Mossberg

Walt Mossberg, a columnist for the Wall Street Journal, delivered some stinging remarks about how large telecom and media companies deliver broadband services and programming to North Americans.

“We really suck at broadband,” Mossberg complained during opening remarks at Beet.TV’s first executive summit held at the Embassy of Finland in Washington.  “We have terrible, terrible broadband.”

“The typical consumer either has been lured into broadband by a DSL service that in Finland would not count as broadband — 768kbps is not broadband,” Mossberg said.  “If [the government] adopted a regulation not allowing Verizon to call that crap broadband, it would help.”

Mossberg added that cable modem service in the US and Canada is so slow, it is the object of pity and pathos in countries like Japan and Korea, and we’re overcharged for it.

http://www.phillipdampier.com/video/Verizon Should Stop Calling DSL Broadband 2-17-11.flv

Mossberg’s comments come as part of a discussion about the online video revolution, which he says is being hampered by copyright controls, outdated advertising models, and broadband providers delivering sub-standard service.  (8 minutes)

Inner city Americans pay substantially more for broadband service than their neighbors in wealthy suburbs, while rural America pays the highest prices of all for broadband service, according to the results of a new study.

The Investigative Reporting Workshop at American University analyzed broadband speeds and service around the nation’s capital to learn how broadband is priced in different neighborhoods and communities.  The study covered the eighth largest metro area, which included over five million residents in the District of Columbia, Maryland, and Virginia.

Broadband providers never release specific data about their customers’ broadband service and the prices they pay for it, considering it a closely guarded business secret.  The Workshop went direct to consumers to get around this limitation, combining actual speed test results with the true cost of standalone broadband service reported by study participants.  It’s among only a handful of studies that rely on actual raw performance and pricing data — not company-provided general marketing information about speeds and pricing.

The conclusions expose a dramatic difference in broadband pricing depending on where one lives, what company they do business with, and how well each company’s network performs.

The results?  Broadband pricing was cheapest from Comcast, the region’s dominant cable company and most expensive, by far, from a wireless ISP (WISP) that serves the Culpepper, Virginia area.  Residents in wealthy suburbs in Fairfax County, Virginia and Montgomery County, Maryland enjoyed the best bang for their buck, charged nearly half the price-per-megabit that residents inside the urban District of Columbia pay.  Rural residents were stiffed with high prices for comparatively slow speed service.

Verizon, the area’s dominant phone company did poorly in the study, in part because of the substantial number of legacy DSL customers who are paying a lot for little speed.  Although Verizon’s fiber-optic FiOS service is making inroads in some parts of the study area, its high speeds don’t reach enough customers to offset Verizon’s larger base of DSL customers.

Here’s how Comcast and Verizon compared:

• Comcast, according to an average of 1,254 surveys, charged customers $5.76 per Mbps;
• Verizon, according to 1,744 surveys, charged $12.34 per Mbps — more than twice as much as Comcast.
• Verizon charged $50.86 per month on average.
• Comcast charged $52.68.
• The median, or midpoint price, is much lower, at $5.13 per Mbps for Verizon and $2.84 for Comcast.

Cox Communications, a cable company that serves Fairfax County and Fredericksburg in Northern Virginia, charges $6.60 per Mbps, according to 528 surveys. Cox’s monthly average cost was $46.77.

Rounding out the five regional providers, RCN Corp., averaged $11.06 per Mbps, or $48.57 per month, for a median price of $5.77 per Mbps, according to 126 surveys, and Clearwire Corp., according to 172 surveys, averaged $16.19 per Mbps for $42.16 per month and a median price of $12.47 per Mbps.

By far the worst values went to rural customers.  Overall, the study found rural residents pay $30.28 per Mbps (based on 431 surveys) and $53.84 per month for service, a per-megabit rate far higher than the other three regions.

Virginia Broadband LLC, a Culpeper, wireless broadband provider, offered the worst value. According to a summary of 24 surveys, the company charges a whopping $198.13 per Mbps, the most of any company that underwent more than one test. The average monthly bill was $94.07, and the average speed was less than a megabit per second.

Comcast, RCN, and Virginia Broadband did not respond or refused to comment.  Verizon said the results were unfair because it did not distinguish between FiOS fiber to the home customers and their traditional DSL service.

They also criticized the study’s price comparisons, which relied solely on standalone broadband service pricing.  Verizon, like most providers, discounts services to customers who choose to bundle their telecommunications products together.

The study arrives at the same time the federal government has released their own national broadband map, which relies to a large degree on information volunteered by broadband providers.

The study has been criticized for not accurately depicting true broadband speeds and pricing, which can distort the true picture of broadband availability across the United States.

The Canadian Radio-television and Telecommunications Commission

Thanks to quick work from the Canadian Radio-television and Telecommunications Commission (CRTC), Canadian broadband providers have wasted no time announcing new usage limits and penalties for those who exceed them.

The principal culprit for the Internet Overcharging: Bell (Canada), the nation’s largest telecommunications company.

Bell’s newly won right to charge wholesale customers usage-based billing rates has caused a collective groan from independent providers from Vancouver to Charlottetown. Primus, the second-largest alternative communications company in Canada, threw up its hands and announced it was going to pass Bell’s costs along to their customers.  Some other providers have already raised rates, shocking customers who received December bills with $100 in overlimit penalties.

