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Lies, Damned Lies, and Broadband Numbers: Life is Good, Say Broadband Providers; Consumers Disagree

Mehlman

A telecom industry front group acknowledged today American broadband in the last decade has not won any awards for speed or price, but if you just give the industry ten more years of deregulation, there will be more competition than ever to change that.

For the Internet Innovation Alliance’s Bruce Mehlman, the cable and phone companies have done a fine job bringing broadband to Americans, especially considering the industry is only ten years old.  If you leave things the way they are today, the next decade will bring even more competition from phone and cable companies, he promises.

But consumer groups wonder exactly how a duopoly will ever deliver world class service in the next ten years when it has spent the last ten hiking prices on slow speed broadband and now wants to limit or throttle usage.

This afternoon, National Public Radio’s All Things Considered tried to referee the broadband debate, pondering whether America is a world leader in broadband or has just fallen behind Estonia.  Reporter Joel Rose was perplexed to find two widely diverging attitudes about broadband, each with their set of numbers to prove their case.

On one side, consumers and public interest groups like Consumers Union and Free Press who believe deregulation and industry consolidation has created a stagnant broadband duopoly that only innovates how it can get away with charging even higher prices.

On the other, the phone and cable companies, the groups they finance, and their friends on Capitol Hill who believe there isn’t a broadband problem in the United States to begin with and government oversight would ruin a good thing.

Compared with other nations, the United States has continued to see its standing fall in broadband rankings measuring speed, price, adoption rates, and quality.  When East European countries and former Soviet Republics now routinely deliver better broadband service than America’s cable and telephone companies, that story writes itself. Embarrassed industry defenders prefer to confine discussion of America’s broadband success story inside the U.S. borders, discounting comparisons with other countries around the world.

For Rep. Joe “I Apologize to BP” Barton (R-Texas), it’s even more simple than that.  Even questioning the free market is downright silly.

“As everybody knows, if it’s not broke, don’t fix it,” Barton said at a March congressional hearing to discuss broadband matters. “And y’all are trying to fix something that in most cases isn’t broke. Ninety-five percent of America has broadband.”

Industry-financed astroturf and sock puppet groups readily agree, and dismiss industry critics.

Bruce Mehlman, co-chair of the industry-supported Internet Innovation Alliance, which opposes more regulation, acknowledges that the story of broadband in the U.S. is a classic glass-half-full, glass-half-empty predicament. Still, he says he thinks broadband adoption in the U.S. is going pretty well considering broadband has only been available for 10 years.

“For the optimist, you’d say within a decade we’ve seen greater broadband deployment than you saw for cell phones, than for cable TV, than for personal computers,” Mehlman says. “It’s one of the great technology success stories in history.”

Mehlman says Americans don’t need more government intervention to make broadband faster and cheaper. “We haven’t yet and that’s in the first decade,” he says. “In the second decade, the marketplace is only going to be that much more competitive.”

Kelsey

The problems go further than that, however.

Derek Turner, research director for the public interest group Free Press, told NPR broadband rankings tell an important story. “For the providers to try to say that there’s no problem, it’s merely just a smoke screen,” he says.

Providers would prefer to measure their performance against each other instead of comparing themselves with foreign providers now routinely providing better, faster, and cheaper service than what American consumers can find.  They have to, if only because of those pesky international rankings illustrating a wired United States in decline.

Joel Kelsey at Consumers Union tells NPR there is an even bigger question here — what role broadband plays in our lives.

Because 96 percent of Americans can only get broadband from a duopoly — the phone or cable company, the only people truly singing the praises of today’s broadband marketplace are the providers themselves and their shareholders.  Consumers see a bigger problem — high prices, and particularly for rural consumers, slow speeds.

“If you talk to [the] industry,” Kelsey says, “they think of broadband as a private commercial service akin to pay TV or cable TV.”

On the other hand, Kelsey says, “There’s a lot of folks who think it is an essential input into this nation’s economy — an essential infrastructure question.”

National Public Radio reporter Joel Rose dived into the battle over broadband numbers between consumer groups and industry representatives. Is America’s broadband glass half-full or half-empty? (June 28, 2010) (4 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Analyst Says Re-Educating Consumers to Give Up ‘Unlimited’ is Key to Overcharging Success

Mark Lowenstein was a vice president of strategy at Verizon Wireless, where helped set pricing for the carrier.

