[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/KJCT Grand Junction Wi-Fi Hot Spots 7-18-11.mp4[/flv]

The voluntary agreement between many of the nation’s largest Internet Service Providers and copyright holders is striking fear into the hearts of small retail businesses who provide free Wi-Fi to their customers.  If those customers download illegal content, who is ultimately going to be held to account?  KJCT-TV in Grand Junction, Colorado investigates whether some local coffee shops may be forced to shut their Wi-Fi off, or make customers sign agreements before they can log in.  (2 minutes)

Phillip "Not Paid by AT&T" Dampier

When asked if the merger of AT&T and T-Mobile will limit customer choice, NAACP’s local executive director Stanley Miller told a Cleveland, Ohio television station, “I don’t think that’s an issue in today’s environment; I think the companies are smarter today and they will make people understand and give them the beneficial services that they’ll need.”

The civil rights group had nothing to say about how much AT&T will charge for these “beneficial services.”

At least WEWS-TV in Cleveland is bothering to ask the question.  Most of America’s television news has either ignored the enormous merger on offer from AT&T and T-Mobile, or didn’t wade much further beyond AT&T’s press release about the “benefits” the merger will bring.  Unfortunately, the television station never bothered to alert viewers to the fact the civil rights group receives substantial financial support from AT&T.

Miller’s performance trying to tout his parent organization’s unqualified support for the merger sent a very clear message to anyone watching NewsChannel 5 — he doesn’t really understand what he is talking about.

On the issue of expanding wireless service into rural Ohio, Miller was left tongue-twisting his way into advocating a monopoly because they’ll be best equipped to get service to those who need it.  That’s a fascinating prospect — a monopoly spending money expanding service where it is unprofitable to provide.  That’s the reason companies like AT&T have ignored rural America, and will continue to do so — merger or not.

Miller (WEWS-TV)

In fact, AT&T’s claim that it needs the network of T-Mobile to stop the persistent problems of dropped calls and slow data service doesn’t make much sense either.  Verizon, AT&T’s closest competitor, doesn’t seem to be suffering those problems, perhaps because it has made investments in upgrades AT&T has avoided.

In California, consumer advocate Jon Fox was taking an equally skeptical look at AT&T’s claims on behalf of CalPIRG, the California Public Interest Research Group.  Fox noted AT&T’s promotion of the merger in his state came at invitation-only cheerleading sessions run by company officials:

Earlier this month, AT&T California President Ken McNeely explained to an invitation-only audience that the proposed merger with T-Mobile will create new jobs, help communities and improve wireless phone service. AT&T preferred not to take questions from the general public on how that vision fits with AT&T’s history of consolidation, layoffs and aggressive market behavior.

Nearly 30 years after regulators broke up AT&T’s unprecedented control over the U.S. wired phone market, consumers are asked to believe that this time things will be different. This notion defies both experience and common sense. Unless significant market regulation is put into place that encourages a competitive wireless arena to flourish, this proposed merger will be bad for consumers, innovation and economic growth.

Fox notes the wireless marketplace in the United States is hardly a paragon of competitiveness today.  If the merger were approved, 76 percent of Americans would receive wireless service from two providers — AT&T and Verizon.  Fox observed America’s next-most-hated conglomerate — the oil and gas industry — wishes it could have that sort of market power.  The top two oil companies in the U.S. have a combined market share of only 24 percent.  America, he notes, wouldn’t tolerate that kind of consolidation in the gasoline market, so why should we tolerate it in the mobile market?

The California Public Interest Research Group

Fox advocates more competition, not less.  He suggests the government force AT&T and Verizon to open their cellular networks to independent third party competitors at fair prices, and let everyone compete.  That could germinate competition that would end the chorus of rate increases from the largest players and allow for innovative pricing plans that don’t force customers into the nearly identical service plans AT&T and Verizon want to force you to accept.  T-Mobile already provides the most innovative pricing in the wireless marketplace, and AT&T is about to swallow that innovation whole.

What ultimately happens to a well-dwarfed Sprint remains an open question, but one many on Wall Street have already answered, suspecting America’s third largest carrier simply won’t be in a position to compete.  Fox thinks the situation is dire when two companies will have a virtual lock on wireless data services Americans increasingly depend on.