“It’s an economic disincentive for Internet use,” said Matt Stein, vice-president of network services for Primus. “It’s not meant to recover costs. In fact these charges that Bell has levied are many, many, many times what it costs to actually deliver it.”

That is a hallmark example of what happens under Internet Overcharging schemes like “usage-based pricing,” usage caps, or other limited use plans.  Customers don’t pay for their actual broadband use — they overpay, especially when stiff penalties are imposed when they exceed their usage allowance.

“Canada’s broadband market is a racket, period,” says our reader Andy, who lives near Petawawa, in northern Ontario.  “If you are in a major city in the south, you can choose Bell or one of their lackeys or the cable company, which almost always means Shaw or Rogers in English-speaking Canada.”

Andy doesn’t have access to cable, so his broadband comes courtesy of DSL from the phone company.  He counts himself lucky he has that, even though it only delivers around 512kbps and is down at least once a week, especially when the weather is bad.  Other communities have no broadband at all, and some areas are so desperate for access, they have provided financial incentives to attract a provider to town.  It rarely succeeds.  Zeropaid reports a handful on unscrupulous would-be providers have taken the incentives and left town with no broadband service to show for it.

“These guys only want the easy customers and they’ve got them in Toronto or Ottawa,” Andy says. “The rest of us can live with dial-up.”

The Canadian government occasionally launches highly publicized demonstration projects to deliver rural broadband in northern Canada, often over wireless, something Andy scoffs at.

“When the TV cameras are shut off and [Prime Minister] Stephen Harper’s political bandwagon goes home, the networks last for about a month until something goes wrong and the whole thing shuts down, sometimes for weeks before someone repairs it,” Andy says.

There oughta be a law.

Katz

In fact Canada, a country with a reputation for keeping a regulatory eye on essential services, has an agency that is supposed to protect consumers and monitor telecommunications services. Unfortunately for Canadians, it was that agency that gave Bell the go-ahead to kill unlimited, flat rate broadband — the service that has kept most independent service providers in business.

Critics charge the Commission has been acting more like a Big Telecom industry trade group than an independent oversight body, and many independent providers openly wonder how long they’ll survive with Bell’s predatory pricing.

Reviewing who serves on the Commission may provide some answers about why they seem to be closely aligned with Canada’s largest telecom companies.  Many of the commissioners used to work for the very companies they are now asked to regulate, and some are likely to return to them after their stint at the CRTC.  The agency’s supposedly independent commissioners know if they want future employment in the telecommunications industry, it’s best not to antagonize your next boss.

Take Commissioner Leonard Katz.  He joined the CRTC in 2005 and was appointed vice chairman of telecommunications in 2007.  For 30 years before joining the Commission, Katz was employed by Canada’s largest telecom firm, moving up through Bell’s management ranks from 1974-1985.  His last big job at Bell was as the assistant director of Bell’s regulatory lobbying department, where he spent his energy and time dealing with federal politicians and the CRTC.  Katz also loves Canada’s wireless industry, dominated by Rogers Communications.  He was founder and chairman of the Cellular Telecommunications Industry Association Clearinghouse for wireless carriers.

Arpin

Or there was Michel Arpin, a consummate former insider at some of Canada’s largest corporately-owned broadcast station groups like Astral Broadcasting, Mutual Broadcasting, and Radiomutuel.  He also had a side relationship with Telus, a western Canadian telecom company that also belongs to the Canadian Association of Broadcasters (CAB).  Arpin served CAB as vice-chair and chair. Arpin, the corporate media man, also served as the vice-chairman of the CRTC’s broadcast division until late last year.

Other examples:

• Rita Cugini — A regional commissioner for the province of Ontario, her professional background has been working for some of the province’s biggest media interests, including Alliance Atlantis, Telelatino, and CFMT/OMNI.  She also is integrally involved with the Canadian Association of Broadcasters, which bends the ears of regulators regularly on a variety of matters;
• Tim Denton — About as close to the broadband industry as you can get, Denton’s role as a commissioner began in 2008, but his money was made working for the broadband industry, including the Canadian Association of Internet Providers, which lobbies for big broadband provider interests.
• Candice Molnar — Serves today as regional commissioner for Manitoba and Saskatchewan, but she knows most of the prairie provinces’ movers and shakers by name, having spent more than 20 years at SaskTel, Saskatchewan’s biggest phone company.  She helped guide SaskTel from provincial to federal regulation when she worked there and her voting record shows her heart is still with her former employer.

Cugini

With a Commission stacked against ordinary Canadian consumers, it’s no wonder Internet Overcharging schemes and stifled broadband competition rule the day in Canada.

“Rural Canada always pays the biggest price,” says Andy.  “If it didn’t happen in Toronto or Ottawa, it didn’t happen at all.”

Andy complains Canadian broadband will never improve with Internet Overcharging schemes in place.

“They complain about your usage and say if they can restrict it, they can improve service to more people; well, where is my better service?” Andy asks.

“At least I don’t have to worry about their usage allowances… yet,” Andy says. “Even if I left my connection running continuously, at these speeds I doubt I could do much damage.”