The key to turning America into a haven for Internet Overcharging schemes is Re-educating customers to accept that unlimited ‘isn’t fair,’ especially in wireless mobile broadband.

Mark Lowenstein, an industry analyst and commentator, has given his prescription to Internet providers just itching to slap usage limits and overlimit fees on consumers enjoying unlimited broadband service:  you have to Re-educate consumers to accept Internet Overcharging schemes as a “positive” rather than a “punitive” development.

Fierce Wireless, where Lowenstein’s ideas were published, left out the fact he was also a senior executive at Verizon Wireless.

Despite the billions in profits earned from today’s broadband marketplace, some in the industry want to banish “unlimited” from subscribers’ lexicons.  Sure it’s true that many companies’ investments in broadband expansion and upgrades have actually declined in the last few years, right along with the costs to provide the service.  But in a world where revenues in other parts of the business are drying up, someone has to make up the difference — you.

For AT&T, the decision was easy.  If you want the raging-popular iPhone, you’re going to need a two-year service contract and a data plan limited to 2 GB of usage per month.  Exceed that at your financial peril (or use a Wi-Fi hotspot and stay off our 3G network).  Don’t like it?  Too bad for you.  Where else will you find a subsidized iPhone?

Now that AT&T has thrown down the smartphone cap gauntlet, Lowenstein is ready to offer carriers advice on how to make their abusive pricing schemes go down better with consumers.  He wants everyone to take a crash course in computer science. Grandparents everywhere will come to understand the meaning of megabyte and get into the habit of contemplating how many of those will be eaten from usage allowances everytime they use their phones.

A key part of the transition to usage-based pricing is going to be educating users and the app development community about what a “megabyte” is, as well as developing more advanced tools and the right early warning systems to ensure wireless operators don’t end up testifying before Congress for Bill Shock, Part 2. U.S. consumers are accustomed to flat-rate pricing in all other aspects of their connected life: landline phone, wireless voice (increasingly), cable, broadband and so on.

Lowenstein considers AT&T Usage Estimator to be “nifty,” missing the irony of his own declaration that AT&T’s nasty cap means “moderate usage of anything multimedia gets you to 2 GB pretty fast.”  AT&T, he notes, also helpfully notifies customers they are about to bust through AT&T’s subjective definition of an appropriate usage allowance.

He concedes there are some “gray areas” — mere minutiae in AT&T’s greater scheme for fatter profits:

  • New generation multitasking smartphones can run apps and other bandwidth-consuming features in the background, sometimes simultaneously, leading to exponential increases in data usage;
  • The model of the “constant connection” means apps in the background exchanging data over the mobile network 24/7 could consume plenty of data, or perhaps not.  Few know for sure;
  • Consumers are forced to pay for spam, advertising, unwanted file transfers and attachments, and other data not specifically requested;
  • Family plan users now need to track something else on AT&T’s website — how much data their kids are using.  Remember the wars over cell phone voice calling plan overages and text messaging?  Wait.

In Lowenstein’s world-view, this all represents opportunity.

Among his suggestions:

  1. Add special ratings to apps that are highly consumptive of content.
  2. Provide notification before certain content downloads or heavy usage apps.
  3. Provide a view into other family plan users.
  4. Provide the option for sponsored content and value exchange.

That last one may prove to be the most controversial at all.  It assumes the Kindle model — where the content producer builds in the price of network consumption.  That would make AT&T’s day — forcing content producers to cough up money to deliver content over the same network AT&T already charges customers to access.  Who would turn down being paid twice for the same thing?  Lowenstein’s model allows for advertisers to defray part of the costs:

An advertiser or sponsor could pick up some of the network cost. Or the content publisher could bundle the price of data into the app. Users are comfortable with the “choice” model in the TV world: view it for free on broadcast or Hulu, with commercials; pay a monthly fee for the DVR service and skip the ads; or pay a premium to view that content on-demand, commercial-free.

That suggestion benefits AT&T enormously, but does nothing for content producers who can’t even sustain themselves with advertising.  Lowenstein suggests they should now seek out advertisers to remunerate AT&T?  The implications of wireless carriers deciding who gets the usage-cap-exempt content deal and who doesn’t opens a whole new Pandora’s Box.  It effectively allows a handful of companies to pick the winners and losers in the mobile broadband marketplace.  After all, if AT&T offered free videos on its own video portal but didn’t exempt other websites with the same video content, guess where users will choose to watch.

