

I used to debate some of my economist friends on why I thought metered pricing or more restrictive usage caps were a bad idea, but I couldn’t honestly say that my opinion was entirely objective.  My dislike for usage caps stems from the fact that I am a heavy broadband user and an uncapped broadband service is very beneficial to me since everyone else pays a little more so that I can pay a lot less on my broadband service.  But beyond self interest, I can’t make a good argument why the majority of broadband users who don’t need to transfer a lot of data should subsidize my Internet requirements.

Your opinion is still not entirely objective, George.  Your employer has industry connections.

Our readers, many of whom are hardly the usage piggies the industry would define anyone who opposes these overcharging schemes, all agree whether it’s 5GB or 150GB per month, they do not want to watch an Internet “gas gauge” or lose their option of flat rate broadband pricing that has worked successfully for this industry for more than a decade.  George and his friends assume this is an “us vs. them” argument — big broadband users want little broadband users to subsidize their service.

That’s assuming facts not in evidence.

What is in evidence are studies and surveys which show that consumers overwhelmingly do not want meters, caps, usage tiers, or other such restrictions on their service.  They recognize that a provider who claims to want to “fairly charge” people for service always means “everyone pays more, some much more than others.”  To set the table for this “fairness,” they’ve hired Washington PR firms to pretend to advocate for consumers and hide their industry connections.  Nothing suspicious about that, right?

Although George can’t make a good argument opposing usage caps, that doesn’t mean there aren’t any.  Among the many reasons to oppose caps:

• Innovation: Jobs and economic growth come from the online economy.  New services created today by U.S. companies, popular here and abroad, would be stifled from punitive usage caps and consumption billing.  Even the broadband industry, now in a clamor to provide their own online video services, sees value from the high bandwidth applications that would have never existed in a capped broadband universe, and they are the ones complaining the loudest about congested networks.
• Consumer Wishes: Consumers overwhelmingly enjoy their flat rate broadband service, and are willing to pay today’s pricing to keep it.  The loyalty for broadband is much greater than for providers’ other product lines – television and telephone.  That says something important — don’t ruin a good thing.
• The Fantasy of Savings: As already happened across several Time Warner Cable communities subjected to “experimentation,” the original proposals for lower consumption tier pricing offered zero savings to consumers who could already acquire flat rate “lite” service for the same or even lower prices.  Even when tiers and usage allowances were adjusted after being called out on this point, consumer outrage continued once consumers realized they’d pay three times more for the same broadband service they had before the experiment, with absolutely no improvement in service.  Comcast and other smaller providers already have usage caps and limits.  Pricing did not decline.  Many combine a usage allowance -and- lower speed for “economy” tiers, negating the argument that lower pricing would be achieved with fast speeds -and- a usage allowance.
• Justifying Caps Based on Flawed Analysis: The report’s authors only assume customer adoption at standard service pricing, completely ignoring the already-available “economy” tier services now available at slower speeds.
• Speed Based Tiers vs. Consumption Based Tiers: Consumers advocate for speed-based tiering, already familiar to them and widely accepted.  New premium speed tiers of service can and do already generate significant revenue for those who offer them, providing the resources for network expansion providers claim they need.
• Current Profits & Self Interested Motives: Broadband continues to be a massively profitable business for providers, earning billions in profits every year.  Now, even as some of those providers reduce investments in their own networks, they claim a need to throw away the existing flat rate business model.  Instead, they want paltry usage allowances and overlimit penalties that would reduce demand on their networks.  That conveniently also reduces online video traffic, of particular concern to cable television companies.
• Competition & Pricing: A monopoly or duopoly exists for most Americans, limiting competition and the opportunity for price savings.  Assuming that providers would reduce pricing for capped service has not been the result in Canada, where this kind of business model already exists.  Indeed, prices increased for broadband, usage allowances have actually dropped among some major providers like Bell, and speed throttles have been introduced both in the retail and wholesale markets.