Internet users in the Philippines have reacted angrily to a government proposal to limit broadband consumption that turns out to have been written by the telecommunications companies that would benefit from it.

The National Telecommunications Commission’s (NTC’s) proposal would allow broadband providers across the country to establish usage limits of 5GB per day, both to “combat piracy” and to “improve service” across the country.  But critics charge, and at least one spokesperson for the Commission admits, many of the proposals in the draft document governing broadband were written entirely by the telecommunications companies themselves.

Much of the Philippines receives DSL broadband service from standard copper telephone wires.  The country’s broadband rankings are dismal, scoring 141st out of 185 ranked nations in a Speedtest survey.  Filipino Internet users suffer with slower average broadband speeds than users in Albania, Djibouti, Uzbekistan, and Libya.

Government efforts to improve service routinely run into well-manned roadblocks established by powerful, politically connected corporate interests.

What began as a pro-consumer reform measure to get providers to accurately depict their broadband speeds has been largely transformed into an industry wish-list fulfilled, according to TXTPower, a pro-consumer action group.

One consumer advocacy group isn't buying providers' arguments

The group lists the problems consumers routinely endure from telecommunications providers — issues the NTC proposal largely fails to address:

“Failure to deliver promised services, failure to address customer complaints, failure to compensate customers for poor or botched services, the imposition of long contracts and so-called termination fees are hallmarks of the telcos when it comes to broadband Internet connections,” the group outlines.

TXTPower wants the Commission to schedule a series of public meetings across the country to allow consumers to provide input on the draft reform law.  The group criticized an under-publicized December meeting that was attended largely by professional lobbyists for the telecom companies.

“We are sure that consumers nationwide will look forward to attending such consultations and tell the NTC what the so-called regulator should be doing,” the group says.

The group thinks setting a national minimum speed would be a good start.

“Up to now, the NTC has failed to follow the lead of telecom regulators worldwide in defining what broadband Internet is, whether delivered via dial-up, wired or wireless connections. For instance, the United States now defines “basic broadband” as Internet service with a download rate of at least 4 Mbps and an upload rate of 1 Mbps. Worldwide, the trend is to consistently raise the basic minimum,” said Tonyo Cruz, the group’s president and chief executive officer.  “Without such a definition, the NTC leaves telcos practically free to hoodwink end-users, including business and the government, regarding broadband services, the cost and pricing, and to keep Philippine Internet access among the slowest and most expensive in the region. At the same time, we cannot begin to estimate the amount of access fees charged or practically extorted by telcos for undelivered, under-delivered or poor services.”

Philippine broadband is as fast as dripping molasses on a cold January morning.

Instead, with the input of some of the Philippine’s largest telecom interests, the Commission has offered the country limited improvements based on rationing and full disclosure of the slow speeds most in the country endure. [Read about the experiences of one Philippine student who has endured bad broadband for most of his life.]

The draft law raised the ire of consumers with the insertion of clauses like this:

WHEREAS, it has been observed that few subscribers/ users connect to the internet for unreasonably long period of time depriving other users from connecting to the internet [...] Service providers may set maximum limits on the data volume allowed per subscriber/user per day.

NTC Public Relations Officer Paolo Arceo readily admits this, and several other provider-friendly clauses came at the behest of the telecommunications industry.

“[This] particular clause was suggested by public and public telecommunications entities to prevent network abuse by unscrupulous subscribers who violate intellectual property laws, particularly on copyright, by downloading movies and software, similar to abusive subscribers of unlimited call/text promotions which were primarily designed or person-to-person use but used for voluminous commercial undertakings,” he said.  “These types of network abuse limit accessibility to a few instead of providing adequate access for all of the subscribers. Commercial or high volume users may avail of other internet connection packages which have committed higher speeds and allow heavy data exchanges.”

But critics of the proposal warn broadband companies will seek to impose limits starting at 5GB of usage per day, with no limit on how low those caps could ultimately go to help guarantee performance requirements also included in the proposal.

How low can Philippine caps go?

“The proposal demands broadband providers live up to their advertised speeds and be up and running with satisfactory performance at least 80% of the time,” writes Quezon City resident Jose Albas, one of our readers. “Since providers blame ‘heavy users’ for performance problems now, imposing more drastic limits is the cheapest way to hit performance standards without spending money upgrading facilities.”

Cruz from TXTPower believes the usage cap proposal doesn’t adequately address the Philippines’ dreadful broadband experience.

“The NTC misses the entire point of the problematic broadband Internet connections in the Philippines: They are slow, unreliable and expensive compared to other countries in the region. But the NTC would not know this because the agency has not, up to now, sat down, studied and resolved to define what broadband really is,” Cruz said.

Popular Philippine blogger ‘Cocoy’ wrote a letter to Philippine President Benigno Aquino arguing the telecommunications authority is catering more to the business interests they regulate than the consumers they are supposed to represent, and for naught:

The NTC draft memorandum to put caps on Internet usage is regressive. It does both business and consumer no good. It will not encourage telecoms to reinvest to improve their service, and help the broader market unlock our potential.