Lowenstein believes taking these kinds of steps will somehow insulate the wireless industry from charges it’s barely competitive, restricts too much, and charges even more.  Yet usage limits like AT&T’s, coming even as carriers enrich themselves with gotcha add-on plans and extra fees will speak far louder than AT&T providing customers a guide on how to be abused by the wireless carrier just a little less.

I also think how usage-based pricing is handled in wireless will be closely watched in the wired broadband world. Consumers have become accustomed to flat-rate pricing for unlimited data from their broadband provider. But with the exponential growth of video consumption, and the notion of more TV and movie programming being downloaded from or streamed via the Internet, usage-based pricing for certain types of content or highly consumptive customers might be coming to a broadband neighborhood near you.

The “unlimited” ride might be coming to an end, but there’s an opportunity to implement it in a positive, rather than a punitive, manner.

In spite of Lowenstein’s love of telecom industry talking points (hardly a surprise considering he works for that industry), his notions that consumers will accept increasing broadband bills even as the level of service provided is reduced makes him not only wrong, but hopelessly out of touch.

Verizon Wireless Set to Abandon Unlimited Wireless Data On Its Forthcoming 4G Network

Verizon Wireless is contemplating the end of flat rate, unlimited data plans as it introduces fourth generation data networks this year.

“We will probably need to change the design of our pricing where it will not be totally unlimited, flat rate,” John Killian, chief financial officer of Verizon Communications Inc., the wireless unit’s parent, said in an interview at Bloomberg’s headquarters in New York.

Verizon expects “explosions in data traffic” as the company introduces customers to its 4G network, potentially ten times faster than older mobile broadband technology.  Verizon Wireless, already capturing enormous sums of revenue from consumers forced into mandatory, expensive data plans when they upgrade to smartphones, will soon discover some serious limits on those plans.

The irony is, Verizon’s 4G upgrade will bring wireless broadband speeds to consumers they realistically cannot use for much more than web browsing, e-mail, and low-bandwidth apps.  Video downloads will burn through data limits imposed at the level AT&T introduced for its customers earlier this month.

Killian

Wall Street wants consumers re-educated to believe broadband can never be unlimited and must be treated as a precious, limited resource.

“The more bandwidth that you make available, the faster it will be consumed,” said Craig Moffett, analyst at Sanford C. Bernstein & Co. in New York. “From Verizon’s perspective, the last thing you want is for another generation of consumers to be conditioned to the idea that data is always going to be uncapped.”

Moffett’s clients hope that is true because usage limits will control costs and make customers think twice about using their data features on their phones.  Reduced demand equals increased revenue, just what Wall Street ordered.

Verizon Wireless has already set the stage for that increased revenue with mandatory add-on plans that boost customer bills, especially for those buying smartphones.  Although just 17 percent of Americans own smartphones today, Verizon predicts 70-80 percent of customers will upgrade to smartphones in the next few years.  That guarantees an “upgraded” bill as well.

Estimates about current average data usage from smartphone customers ranges from 200-600 megabytes per month, but that was before the arrival of video-friendly 4G network technology and the newest generation of phones optimized for video, which can easily consume ten times as much.

Verizon recognizes the “video threat,” and press reports suggest the limits will only be imposed on the 4G network.  Current generation 3G networks make viewing video tedious, a natural barrier for customers planning to “use too much.”

Verizon’s widely anticipated limits, almost certainly to be equivalent to AT&T’s with respect to allowances and pricing, may dampen enthusiasm for the iPhone on Verizon’s network.  Any existing AT&T customer is grandfathered into unlimited data plans for their smartphones.  If those customers leave AT&T, they will be forced to take a usage-capped data plan from Verizon with no looking back.  AT&T won’t provide unlimited plans for customers returning to their fold.

Time Warner Cable Will Pay Frontier’s Early Termination Fee If You Switch Phone Companies

Phillip Dampier June 22, 2010 Competition, Consumer News, Editorial & Site News, Frontier Comments Off on Time Warner Cable Will Pay Frontier’s Early Termination Fee If You Switch Phone Companies

Time Warner Cable is back again with another offer to existing Frontier Communications customers trapped in multi-year service agreements.  If you dump your Frontier landline overboard for Time Warner Cable’s Digital Phone service, the cable company will send you a gift card worth $200 good towards defraying your early termination fee, if any.  If you don’t have such a fee, you pocket the $200.  A year ago on this date the company ran a similar promotion heavily promoted in local cable television ad spots.

