A new report published by the Federal Communications Commission this week finds Americans are being ripped off by their broadband providers who promise speeds 50 percent faster than they actually receive.

In a generically named report, “Broadband Performance,” the FCC finds Americans love spending increasing amounts of time on the Internet, but face providers making bogus marketing claims for speeds they’ll never actually receive.

In 2009, average […] advertised download speeds were 7–8 Mbps, across technologies. However, FCC analysis shows that the median actual speed consumers experienced in the first half of 2009 was roughly 3 Mbps, while the average (mean) actual speed was approximately 4 Mbps. Therefore actual download speeds experienced by U.S. consumers appear to lag advertised speeds by roughly 50%.

[…] The “up to” speed, however, does not provide an accurate measure of likely end-user broadband experience. That experience depends on multiple factors, including the actual speed that consumers realize, taking into account the impact of network congestion; and other metrics like the availability of the network, latency, jitter and packet loss. In other words, consumers need a better, publicly agreed upon measure of broadband performance that reflects the network operation and end-user experience.

No surprises here - the FCC found fiber delivered the fastest broadband speeds with wireless and satellite service delivering the slowest

Providers in several countries have been called to account for marketing claims that never seem to be realized by customers.

For years, providers have relied on the weasel words “up to” to escape charges of outright misrepresentation of their products.  The FCC doesn’t believe the status quo properly informs consumers about true broadband speeds, especially when comparison shopping.

Some of the widest gaps between advertised and actually delivered speeds came from telephone company DSL service.  Many phone companies define their maximum speeds based on theoretical maximums, not the actual average speeds encountered by customers.  While some providers claimed up to 10Mbps service, they only actually delivered up to 3Mbps to many customers.

The report recommends new disclosures, including average actual speeds delivered to customers, what kind of speeds customers can expect during peak usage times, and what speeds consumers will encounter while using certain online applications.

Speeds can make all the difference for certain classes of broadband users, also defined in the FCC report:

➤ Advanced. These consumers use large amounts of data and tend to use the highest quality voice, video, and other cutting-edge applications.

➤ Full media. These consumers are moderately heavy users of broadband and mobile applications, seeking to access high-quality voice, data, graphics, and video communications but, typically not in the most cutting-edge forms.

➤ Emerging multimedia. These consumers utilize some video and graphical content but still see the Internet primarily as a way to communicate and access news and entertainment in a richer format than found in offline content.

➤ Utility. These consumers are largely content to access the Internet for basic news, communication, and basic entertainment.

The New America Foundation thinks the gulf between promises and reality has grown so large, it’s time to bring “The Schumer Box” to broadband.  Named after Sen. Chuck Schumer (D-NY), the “Schumer Box” was made a part of every credit card application and cardholder agreement.  It breaks out in large print fact-based disclosures to consumers about what kind of service and pricing to expect.  The Foundation wants consumers to have truth-in-labeling introduced for Internet users who will be able to comparison shop providers more effectively.

One consumer group wants a credit card-style disclosure of broadband speeds and policies

While the FCC’s findings may not reach the level of credit card-style disclosures, the agency does recognize there is a significant problem with providers misrepresenting their broadband speeds.

The report also found consumers are increasing their amount of monthly usage, often correlated to the speeds they receive.  Those with the fastest broadband accounts consume the most (and typically also pay the most for service).  Those with slower speeds consume less.

That finding supports the contention among many consumer groups that today’s speed-based broadband tiers fairly compensate providers for customer usage.  Those who use the most pay the most for the fastest speeds. Those who use the least pay lower prices for lower speed tiers.

The agency also rated fiber to the home America’s fastest broadband technology, followed by cable broadband, then DSL service, and finally wireless/satellite-delivered service.

Phillip "Cry Me a River, Guys" Dampier

Like two peas in a pod, Robert Cyran and Bob Cox are back for the umpteenth time with their views on something.  A few years ago, they were upset because the group Radiohead decided consumers should name their own price for one of their albums.  This time it’s about Net Neutrality and variable pricing for broadband.  Writing for Reuters BreakingViews, they’re deeply concerned poor traditional phone and cable companies are being shortchanged — saddled with the costs of building and maintaining networks that content companies like Google, Apple, Cisco, and Microsoft get to use for free.

As for the four leading [content companies], they have a combined net cash pile of around $140 billion. Last year they spent $4.9 billion on capital expansion, a tenth of what the big four [telecom companies] paid to erect new cell towers, buy routers and extend fiber-optic cables.