Broadband in the Philippines has become increasingly important in a country with a troubled economic and political past now re-inventing itself in the new digital economy.  The country’s broadband rankings in Asia, a hotbed of broadband development, has proved an embarrassment for the Aquino government.

Draft NTC Memo Order for telcos on Minimum Speed of Broadband Connection, December 2010

The World Economic Forum’s Global Information Technology Report ranked the Philippines 85th out of 133 countries, right behind Trinidad and Tobago, Russia, El Salvador, Ukraine, Guatemala and Serbia. To compare, Vietnam ranks 54th — Thailand ranks 47th.

Cutting users off after their daily ration is reached delivers a range of consequences, from from the annoying to a fundamental challenge to free speech.  Jed Mallen illustrates what happens when providers protect their profits at the expense of their customers:

I was downloading the new Slackware release about a month ago via Globe Tattoo and after a while got an SMS message via their app that goes something like — fair usage policy is imposed. 800 mb is the limit. I was using their Php 50/24 hours promo. Yes my download stopped.

How about that? That’s not piracy. That’s a free operating system that I have been using for the last 10+ years.

International rights lawyer Romel Bagares warned that the implications of high volume data caps and other Internet Overcharging schemes had even greater implications: impeding consumers’ basic rights to online information.

“Whistleblower sites such as WikiLeaks process large amounts of information. Also, especially in the Philippines, you have many public schools that use the Internet heavily for educational purposes. Putting in caps would prevent people from sharing as well as receiving information,” Bagares said.

“This is against consumers’ interests, because you have people suffering from ‘bill shock’ as well as denying their right to information,” he told GMANews.TV.

Bagares doubts pirates are the real reason behind the proposed usage caps.

“Konti lang ang pirates! (There are so few pirates!) You’re punishing the majority [of the public] for the actions of a very few tech-savvy individuals,” he said.

Salalima

Bagares’ views seem to be backed by the Commission’s own staff.

NTC Common Carriers Authorization Department Director Edgardo Cabarios told GMANews.TV that the entire scheme originated from the Philippines’ major phone companies.

“There were apprehensions raised [by telcos] over abusive users. This [data cap] is meant to discourage unfair use, to give everyone a chance. The idea is to protect the majority of consumers,” Cabarios said.

But Cabarios also admits that the “abusive users” the Internet Overcharging scheme is supposed to target account for just one to two percent of Filipino broadband consumers.

Unsurprisingly, the companies that proposed the usage limits are publicly praising the Commission’s willingness to insert them into broadband reform proposals.

“[The clause] is consistent with the demands of fair use. This guarantees that abusive consumers of broadband/internet service do not monopolize available capacity to the detriment of other paying customers. The definition of the volume cap can be left to the individual telecommunications providers to define based on the different service plan offers they provide, all in the spirit of competition,” said Philippine Chamber of Telecommunications Operators president Atty. Rodolfo A. Salalima in a letter to NTC commissioner Gamaliel A. Cordoba.

In a welcome turn of events, the League of United Latin American Citizens (LULAC), which has routinely turned up as a member of Big Telecom-backed astroturf campaigns and takes money from AT&T, has come together with Latinos for Internet Freedom to issue a joint statement calling on the Federal Communications Commission to adopt equal Net Neutrality policies for wired and wireless broadband services.

“Although we disagree on some of the components of the proposed network neutrality regulations, there is one point on which we are in lock step: the FCC’s network neutrality rules must apply equally to wireline and wireless internet access.  Of course we understand that what is ‘reasonable network management’ may be slightly different over different types of connections.  Cost is the primary barrier to broadband adoption, and Latinos are turning to their mobile phones as their only onramp to the internet.  We are committed to finding ways to lower broadband costs by increasing competition through wireless access and other means.  It is therefore essential that the FCC ensures that users of wireless and wireline services are protected by its openness rules.”

Of course, broadband providers’ demands for deregulation and unified opposition to Net Neutrality have never delivered and will never provide cheaper Internet service to anyone.  In fact, the court ruling that eliminated the FCC’s authority over broadband gave providers nearly a year of a wide open marketplace, yet many providers are now sending out notices they are -increasing- broadband prices for subscribers.  Net Neutrality has never been enforced against wireless networks either, and as a result most either usage cap, throttle, or charge enormous overlimit fees for users deemed to be “using too much.”

Increased competition can bring lower prices, but only if it extends well beyond today’s duopoly.  In areas where one provider is likely to maintain a de facto monopoly, effective oversight is required to ensure consumers receive adequate service at fair prices.

Still, it is a surprising and welcome change to see LULAC recognizing the true nature of broadband access for many economically-challenged Americans, especially in minority communities where unemployment continues to be catastrophic.  Some consumers are finding prepaid wireless broadband service to be one way onto the Internet, yet Big Telecom has sought to keep those networks exempt from any Net Neutrality consumer protections.  That cannot be allowed to happen.

Watch these two competing spots from Verizon and the Latinos for Internet Freedom.  One is self-serving and a tad condescending, the other calls for a free and open Internet where individuals get a level playing field to tell their own stories and live their own lives without fear or special favor.  (2 minutes)

HP's Snowjob: The company that brought you the $70 ink cartridge supports an end to flat rate Internet service to "save" you money.