That’s not the view of the NAACP, of course.  But then the NAACP is hardly an independent observer, being the recipient of a considerable amount of money and executive talent from AT&T.  That counts for a whole lot more than the rank and file members of the organization, who will be paying the increased prices AT&T has in store for everyone.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/WEWS Cleveland ATT T-Mobile Merger 7-14-11.mp4[/flv]

WEWS-TV in Cleveland investigates the ramifications of a merger between AT&T and T-Mobile.  More than 94% of all Ohioans filing comments with FCC oppose the merger, but groups like the NAACP support it.  NewsCenter 5 wanted to find out why.  (3 minutes)

A California company with a novel approach for renting DVDs faces the prospect of a preliminary injunction against the service if a judge agrees the service is skirting copyright law.

Zediva promotes itself as a remote DVD rental service that avoids lengthy delays often imposed on online streaming and pay-per-view services.  The company allows customers to “rent” DVD titles the same they are released, remotely streaming the contents over a broadband connection.  Zediva says it literally has a bank of DVD players which customers can access and remotely control.  When a customer “rents” a DVD, a Zediva employee inserts the disc into a DVD player and gives each customer up to two weeks to watch the movie.  Because Zediva says only one customer can rent the physical DVD at a time, it is not skirting copyright or streaming laws. The service will even mail the DVD to a customer if they don’t want to watch it over their Internet connection.

Zediva argues it is using the Internet as a way to connect the DVD player to a renter’s television.  The company says it should not matter where the player is physically located, and because a customer can exclusively control the actual player during the rental period, it is not violating any laws.

Hollywood disagrees, and the Motion Picture Association of America promptly filed suit in April, claiming Zediva’s business model undermines its licensing agreements with online movie services.  The lawsuit claims Zediva is not paying movie streaming rights like other online movie services, and is not comparable to a traditional movie rental store because the company makes individual titles available for viewing by other parties as soon as four hours after a customer stops watching, even though they can return and watch the movie again for no additional charge for up to two weeks.

This week, the MPAA touted a potential new friend of the lawsuit — Cablevision, which filed its own amicus brief in the case drawing distinctions between its Remote DVR service and Zediva.  Cablevision is in trouble with some rights holders over its new Remote DVR, which records shows on equipment at the cable company’s offices and then streams the programming on-demand to subscribers’ TV sets.  Some contend Cablevision owes “per performance” license payments for every show watched over the service.  Cablevision has consistently argued to the contrary, suggesting the actual location of the storage system should not matter, so long as the recordings are made and watched by only a single customer.

But Cablevision’s brief shows the company has no interest in being connected to Zediva, arguing its Remote DVR service is not comparable to the pay-per-view business Zediva is running.

A judge is expected to hear the case early next week.

[flv]http://www.phillipdampier.com/video/CNBC Zediva Video Streaming Service 3-17-11.flv[/flv]

CNBC and the New York Times’ David Pogue tried out Zediva back when it was introduced in March of this year.  (3 minutes)

Cantor

For all of the bluster about not raising taxes, a group of House Republicans have proposed doing what one telecom organization concludes is exactly that by diverting Universal Service Fund revenue paid by landline and cell phone customers to reduce the budget deficit.

The idea to divert at least $1 billion annually — about 25% of the USF budget, comes from House Majority Leader Rep. Eric Cantor (R-Va.).  USF fees are paid by consumers as part of their telephone bill.

With nearly a quarter of the USF’s $4.5 billion annual revenue diverted to the treasury, phone companies would either have to curtail efforts at rural broadband expansion, now proposed under USF reform efforts, or lobby for an increase in the amount of the fee to cover the diverted shortfall.

Telecom industry groups representing rural phone companies and local utility regulators blasted the proposal, saying it would destroy rural broadband expansion efforts underway by small independent and co-op phone companies.  The Universal Service Fund was designed to subsidize phone service in rural America to ensure equality of access and rates regardless of where Americans live. Without it, many rural phone companies face serious financial difficulties, especially as consumers increasingly look to providers to deliver broadband service.

“While we understand Congress is scrambling to resolve the deficit issue, our lawmakers should not tap into the Universal Service Fund as a last-minute solution. To divert these vital but limited funds from their intended use would be counterproductive and may undermine our national broadband goals,” said National Association of Regulatory Utility Commissioners president Tony Clark. “The Universal Service Fund is funded by fees consumers pay through their telephone company to ensure affordable access to telecommunications service across America. The Universal Service Fund receives no federal monies and should not even be under consideration in this debate.”