[…]The introduction of variable pricing, or charging customers based on the data they consume, will help pay for the needed gear. But it means that the already unpopular [telecoms] will stick their customers with far larger bills — a recipe for political interference. Meantime, the [content companies] would continue to carry away what the telecom operators see as a disproportionate share of the benefits.

This analysis is a mile wide and an inch deep — fundamentally flawed because of information Cyran and Cox either ignored, didn’t know about, or didn’t care to consider.

First, Cisco is hardly a content company.  It is doing quite nicely feeding rumors of the forthcoming great tsunami of data — the “zettabyte era of broadband” that will result in a global traffic jam only they can help overcome. Cisco’s success comes from the sale of advanced networking equipment that can manage the growth of the Internet.  The amount of data that crosses today’s broadband wires has grown exponentially, even as the costs to manage it are increasingly declining on a per-gigabyte basis.  Apple is partly a content company, but more importantly is a developer of devices like the iPad and iPhone which are driving growth in wireless networks and helping justify the acceptance of monthly wireless phone bills easily over $100 a month in many households.  Google has content, but is also willing to take a plunge into being a provider itself, with plans to deploy an advanced 1Gbps fiber network that big telecom providers say cannot be built in a sensible way (to their investors.)  Finally, love or hate Microsoft, they have successfully powered the growth of personal computing which made the concept of broadband something telecom companies could actually sell to their shareholders as a viable business.

Cyran and Cox equate content providers and big telecom companies as unequal beneficiaries of the broadband revolution.  But just like many other powerful interests opposed to Net Neutrality, they forget those big telecom companies earn enormous revenue and profits from their customers — you and I.  The financial reports of all of these companies tell the story Cox and Cyran don’t.  Broadband profits among large telecom companies are the biggest growth area these companies have.  Deploying the service reaps financial windfalls.  Even with capital expenses involved in constructing fiber optic networks, broadband revenue can still make shareholders smile like no other component in today’s triple play packages.

On the wired side, Verizon has announced it has suspended further expansion of its fiber network FiOS indefinitely.  No other national cable or phone company is currently constructing true fiber to the home networks. Instead, most deploy fiber to the neighborhood and let coaxial or copper wiring cover the rest of the way.  Indeed, capital spending by many telecom companies is actually dropping.

On the wireless side, more than 90 percent of Americans now carry cell phones.  The monthly prices most pay for service exceeds that of their landline provider, if they have one.  Yet for all of the awful costs wireless providers face, AT&T and Verizon can’t wait to devote more time and energy to the wireless side of their business, because that is where the real money can be found.

It’s difficult to claim “victim” status of unequal treatment when you’re standing in a room filled with piles of cash.

The authors also completely ignore the fact companies that produce content don’t just throw it on the web for free.  An entire industry devoted to delivery of streaming media and other high bandwidth content buys fat pipelines from these telecom companies to deliver content to consumers.  Every content provider already pays their fair share for the traffic they generate.  Consumers pick up the rest as part of their monthly bill.

But Cyran and Cox believe these content companies (and consumers) should pay dramatically more to telecom companies for “upgrades” that may or may not materialize, and are frankly just the cost of doing business, which can be recouped from the relatively expensive broadband pricing Americans already pay for service.  The profit margins for broadband service are enormous.

Variable pricing, which we consistently call Internet Overcharging, is nothing more than price gouging, and the one true fact in their piece we agree with is that customers will get stuck with the bill.

Reardon is fine with this vision of your online future.

Marguerite Reardon confesses she’s confused.  She doesn’t understand what all the fuss is about regarding Google and Verizon teaming up to deliver a blueprint for a corporate compromise on Net Neutrality.  In a column published today, Reardon is convinced she’s on a debunking mission — to deliver the message that rumors of the Internet apocalypse are premature.

As I read the criticism of Google and Verizon’s supposed evil plan to demolish the Internet, and as I hear about “protests” of several dozen people at Google’s headquarters, I scratch my head and wonder: am I missing something?

The Google-Verizon Net neutrality proposal I read last week doesn’t sound nearly as apocalyptic as Free Press, a media advocacy group, and some of the most vocal critics out there have made it sound.

In fact, most of proposal sounded a lot like a plan FCC Chairman Julius Genachowski offered nearly a year ago, which many Net neutrality proponents seemed to support.