HP’s Joe Weinman argues consumers are behind the drive to abandon flat rate, “all you can eat” broadband pricing.

Weinman, whose company sells products and services to some of America’s largest broadband providers, has taken up their position that flat-rate Internet service is bad for you, claiming many are paying too much for Internet service they use too little.

In an essay posted on GigaOM, Weinman brings back the all-y0u-can-eat buffet metaphor:

For the record, I like unlimited Internet access just as much as anyone else. However, such plans appear to be on their way out, and here’s why. As I’ve explored in ”The Market for Melons” (PDF), pay-per-use is not an evil plot by greedy robber barons, but a natural outcome of independent, rational consumer choice. Consider a town with an all-you-can-eat (flat rate) buffet and an a la carte (pay-per-use) restaurant. Smart shoppers on diets will save money by patronizing the a la carte restaurant, whereas heavy eaters will save money by visiting the buffet. As patrons switch, the average consumption of the buffet will increase, driving price increases for the luncheon special, causing even more users to switch to pay-per-use.

Bottom line: it is not the proprietors driving this dynamic, but the customers themselves acting out of pure, rational self-interest—light users, by deciding not to subsidize the heavy ones, foster the vitality of the pay-per-use model.

Unfortunately for Weinman, most American broadband customers don’t believe a word of this, and even he was forced to admit as much when he noted consumers “often prefer to overpay for flat-rate rather than save money but risk bill shock.”

Karl Bode at Broadband Reports wasn’t suckered for a moment either, noting:

[...]Cable industry lobbyists would like the public to believe that such a shift isn’t about making more money, it’s about helping the poor. Not only is the metered billing push absolutely about making money, it’s about artificially constricting the pipe to protect uncompetitive carriers and TV revenues from Internet video. But instead, there’s a very concerted effort afoot to portray this shift as necessary, inevitable, and even altruistic.

Most consumers prefer the simplicity of flat rate pricing, and understand that ISPs are perfectly profitable under the flat-rate pricing model. They also understand that this is a pipe dream forged by never-satisfied investors, and once implemented ends with ever soaring per gig fees and ever shrinking usage caps.

Weinman’s essay completely ignores the reality his preferred pricing model already delivers to those who live under it in Canada.  Canadian broadband rankings continue to decline as customers there pay higher prices for a lower level of service, with usage caps that actually decline when new competitive threats from online video emerge.

Just what the doctor ordered: HP's Rx for American Broadband

We had to take time out to respond directly to Weinman and his cheerleading friends (see the comments section), some who wrote comments below the piece and couldn’t be bothered to disclose they owe their day jobs to industry-backed dollar-a-holler groups that are committed to delivering on behalf of their provider benefactors:

When Big Telecom comes ringing with promises of savings from metered or capped broadband, hang up immediately.

These plans save almost nobody money and expose dramatic overlimit fees to consumers, creating the kind of bill shock wireless phone users endure.

The OPEC-like Internet price-fixing on offer from big players delivers broadband rationing and sky high prices, while retarding Internet innovations that providers don’t own or control.

Consumers are forced to double check their usage and think twice about everything they do online out of fear of being exposed to huge overlimit fees up to $10 a gigabyte for exceeding an arbitrary limit ranging from 5-250GB.

Americans already pay too much for Internet service and now the providers want more of your money. The rest of the world is moving AWAY from the pricing schemes Weinman would have us embrace. It’s such a serious issue in the South Pacific, the governments of Australia and New Zealand are working to address the problem themselves.

Providers are already earning BILLIONS in profits every quarter from their lucrative broadband businesses. Now the wallet biters are back for more, with the convenient side benefit that limiting consumption is a great way to prevent Internet-delivered TV from causing cord-cutting of cable TV packages.

As far as consumers are concerned, and Weinman admits as much, people are happy with today’s unlimited price models. When Big Telecom complains people are overpaying for broadband, wouldn’t their shareholders be telling them to shut up and take the money? There is more to this story.

Weinman defends the extortion proposition Big Telecom would visit on us: either give us limited use pricing or we’ll raise all of your prices.

But as consumers have already figured out, these providers never reduce prices for anyone. When was the last time your cable bill went down unless you dropped services?

Don’t be a sucker to Big Telecom’s “broadband shortage” or pricing myths. Broadband is not comparable to water, gas, or electric. The closest comparison (and the one they always leave out) is to telephone service, and as we’ve seen, that business is increasingly moving TOWARDS flat race, unlimited pricing.

Want to know what metered pricing does to the wallets of consumers? Just ask Time Warner Cable customers in Rochester, Greensboro, San Antonio, and Austin what they thought about the cable company’s “innovative” pricing experiment that tripled the price for the same level of broadband customers used to get for $50 a month. After the torches and pitchforks were raised over $150 a month broadband service, Time Warner backed down.

Either with or without metered pricing, the cable company raised its prices three times last year alone.