John Rose, president of the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), called Cantor’s proposal “a totally new tax.”

The Federal Communications Commission has been working with state and local regulators, members of Congress, and rural telephone interests to transition the fund away from subsidizing basic telephone service, which is now ubiquitous in the United States, and towards a general purpose broadband rollout fund, to help provide capital to expand broadband service into communities deemed by larger providers as unprofitable to serve.

Some critics of the program suggest in its present form, it suffers from waste, fraud, and abuse.  Rep. Cliff Stearns (R-Fla.) noted the original fund charged consumers less than five percent of their long distance bill, but subsequent increases have resulted in consumers paying up to 14%.  Stearns said more must be done to reduce the cost of the USF for consumers and has supported prior reform efforts.

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Rep. Cliff Stearns (R-Fla.)’s opening remarks in a 2009 hearing criticize the increasing costs consumers find on their phone bills for the Universal Service Fund.  (5 minutes)

AT&T warns DSL customers they can watch 10 High Definition movies per month... and use their Internet connection for absolutely nothing else, unless they want to incur an overlimit fee of $10.

AT&T has released a phoney baloney video for their customers purporting to “explain” broadband usage and the company’s completely arbitrary usage limits on DSL and U-verse customers: “A single high-traffic user can utilize the same amount of data capacity as 19 typical households. Lopsided usage patterns can cause congestion at certain points in the network, which can slow Internet speeds and interfere with other customers’ access to and use of the network.”

Too bad these claims are not verified with actual facts.

Meaningless statistics

AT&T’s claim that less than two percent of their customers use 20 percent of available bandwidth is frankly meaningless to the company’s DSL and U-verse hybrid fiber-copper networks.  For years, phone companies made a marketing point that unlike cable broadband’s shared network, their DSL service was never shared with anyone else in a neighborhood.  Therefore, running it at a trickle or full speed ahead should have no impact on any other customer.  The only exception to this rule comes from phone companies that under-invest in their middle mile and backbone networks.  For AT&T, that means trying to serve too many customers on inadequate equipment ranging from a poorly planned network of D-SLAMs, which connect individual customers with a fatter pipeline back to the central office, or an inadequate network between the central office and AT&T’s regional backbones.  Fiber, such as that used by AT&T’s more modern U-verse system, completely solves any capacity issues.  Broadband traffic is only a tiny percentage of the bandwidth consumed by AT&T’s IPTV video service — the one that delivers U-verse TV to your home.  AT&T imposes no viewing limits on customers, of course.

Any actual capacity crunch would only show up during peak usage periods — when AT&T customers of all kinds pile on their broadband connection at the same time. AT&T’s usage cap regime does next to nothing to mitigate that kind of congestion.  Here’s why:

Since AT&T and other broadband companies routinely claim the average use per customer is well under 20GB per month, and only 2 percent of customers are currently deemed “heavy users” by AT&T, that tiny percentage of customers cannot create sufficient drag on AT&T’s DSL network even if they opened up their connections to full speed traffic.  In reality, the 98 percent of “average” users piling on the network during prime time would be the only thing capable of the kind of critical mass needed to create visible congestion.  What uses more capacity?  Two customers using their 7Mbps DSL lines to stream online videos concurrently or 98 customers all using their 7Mbps DSL lines at the same time for virtually any online activity?

The math simply doesn’t add up.

The Congestion Myth

AT&T targets their broadband customers with an unwarranted, arbitrary Internet Overcharging scheme they cannot effectively explain to customers.

As two week’s of hearings this month have demonstrated, Bell Canada’s similar arguments for its usage caps simply come without any evidence of actual congestion.  In fact, company officials modified their position to talk more about peak usage congestion, a problem that cannot be controlled with a usage cap well in excess of the average consumer’s usage.  In fact, only a speed throttle could control network congestion at the times it actually occurred.  AT&T also ignores when its customers are using its network.  Is a heavy user downloading files at 3 in the morning creating a problem for other users?  No.  Are the majority of their average-usage customers all jumping online after school or work creating a problem?  Perhaps, if you believed AT&T even had a congestion problem.

Industry maven Dave Burstein does not, and Burstein talked to two chief technology officers at AT&T who told him wired broadband congestion is a “minimal” problem for the phone company.

