Rep. Eric Massa (D-NY) introduces pro-consumer legislation designed to stop Internet Overcharging schemes.

Congressman Eric Massa (D-New York) will formally introduce the Broadband Internet Fairness Act (H.R. 2902) this morning on a nationwide conference call with rep0rters.

Rep. Massa is joined by two organizations that helped to bring about the bill’s creation – Stop the Cap!, an all-consumer advocacy group opposed to Internet Overcharging schemes and service limits, and Free Press, a national, nonpartisan organization working to reform the media and promote universal access to communications.

Rep. Massa introduced the bill after hearing an outpouring of complaints from constituents in his home district in western New York.  Time Warner Cable’s Rochester division announced plans to implement an Internet Overcharging scheme on residential customers on April 1st which would dramatically raise rates on broadband service from $50 per month to $150 per month for continued access to unlimited service.  Other subscribers faced the prospect of a severely curtailed broadband service with limited usage allowances and overlimit fees for exceeding them.

“Access to the internet has become a critical part of our economy and we can’t let corporate giants limit the public’s access to this important tool,” said Congressman Eric Massa. “The Broadband Internet Fairness Act is all about protecting consumers from outrageous internet overcharges and giving the public a voice in this process. I have taken lots of time to work on this bill and have consulted with my constituents and industry experts. Now the hard work of passing this bill begins.”

The Broadband Internet Fairness Act will prevent the monopolistic rate increases of broadband companies by promoting the interests of broadband customers.  Specifically the bill:

• Requires internet service providers (ISPs) to submit plans to the Federal Trade Commission (FTC), in consultation with the FCC if they plan to move to a usage-based plan;
• Prohibits volume usage plans if the FTC determines that these plans are imposing rates, terms, and conditions that are unreasonable or discriminatory;
• Sets up public hearings for plans submitted to the FTC for public review and input;
• Only affects internet providers with 2 million or more subscribers;
• Imposes penalties for broadband ISPs that ignore these rules.

Phillip Dampier, a consumer writer from Rochester, New York created a website in 2008 to combat Internet Overcharging schemes.  Stop the Cap! is an all-consumer, all-volunteer website combating Internet Service Providers attempting to impose arbitrary usage limits, unwarranted and overpriced “consumption billing,” and extra fees and penalties on broadband subscribers.  The site has been visited by more than 100,000 people in the past year, particularly during Time Warner Cable’s proposed Internet Overcharging trial.

“When word of Time Warner Cable’s plan reached us in western New York on April Fool’s Day, we had to verify this wasn’t simply a bad joke,” Dampier said.

Phillip Dampier

“The Internet Overcharging scheme Time Warner Cable was proposing would have tripled our broadband bill for the exact same level of service we enjoyed as loyal Road Runner customers since 1998, when the service first became available in Rochester,” Dampier said.

“At a time when the economy is hurting, and our family already spends more than $175 a month on Time Warner Cable services, asking us to pay at least $275 a month was way out of line,” he added.

Dampier’s website quickly mobilized Time Warner Cable customers in all of the cities chosen for the proposed trial.

“People from New York, North Carolina, and Texas may not always agree on everything, but we found common ground with our friends in Austin, San Antonio, Beaumont, and the Triad region of North Carolina in absolute opposition to these pricing schemes,” Dampier said.

Media attention on the story, particularly in Rochester, was relentless.  One news anchor said few issues had provoked as much outrage from viewers than Time Warner Cable’s proposed pricing changes for Internet service.

In mid-April, Time Warner Cable CEO Glenn Britt announced that the company was “shelving” its pricing experiment until customers could be “educated” about the benefits.  Since that time, Time Warner Cable officials have continued to make public statements praising what they call “consumption-based billing.”

Dampier believes that means Time Warner Cable will be back for more.

“There is no doubt in my mind this company has not abandoned their Internet Overcharging proposals — they are simply internally trying to find ways to convince their customers to accept new pricing without creating another firestorm of bad publicity,” Dampier says.

“Ultimately, providers want people to think twice about using their Internet service, forced to make daily visits to online ‘gas gauges’ to check their usage, and always worrying about how close they are to paying overlimit fees,” he says.

“Stop the Cap! believes customers should be able to use their broadband service without the fear of getting even higher cable bills than they already receive every month, especially on a product already making a lot of money for providers,” he adds.

Several visitors to Stop the Cap! own shares in Time Warner Cable stock, and were surprised to learn company officials were attempting to claim the new charges were necessary to pay for upgrades to their network to deal with broadband traffic growth, because Time Warner reported exceptional profits from their broadband division in both 2007 and 2008.

“In 2007, TW made $3,730 Million, on high speed data alone, and then had to turn around and spend $164 Million to support the cost of the network. 2007 total profit on high speed data: $3.566 Billion”

“In 2008, TW made $4,159 Million, on high speed data alone, and then had to turn around and spend $146 Million to support the cost of the network. 2008 total profit on high speed data: $4.013 Billion”

“It cost TW 11% less money in 2008, to keep their network running, than in 2007.”

In one 10-Q filing in late 2008, Time Warner reported, “high speed data costs decreased for the three and nine months ended September 30, 2008, primarily due to a decrease in per-subscriber connectivity costs, partially offset by subscriber growth.”