The industry’s meme that “usage-based pricing” in inevitable is only true if consumers allow it to happen.  The parade of Internet Overcharging advocates all share one thing in common — they earn a living from the providers that dream about these pricing schemes.  Always follow the money.  As we’ve exposed repeatedly, the vast majority of defenders of these kinds of pricing schemes are not consumers.  They are:

• The providers themselves;
• Wall Street banks, investors, and the business media catering to them;
• Non-profit groups receiving substantial contributions from providers;
• Industry-funded “think tanks” and research that can carry the industry’s public policy agenda, hoping the media that quotes them are too lazy to follow the money;
• Equipment and service vendors, unions, and other groups who depend on the business or jobs they get from providers.

While some American broadband providers continue to dream of Internet Overcharging schemes for American customers, one of the world’s most usage-capped countries continues its march forward to abolish them.  Australia’s Optus, a major broadband provider, today announced it was dramatically increasing usage allowances on customers, effective immediately.

The Fusion 99 plan, which bundles telephone and broadband service, sees its data allowance increased from just 15GB of usage per month to 500GB (twice that of American cable giant Comcast).  Ditto for the Fusion 109 plan, which originally doubled the 15GB limit to 30.  Now it offers a 500GB allowance of usage.

If 500GB isn’t enough, Optus has announced its Fusion 129 plan includes 1000GB — a terabyte — of usage per month, which includes unlimited long distance calling and calls to Australia’s mobile phone customers (most countries outside of North America require the calling party to pay mobile rates when calling a mobile customer).  Even customers on Optus’ budget-minded standard and “naked” (standalone) broadband plans will benefit from new 500GB allowances.  Those who manage to exceed their allowance will find broadband speeds reduced to 250kbps until the end of the billing cycle.

Some Australian ISP’s take all limits off during off-peak usage hours.  The country has traditionally suffered from usage caps because of international undersea cable capacity problems which restrict how much traffic can be sent and received between the South Pacific and North America and Europe.  Increased undersea fiber capacity is tempering those traffic restrictions, and momentum towards unlimited use plans (or those with ridiculously high allowances) is the result.

Lifehacker produced a broadband plan breakdown showing the dramatically increasing usage allowances for Australian broadband customers. Traffic shaping continues to be an issue, however. Such speed control measures traditionally target peer-to-peer traffic. Total cost is the total price of the service over the length of the term contract. This chart represents high end plans, typically offering the highest speed tiers. All dollar amounts are in Australian dollars.

The Australian Broadcasting Corporation’s ‘The Gruen Transfer’ takes a humorous look at how phone companies Down Under advertise their services, including a reference about how “capped” services represent revenue gold to service providers.  (15 minutes)

When the FCC delivers for Big Telecom's agenda, stocks soar. Comcast shares exploded on news the company could largely do as it pleases with its broadband service. (CNBC)

Comcast’s stock price soared today as Wall Street was cheered by news America’s largest cable operator would likely face little regulatory restraint from consumer protection policies designed to keep broadband providers from meddling with Internet traffic.  But investors were also excited by the green light signaled by Federal Communications Commission chairman Julius Genachowski that launching Internet Overcharging schemes like “usage-based” billing, speed throttles and hard usage caps on broadband consumers was also acceptable marketplace behavior.

Craig Moffett, a Wall Street analyst with Sanford Bernstein said Genachowski’s remarks left the marketplace with little doubt it can get away with price increases and new limits on broadband consumption.

“The FCC here is expressly acknowledging the need to ration broadband, and that’s a really big deal,” said Moffett, appearing on CNBC this afternoon.  “I think you are going to start to see usage-based pricing plans from the broadband providers pretty quickly.”

Moffett also acknowledged his firm’s own research showing consumers despise such pricing schemes and admits the impact on America’s broadband landscape is likely to include a dramatic shift in how customers use their Internet accounts.

“When customers think they are going to be charged when they click on that link and watch a movie, they are going to be inclined to watch fewer movies,” Moffett said.  “You can’t expect linear progression of online video because there are going to be feedback loops like usage-based pricing that are going to limit usage.”

Moffett says cable operators are benefiting from Chairman Genachowski’s new approach because it opens the door to repricing wired broadband accounts to limit broadband consumption.  Since most analysts guessed regulators would allow usage-based pricing to remain on wireless broadband, the unexpected green light for similar rationing plans on cable broadband, DSL, and other wired services was welcome news, at least for providers and Wall Street.

Consumers that don’t deliver a resounding negative response to elected officials, the FCC, and the White House better start thinking twice about clicking that YouTube video, because that few minutes could cost plenty if providers slap higher prices and limits on broadband service in the coming year.

A Wall Street telecom analyst predicts the end of unlimited home broadband accounts is going to come quickly, now that the FCC has capitulated on Net Neutrality policies.  (3 minutes)

Studies find few surprises for cable and phone companies that pay for them.

Internet plans with term contracts, usage limits, and other pricing tricks are good for consumers and save them money over comparable unlimited usage plans.

That is the conclusion of a new study from the Technology Policy Institute, an industry front group funded by AT&T, Comcast, the National Cable & Telecommunications Association, Qwest, Time Warner Cable, T-Mobile, and Verizon.