More recently, building our colocation server for Digital Society has made me realize that usage caps not only has the potential to lower prices, but it can also facilitate higher bandwidth performance.  Case in point, Digital Society pays $50 per month for colocation service with a 100 Mbps Internet circuit, and at least $20 of that is for rack space and electricity.  How is it possible that we can get 100 Mbps of bandwidth for ~$30 when 100 Mbps of dedicated Internet bandwidth in colocation facilities normally costs $1000?  The answer lies in usage caps, which cap us to 1000 GBs of file transfer per month which means we can only average 3 Mbps.

One thousand gigabytes for $30 a month.  If providers were providing that kind of allowance, many consumers would consider this a non-issue.  But of course they are not.  Frontier Communications charges more than that for DSL service with a 5GB per month allowance in their Acceptable Use Policy (not currently enforced.)  Time Warner Cable advocated 40GB per month for $40-50 a month.  Comcast charges around $40-45 a month for up to 250GB.  Not one of these providers lowered their prices in return for this cap.  They simply sought to limit customer usage, with overlimit fees and penalties to be determined later.

Of course, web hosting is also an intensively competitive business.  There are hundreds of choices for web hosting.  There are also different levels of service, from shared web hosting to dedicated servers.  That is where the disparity of pricing is most evident, not in the “usage cap” (which is routinely more of a footnote and designed to keep Bit Torrent and high bandwidth file transfer services off their network). There is an enormous difference in pricing between a shared server environment with a 1000GB usage cap and a dedicated rack mount server located in a local facility with 24 hour security, monitoring, and redundancy/backup services, even with the same usage cap.

So the irony of a regulation intended to “protect” the little guy from “unfair usage caps” would actually force our small organization onto the permanent slow lane.

Actually, the Massa bill has no impact on web hosting usage caps whatsoever.  George’s provider friends would be his biggest risk — the ones that would “sell” insurance to his organization is he wanted assurance that his traffic would not be throttled by consumer ISPs.  I’d be happy to recommend other hosting providers for George if he felt trapped on a “slow lane.”  That’s because there is actual competition in web hosting providers.  If the one or two broadband providers serving most Americans had their way, it would be consumers stuck on a permanent slow lane with throttled service, not organizations like his.

So, who is in agreement with George on this question?  None of his readers, as his latest article carries no reader responses.  But fellow industry-connected astroturfers and providers themselves share their love:

• “This is the story that ISP’s have failed to tell effectively — that consumption-based billing may, in fact, be fairer for consumers.” — Michael Willner, CEO Insight Communications
• “Ars Technica reports on an interesting theory being floated by former Clinton economic advisor Robert J. Shapiro and Federal Reserve economist Kevin A. Hassett” — Brad, astroturfer Internet Innovation Alliance
• “The only way … is to introduce some form of equitable pay-as-you-use pricing.  And I could not agree more.” — Ulf Wolf, Digital Communities Blogs (sponsored by AT&T, Qwest, etc.)

PC Magazine reported even Robert Shapiro, one of the report’s authors, is not advocating for usage caps:

“We’re not talking about a bandwidth cap,” Shapiro said during a call with reporters. “We were looking simply at the different pricing models and their impact on the projections of broadband uptake based on these income sensitivities.”

The report does not specify how ISPs should implement pricing, Shapiro said. “The most important thing to me as an economist is the flexibility – that is, Internet Providers can better determine than I can the particular model that works best.”

That’s not the message astroturfers are taking forward, as they try and sell this as “pro-consumer.”

In 2007, we took our first major trip away from western New York in 20 years and spent two weeks an hour away from Calgary, Alberta.