Time Warner will provide free installation of the phone line including unlimited nationwide long distance for $24.95 a month for 12 months.  With the $200 gift card, that’s above and beyond their usual promotion.  The company is also extending a bundled discount if a customer also takes Road Runner broadband service with their “digital phone” service.

For Frontier customers looking for an early exit, this offers one opportunity.

Existing cable subscribers can take advantage of the offer.  There are terms and conditions to consider, starting with where the offer is available.  The following Time Warner Cable service areas qualify:

  • TWC Western New York
  • TWC Central New York
  • TWC Albany, NY
  • TWC New England
  • TWC Dothan, AL
  • TWC Enterprise, AL
  • TWC Yuma, AZ
  • TWC El Centro, CA
  • TWC Gunnison, CO
  • TWC Telluride, CO
  • TWC Coeur d’Alene, ID
  • TWC Moscow, ID
  • TWC Madison, IN
  • TWC Newburgh, IN
  • TWC Terre Haute, IN
  • TWC Ashland, KY
  • TWC Owensboro, KY
  • TWC Richmond, KY
  • TWC Kansas City, MO
  • TWC Lincoln, NE
  • TWC Ironton, OH
  • TWC Richlands, VA
  • TWC Pullman, WA
  • TWC Clarksburg, WV

Next, the offer is only good for residential customers switching from Frontier’s landline service.  Limit one gift card per customer.  Your final Frontier phone bill showing a disconnect request must be furnished to Time Warner Cable within 30 days to qualify.  Your name and address must match on both bills.  Offer is not available to customers with past due balances with Time Warner Cable, defined as any money owed in the past 30-60 days or customers who have been disconnected for non-payment in the twelve (12) month period preceding this offer.  Service must be ordered by Dec. 31, 2010, and installation must occur within thirty (30) days of order date.

If you’ve contemplated a change in providers but didn’t want to be subjected to a steep early cancellation fee, this isn’t a bad offer.  Although I don’t use Time Warner Cable Digital Phone myself, others in my family do and they are satisfied with the service, although there have been at least two serious outages so far this year that ran several hours.  Since most people also carry a cell phone, any cable outage or power interruption that also takes out your phone line isn’t as serious as it might have been in earlier years.

And, ahem, unlike Time Warner Cable’s attitude towards broadband, they really do provide unlimited calling with their “digital phone” service.

Time Warner Cable is mailing this letter to Frontier Communications customers in the Rochester, N.Y. market. (Click to enlarge)

Australia’s Prime Minister: ‘We Will Not Allow Anything to Block Our National Broadband Network’

Australia’s current Labor government has refused to compromise on its goal of delivering super-fast broadband service to nearly every Australian, declaring they will get the job done no matter what it takes.

“This government is determined to build a national broadband network and will not let anything get in its way,” declared Prime Minister Kevin Rudd.

Rudd was responding to critics from opposition political parties and some private providers who had been trying to throw up roadblocks to stop the government effort, which many private providers felt ceded too much control to the government.

Rudd’s plans to construct the network were bolstered with the release of a new study showing the construction and operating costs to be lower than previously thought.

Courtesy: Wikipedia

Stephen Conroy

Lindsay Tanner, Australia’s Finance Minister, told colleagues, “The government would get its investment back and also, over the course of the investment, earn a modest return.”

Stephen Conroy, Communications Minister, promised wholesale pricing for the unlimited fiber-based service would range between $17.50-26.30US per month.  Retail pricing for entry-level ADSL broadband service from Telstra currently runs $35US per month, with a 2 GB monthly usage allowance.

Conroy previously threatened Telstra that if it didn’t want to help build the national network at a reasonable price, the government would do it themselves.

Tony Smith, opposition Shadow Communications Minister called Rudd’s insistence on a national fiber network reckless, irresponsible, and risky.

But for Australian consumers long subjected to expensive monthly prices for heavily usage limited service, 100Mbps service — or even slower, unlimited service — represents a major improvement.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Network 10 Aus Cheap Broadband 6-21-10.flv[/flv]

The Ten Network in Australia ran this report on the current Australian government’s unwillingness to compromise away its goal for a national fiber network.  (2 minutes)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Nine Australia National Broadband Plan Study 5-6-10.flv[/flv]

Channel Nine reports on the release of the broadband study showing Australia would save money building their own national broadband network instead of letting Telstra build it.  (1 minute)

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