Scott Wallsten and James Riso’s “study,”Residential and Business Broadband Prices, Part 1: An Empirical Analysis of Metering and Other Price Determinants,” claims to have taken a comprehensive look at 25,000 plans offered across North America, Europe and the Pacific to make their case that a residential service plan with a 10GB monthly usage cap would save consumers 27 percent over the price of a comparable unlimited plan, as long as data use stays below the cap.  They also suggest additional savings can be had if consumers lock themselves into term contracts with service providers (most of which carry hefty fees to exit early.)

These results suggest that the unlimited data plans typically offered by most U.S. wireline broadband providers may not be optimal for many consumers. The details of capped plans matter, and how an individual user is affected depends on the base price, allowed data usage, and consequences for exceeding the cap. Nevertheless, because capped plans are—all else equal—cheaper than unlimited plans, many consumers, particularly the low-volume users, are likely to pay less for broadband with data caps than they would for plans offering unlimited data transfer.

Wallsten and Riso make much of AT&T’s recent decision to end unlimited usage for wireless broadband, suggesting that consumers are saving money with new, low-use plans over the company’s old unlimited pricing.  The authors claim close to 70 percent of iPhone users consume less than 200 MB per month, which is the cap for AT&T’s cheaper data plan.

But the authors concede that usage is growing — rapidly in the case of online video, which sets the stage for consumers saving money today, but facing serious overlimit charges on their bills tomorrow:

Some analysts, however, remain concerned that these plans make video streaming impractical given the bandwidth it consumes, could eventually cost consumers more as they use their wireless devices more intensively, and generally make it less likely for wireless to become a viable substitute for wireline broadband. To be sure, while Figure 3 shows that the vast majority of users consume small amounts of data today, it also shows per user mobile data consumption growing quickly, so the number of people who exceed the caps could increase significantly in a relatively short period of time.

Major U.S. wireline providers have not yet introduced metered pricing successfully, though, as shown above, it is common in other countries. An experimental metered pricing plan by Time Warner Cable garnered strong reaction, prompting one group to demand that Congress ―investigate ongoing metered pricing practices to determine the impact on consumers. Some in Congress did, in fact, hold hearings on the plans. In response to this backlash, Time Warner Cable canceled its experiment.

Despite the political reaction, all consumers are not inherently worse off or better off with metered pricing. Low-volume users are likely to be better off under metered plans and high volume users worse off. The net effect on any given consumer depends on his data use, the base price, how much data the base price allows, the price of data when exceeding the cap, and how much he would have paid for an unlimited plan.

Wallsten and Riso also admit several parts of their study are “incomplete,” and “lack data.” We would also include the facts they ignored whether consumers prefer unlimited plans, how customers would feel about a bill with overlimit fees attached, or whether the usage cap levels the authors note in their study are adequate.  They also completely ignore the critical issue of bandwidth cost trends and their relationship to consumer pricing.

But of course they would, considering the same providers who want these pricing schemes are paying the costs for the study.

Welcome to the world of Hired Gun Research.

Wallsten, in particular, has been singing the same cap-happy tune for several years now, churning out the same industry-financed conclusions about broadband.  Back in 2007, he delivered a piece trumpeted by the Progress & Freedom Foundation and the Heartland Institute — two groups notorious for parroting corporate-friendly talking points.  Back then it was about Internet overloads and supporting Internet toll booths for “congestion pricing” after Comcast got caught secretly throttling broadband customer speeds.

Dave Burstein of DSL Prime notes most consumers don’t like caps, lock-in contracts, or speed throttles.

“Policymakers should normally assume that imposing caps generally results in negative consumer welfare. The small efficiency gains don’t come close to making up for a second rate Internet,” Burstein writes. “Everyone is better off with a robust, unthrottled Internet. It allows for an important form of video competition and market access for innovative new net offerings. It’s a better experience for the user and hence more people will be connected, a good thing.”

In this latest study, the two authors completely ignore some very important facts:

• Who sets the pricing for unlimited and usage-capped broadband?  Providers.  Do consumers save money from usage limited plans because of decreased provider costs passed along to consumers or pricing schemes that artificially inflate unlimited broadband pricing to drive customers to “money-saving” limited plans that teach usage restraint or expose consumers to dramatic overlimit fees?

• What are the trends for wholesale bandwidth costs and how does that trend comport with industry pricing schemes that have increased broadband pricing in the United States?  An honest study would reflect these costs are dropping… dramatically, and would introduce the very real question of whether unlimited broadband is a problem in search of a revenue-generating solution that would come from further monetizing broadband with so-called “consumption pricing.”

• What is the consumer perception of usage-limited broadband?  An important part of this equation is whether consumers want unlimited broadband service to be discontinued.  Every study to date not paid for by the providers themselves shows consumers are willing to pay today’s prices for the peace of mind they receive in not being exposed to limits or overlimit fees.  Wallsten and Riso touched on the consumer backlash, to a considerable part coordinated by Stop the Cap!, over Time Warner’s pricing scheme which would have tripled broadband pricing for an equivalent level of service.  But the authors charge on with their pro-cap conclusions regardless.

• Wallsten and Riso’s study only casually mentions the dramatically different paradigms of wireless and wireline broadband.  The former is delivered using technology that is recognized to have limitations that can only be seriously addressed with additional spectrum allocation that could take years to address.  The latter is already being mitigated by cable broadband technology upgrades, fiber optics, and improved backbone connections that often deliver much better access at a fraction of the price providers paid just a few years earlier.  Drawing comparisons between AT&T’s wireless broadband pricing and wireline broadband is dubious at best, especially since two companies largely control pricing and service for the majority of wireless customers in the United States.