Upgrades and Cord-Cutting, Delayed

Two things usage caps can do is help your company delay necessary upgrades to meet customers’ broadband needs, whether they are “heavy users” or not.  AT&T has shown itself historically to be slow to invest, and cheap when it does.  AT&T’s wireless network is bottom-rated by consumers thanks to inadequate network capacity.  The company elected to upgrade on-the-cheap to an IPTV platform that still relies on copper phone lines to deliver service that simply cannot compete in quality and capacity with Verizon’s FiOS fiber to the home network.  But investors love the fact the company counts every penny, even if it means inconveniencing and overcharging customers for their services, usually offered in duopoly or monopoly markets.

AT&T’s usage caps on U-verse are even less credible than those imposed on their DSL service.  U-verse is a fiber to the neighborhood network with near limitless capacity for broadband and video.  In fact, the only “congestion” comes from the copper phone lines that limit how much bandwidth can be supplied to your individual home.  But no matter how much you use, you will not affect your neighbors because your copper phone line is shared with nobody else.  In fact, the biggest chunk of U-verse’s bandwidth is reserved for their video services, which makes arguments about excessive Internet usage on that pipeline un-credible.

What AT&T’s usage cap does assure is that you will not drop that video package from your U-verse service anytime soon.  That lucrative revenue from expensive video packages cannot be forfeit without a fight, and a nice deterrent in the form of an arbitrary usage cap does wonders to keep that cord cutting to a minimum.

Meters That Don’t Measure

One of the worst ongoing problems with Internet Overcharging schemes like AT&T’s is the broken usage meter.  Stop the Cap! has received hundreds of e-mails from AT&T DSL and U-verse customers who report AT&T’s usage meter is either unavailable, broken, or is wildly inaccurate.  With absolutely no independent oversight, and no consistently accurate usage measurement, charging anyone overlimit fees with a broken meter doing the counting is unconscionable.  Yet AT&T may well try.  The company has already been sued by one law firm for what it alleges is an unfair usage meter on the company’s wireless service — a meter that consistently overcounts usage in AT&T’s favor.

AT&T admits they cannot even accurately measure their own customers' usage.

Once getting over the broken meter, customers are directed to a pointless usage-estimator — the ones that tell you about how many tens of thousands of e-mails you can send and receive under AT&T’s cap regime.  In fact, these statistics are irrelevant for the vast majority of customers who never think of sending 10,000 e-mails or exchanging 2,000 pictures or songs.  That’s because customers do not use the Internet to exclusively do those things.  Even with the guestimator, they are left checking a broken usage meter to ponder whether or not they can watch one more show or download another file without incurring a $10 overlimit penalty (or more).  That “generous” limit AT&T touts suddenly doesn’t look so ample when the company gets to the wildly popular activity of streamed video.  AT&T’s own video warns you can only watch 10HD movies a month over your broadband connection — and absolutely nothing else.  No web browsing, e-mail, or photos or music.  Ten movies a month.  Still thinking of dropping your U-verse video subscription now?

Yet AT&T has the nerve to claim, “Our goal is to provide you with the best Internet service possible.”  Really?

Thankfully, not every member of the investor class is thrilled with nickle-and-diming broadband consumers for usage that costs the providing company next to nothing.

The Economist excoriated AT&T for its unwarranted usage limits on its blog earlier this year:

The use of caps allows providers to dish out bandwidth with one hand and take it away with the other. The companies have vastly increased the capacity of various copper, coaxial and fibre lines, but artificially separate out a portion—at least half and often much more—for video which a set-top box or a broadband modem spits out as an apparently distinct service. Cable firms simultaneously push out hundreds of digital channels, while telecoms firms rely on multiple digital streams from live broadcast or cable TV or on-demand pay-per-view. It is as though the water main were divided as it entered the home and a steady, modest stream was made available for showers and at the tap, while most of it was always at the ready for a coin-operated washing machine.

Increasing speed on the internet portion, which would allow consumers to give up on TV subscriptions, is balanced by capping volume. If a consumer does not monitor usage, his internet access can be withdrawn or, in AT&T’s case, overage fees of $10 charged for every additional 50 GB of usage. […] [That] $10 charge applies whether the limit was breached by 1 MB or a smidgen under 50 GB.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Usage.flv[/flv]

AT&T’s new video on broadband usage is based on facts not in evidence and only adds to consumer confusion about arbitrary Internet Overcharging schemes.  (4 minutes)