The cable television industry trade press has repeatedly covered concerns by cable industry officials about the impact of online video on their cable television business model.  Should consumers discover online video can meet their television needs, there is no reason to continue a cable-TV package with the cable operator.  By imposing Internet Overcharging schemes and limits, consumers are discouraged from watching online video because it would eat into their “monthly allowance.”

Congressman Massa immediately connected the dots.

“Cable providers want to stifle the internet so they can rake in advertiser dollars by keeping consumers from watching video on the Internet.  But so long as Americans can’t choose which cable channels they want to pay for, I don’t think cable operators should be able to determine consumers’ monthly internet usage. Additionally, charging based on a bandwidth usage is a flawed model when the cost of usage is totally out of line with the price. Consumers are much better served by plans based on the speed of the connection rather than amount of bandwidth used. Competition is crucial to our economy and I refuse to let monopolistic corporations dominate the market and gouge my constituents,” Massa said.

“Just recently, we had one reader share with us his cable bill for March of this year from the Beaumont region, where this scheme has already been tested, and it had $73 in overlimit penalties on it,” Dampier reports.

“Families with kids are going to rapidly discover that even if parents aren’t doing that much online, their kids will, particularly as they reach teenage years,” Dampier says.

“People need to remember that kids today have never known a world without the Internet, and they are taught to become comfortable with online access as soon as they start to attend school,” he said.

Coincidentally, Rochester is the only major city in New York State not served by Verizon, which is aggressively wiring fiber optic cables directly to homes across the state to provide FiOS, a package of telephone, television, and broadband service to residents at speeds beyond those offered by Time Warner Cable.  There are no plans to wire Rochester with fiber optics, as the incumbent telephone company, Frontier Communications, continues to rely on an aging copper wire infrastructure and considerably slower DSL Internet service.

“Time Warner Cable made choosing Rochester for a test market for Internet Overcharging a safe bet, as consumers have no other options for an equivalent level of service, and Frontier continues to define just five gigabytes of Internet usage an acceptable monthly limit in their agreement with customers, even though it is not enforced for now,” Dampier said.

Dampier tried Frontier’s DSL service in May and discovered it was not at all comparable with his Road Runner service from Time Warner Cable.

“The best speed they could provide our home in the town of Brighton, less than a half-mile from the city line, was 3.1Mbps service, far less than the 15Mbps service we had before, and they wanted us to sign a two year contract and messed up our bill when it was all over,” Dampier said.

For now, he is staying with Time Warner Cable.

“I was among the first five customers for Road Runner in this area when it became available, and have been a loyal customer of Time Warner Cable ever since,” Dampier says.

“I have nothing but praise for the local employees and the quality of service the company provides, but bean counters in New York City apparently believe they can pull a fast one on residents in western New York, and elsewhere, and try and convince us limiting our access and imposing additional charges, fees and penalties somehow represents ‘fairness’ and ‘savings.'”

“Cable customers already know their cable bills never go down, only up, and Congressman Massa is absolutely right — these schemes gouge consumers with extra costs way out of line with the expenses broadband providers actually incur,” Dampier adds.

Company officials have repeatedly claimed that only a small percentage of customers would face price increases under what they call “consumption based billing.”  Some Time Warner public relations officials have compared broadband pricing to splitting restaurant checks, all-you-can-eat buffets, game enthusiasts and “heavy downloaders” using “too much” bandwidth at “ordinary” customers’ expense, and that customers pay for electricity and water on a “metered” basis, so why not broadband as well.

“The problem with all of these claims is that the cable industry created and marketed flat rate pricing themselves, selling customers on the ‘always on’ network which allowed them to watch videos, download music, play games, and do all of the other things broadband networks can do, in return for $40-50 a month, which already provides substantial profits to the provider,” Dampier says.

“Most of the ‘heavy users’ already pay more than average subscribers because they want faster speeds, and pay $10 more a month for Road Runner Turbo, which provides that,” he says.

“For those customers who want to pay less, one of the biggest secrets in town is that providers already provide a “Lite” service for a substantial discount, which is perfect for those who just use their Internet service for web page browsing and e-mail,” Dampier says.

“Best of all, you never have to worry about reading online ‘gas gauges’ or worrying about overlimit penalties showing up on your bill,” he adds.

“The industry wants to make this an ‘us’ against ‘them’ fight, with ridiculous claims about other customers using more broadband and supposedly making others pay for it, but when you look at the enormous revenue companies already earn on this product, the argument falls apart as we’re probably all being overcharged now,” Dampier said.

“Also, the industry loves to try and compare itself with gas, electric, and water utilities, but never the service that most closely resembles their own business – the telephone company.  Flat rate local calling has been available in most cities for decades, and as costs have declined to transport phone calls back and forth, flat rate long distance service is now commonly available from both traditional phone line providers and a growing number of mobile phone companies,” he says.

Time Warner Cable itself markets a “Digital Phone” product that it markets as “unlimited calling nationwide.”

Dampier argues both telephone and broadband networks are about moving data, and for both the costs of moving that data back and forth are declining.  He says telephone companies are lowering prices in response, but broadband companies are still raising prices.

“That’s why we need Congressman Massa’s bill,” Dampier concludes.  “We need to make it very clear they need to find another way to increase their revenues, because this country is already falling behind in the broadband rankings, and we cannot afford to allow a handful of companies to control pricing and limit access just to increase profits,” he said.