• To prove its contention limited broadband service is “common in other countries,” the authors cite a Frequently Asked Questions article by Comcast trying to justify that company’s own usage cap to its customers.  So because Comcast’s PR department says it, it must be true.  In fact, in countries where usage capped broadband has been a traditional problem, consumer demand and public policy efforts have moved providers towards offering unlimited service plans to meet popular demand.  In fact, in countries like Australia, New Zealand, and South Africa, governments have cited usage caps as a serious disadvantage to growth of the digital economy.  Consumers certainly agree.

Burstein adds:

Caps or other throttling measures are almost never imposed because of actual congestion problems (on large, wired networks.)  The caps would be at far higher levels if they were, like Comcast’s 250 gigabytes. The usual explanation is bogus. The typical consumer advocate believes the caps are about preventing competition to the carriers’ own video package. That’s certainly common, but so is price discrimination to yield increased potential revenues. As Scott notes, price discrimination in a strongly competitive market can work out well for all concerned. With strong competition, the benefits flow through to consumers. Since competition in broadband is typically weak, I believe it far more often has little consumer benefit but is good for company profits.

The authors conclude that despite limitations on data available, “The policy implications, however, are clear.  Policymakers should not immediately conclude that data caps and other pricing schemes that differ from traditional unlimited plans are necessarily bad.”  Instead, the authors suggest pricing trends should be evaluated over time to identify the effects on prices, investment and usage.

Although that’s a point Burstein agrees with, we feel there is substantial evidence this debate is based not on experimental pricing to find new customers, but rather a defensive position to respond to an inevitable public backlash against Internet Overcharging schemes.  Providers are desperately looking for excuses to further monetize broadband, cut costs, and deliver an effective impediment to online video competitors using broadband networks to deliver alternative, less expensive services to consumers.

Policymakers should listen to their constituents, who are more than comfortable with today’s unlimited broadband experience.  Nobody objects to experimental low usage plans with discount pricing, but not at the expense of ending or repricing existing unlimited service into the stratosphere.  Today’s broadband industry earns billions in annual profits, even as their costs decline.  Providers have done considerable profit-taking in the last few years from their broadband divisions, slashing upgrades and other investments to keep pace with traffic demands.

Netflix accounts for 20 percent of all broadband activity in the United States during prime time evening hours.  As expected, “Internet experts” that are really little more than paid lobbyists for the broadband industry have started to feed the media scare stories about the great Internet traffic crisis soon to befall the Internet.

Just a few years ago, it was peer-to-peer traffic responsible for Internet “brownouts,” but now Netflix offers an even better, more convenient scapegoat — especially for the broadband providers that compete with it.

Fortune magazine provides a handy dandy needle to pop the balloon of BS from the broadband industry bully boys:

Just for fun, try to guess the year in which the following warnings about the Internet’s impending meltdown were issued:

No. 1: “Over the coming six to 12 months, computer users around the planet are likely to experience the Internet equivalent of the Great Blackout, or at least frequent brownouts, as our information infrastructure staggers and struggles under the heavy onslaught of new users and new demands.”

No. 2: “Internet access infrastructure, specifically in North America, will likely cease to be adequate for supporting demand within the next three to five years.”

No. 3: “Will Netflix Destroy the Internet?  American broadband capacity might not be able to keep up.”

The answers: 1997, 2007 and this week—and that’s just a small sampling from the past 20 years. Such predictions of the Internet’s breakdown are always premised on  the arrival of a scary new device or application that will send lots of digital bits over the Net.  Back in 1995, when Internet sage Bob Metcalfe tried to explain why he foresaw “the Internet’s catastrophic collapse,” he cited a wave of new “Internet appliances,” in particular the dangerous Sony Playstation, which for the first time had Internet access!

[...]What the chicken littles often miss are the clever ways in which Netflix movies and other content get delivered.  Like most major companies that move lots of Internet traffic, Netflix contracts with companies whose job it is to deliver lots of bits, fast and cheap.  Netflix relies mainly on industry giant Akamai, which runs 77,000 servers with big hard drives that it has placed in every nook and cranny of the Internet.  When a college student downloads “Dexter Season 1″ from Netflix there’s a good chance the show is already stored on campus on an Akamai box.

“That video is growing rapidly and going to be huge is true,”  says Akamai co-founder Tom Leighton. “But there’s tons of capacity out at the edges of the network….plenty of capacity in the last mile to your house.”  That capacity, he says, combined with smart delivery of Netflix content from nearby servers, means the Internet can handle Netflix just fine.  If all that traffic had to travel closer to the center of the Internet then many larger peering points would be overwhelmed, Leighton adds. (There’s reason to trust Leighton’s numbers on both counts: he’s also a professor of applied mathematics at MIT.)

Check out KOCO-TV Oklahoma City’s “Internet Panic” story, delivering the broadband industry’s talking points about Internet traffic jams in just 30 seconds.  (1 minute)