After two weeks in Kananaskis Country, Banff, Calgary, and other spots all over southern Alberta, we came away with the Good, the Bad, and the Ugly:

The Good

• Alberta is like Texas, only without the anger: Friendly people everywhere
• Amazing Canadian Rockies contrasting with vast flat prairies and never-ending views of canola, buckwheat, and other crops
• The only place that could convince me to purchase and wear a cowboy hat (they are functional after all)

The Bad

• A Dodge Charger is considered a “small” rental car on Alberta’s vast paved (and frequently unpaved) roadways
• Calgary’s love of photo radar and red light cameras, which must sustain the city’s revenue base
• You’re in “pop” country, and you’d better like Pepsi because Coca-Cola is hard to find.  A “can of pop” on a menu means exactly that.  Ask for ice.
• There are no bumper stickers in Alberta — there are “deckles.”  I contemplated phoning the CBC to find out what a deckle was until I realized they meant “decal.”

The Ugly

• Internet access in hotels we stayed at was either non-existent, slow, or erratic.

Now before you say vacations should mean a break from the Internet, know that for those of us who spend a lot of free time taking care of websites like this, that is the equivalent of asking someone to take a vacation from electricity.  I don’t do camping.

It turns out my experience is becoming less common, as hotels realize sharing a DSL line among 50+ guests on a Linksys wireless router stuck on a shelf in the lobby is just not going to cut it.  Instead, hotels and motels not only in Canada but across the United States have beefed up their broadband… and discovered they could make a killing by overcharging guests to access it.

Now consumers in growing numbers are deciding the “daily fee” for broadband common on hotel bills, often ranging from $10-15 a day, is a dealbreaker.  They are taking their business elsewhere, even if it means foregoing a luxury hotel to stay in a middle-of-the-road chain with the screaming kids in the pool downstairs, as long as the Internet is free.

USA Today reports that for some consumers, charging any fee for Internet access at a hotel is unacceptable.

Frequent business traveler Randall Blinn refuses to stay at hotels that charge for Internet access.

“It really irritates me that the more expensive hotels charge for Internet access when the inexpensive hotels provide it for free,” says Blinn, a computer consultant in Louisville.

Blinn is one of many travelers disturbed by hotels that charge a daily fee for Internet access. He says he books less-expensive hotels with free Internet access, even if his company will pay for a more expensive hotel that charges for online access.

Some 40 percent of hotel chains in the United States have a daily fee for Internet access.  For the hotels that charge, it’s just another source of revenue, just like charging for in-room telephone calls that consumers learned to avoid by using their cell phones.

For Blinn, who has spent about 50 nights in hotels this year, any charge is unacceptable. If he must stay at a hotel that charges, he says, he leaves the hotel for a fast-food restaurant or a coffee shop that provides free Internet access.

A few weeks ago, Blinn says, he spent a lot of time in the concierge lounge of the Marriott hotel in Salt Lake City, because the hotel was charging for Internet access in rooms but not in the lounge.

Some consumers have found methods to avoid the daily fee, ranging from arguments with hotel personnel demanding that daily fees be waived (one went as far as to turn in all of the personal care items left in his room, which he argued cost more than Internet access did anyway), to strategically choosing to stay adjacent to lobbies or other public areas where free Wi-Fi was available, hoping to jump on the wireless signal from their rooms.  Others bring wireless data plans from their cell phone provider, and use those networks for wireless access, bypassing the hotel altogether.

Some hotels automatically waive fees for their most frequent guests, typically enrolled in premium guest club memberships.  But for people like Blinn, having to pay for Internet access for 10-14 days of hotel stays isn’t worth it to “earn” free Internet.  He simply avoids any hotel that charges for access, and let’s them know why.

Jeff Weinstein, editor in chief of Hotels magazine, a trade publication, suggests that kind of complaining will probably put an end to the “daily Internet access fee.”

“I think the message from consumers about this is getting louder, and you will continue to see more (hotel) brands move toward free access over the next year or two,” he told the newspaper.

Below the jump, learn which hotel chains charge guests for Internet access, and which do not.

… Continue Reading