In short, Google and Verizon say they agree to a set of rules for the Internet that would prohibit broadband providers from blocking or degrading lawful content on the Internet. Broadband providers would also not be allowed to take action to impede competition.

This is pretty much what Genachowski has proposed.

OK, terrific. There is agreement.

But wait, Net neutrality zealots are still unhappy.

Hmmm… “zealots?”  Reardon probably just angered the majority of CNET’s readers, who now find themselves labeled as crazed Internet online freedom fighters — net fundamentalists who want absolute protection against big Internet Service Providers tampering with their Internet Experience.

Where can I get my membership card?

Reardon’s “debunk” consists of her narrow, inaccurate definition of Net Neutrality pounded into a pre-conceived notion of what is and is not possible in a competitive broadband marketplace.  In short, she’s satisfied we can all move along… there is nothing to see here:

What Free Press and Public Knowledge don’t seem to realize is that AT&T and Verizon already offer differentiated services today with enhanced quality of service to business customers. Verizon’s Fios TV and AT&T’s U-verse TV services are also examples of managed Internet services that are delivered to consumers. And the last time I checked, no one, other than their cable competitors, has complained about AT&T and Verizon offering competition in the TV market.

The truth is that if Verizon and AT&T wanted to cannibalize their broadband business with premium broadband services, they’d already be doing it. But they aren’t, because there hasn’t been a market for it.

The reality is that consumers are in control of what type of services are offered. If the public Internet can adequately deliver a service for free, then there’s no need to pay for it. But if someone can provide a better service over a dedicated network and there are consumers willing to pay for it, then why shouldn’t it be offered? Isn’t that why some people subscribe to a 768Kbps broadband service for $15 a month, and others pay $100 for a 50Mbps service?

So let’s debunk the debunk.

First, Net Neutrality is not about stopping broadband providers from offering speed-based tiers of service.  In fact, that’s the Internet pricing model we’ve all come to know and love (although those prices are just a tad high, aren’t they?)  Free Press and Public Knowledge do not object to ISPs selling different levels of broadband speed tiers to consumers and businesses to access online content.

Net Neutrality isn’t about stopping ISPs from selling some customers “lite” service and others “mega-super-zippy Turbo” service — it’s about stopping plans from some ISPs to establish their own toll booths on the Internet to charge content producers twice — once to upload and distribute their content and then a second time to ensure that content reaches a particular ISPs customers on a timely, non-speed-throttled basis.  Consider this: you already pay good money for your own broadband account.  How would you feel if you sent an e-mail to a friend who uses another ISP and that provider wanted to charge you 20 cents to deliver that e-mail?  Don’t want to pay?  That’s fine, but your e-mail might be delayed, as paying customers enjoy priority over your freebie e-mail.

A lot of broadband customers may never understand the implications of giant telecom companies building their own toll lanes for “preferred content partners” on the Internet because they’ll just assume that stuck online video or constantly rebuffering stream is the fault of the website delivering it, not their provider intentionally pushing it aside to make room for content from companies who paid protection money to make sure their videos played splendidly.

Second, Reardon need only look to our neighbors in the north to see a non Net Neutral Internet experience in Canada.  There, ISPs intentionally throttle broadband applications they don’t want users running on their networks.  They also spank customers who dare to try what Reardon insists Verizon would never stop — using their broadband service to watch someone else’s content.  With the application of Internet Overcharging like usage limits and consumption billing schemes, cable companies like Rogers don’t need to directly block competitors like Netflix.  They need only spike customers’ broadband bills to teach them a lesson they’ll not soon forget.

Within days of Netflix announcing their imminent arrival in Canada, Rogers actually reduced the usage allowances of some of their broadband customers.  If you still want to watch Netflix instead of visiting Rogers pay-per-view cable menu or video rental stores, it will cost you plenty — up to $5 per gigabyte of viewing.

Reardon seems to think giant providers like AT&T, Verizon, and Comcast care about what their customers want and wouldn’t jeopardize the customer relationship.  Really?  She herself admits she hates paying for hundreds of channels she never watches, yet providers are deaf to complaints from customers demanding an end to this practice.  What about the relentless price hikes?  Wouldn’t that drive off customers?  Perhaps… if customers had real alternatives.  Instead, with an effective duopoly market in place, subscribers pay “the man,” pay an almost identical price from the “other guy,” or go without.

Providers understand their power and leverage in the marketplace.  Until serious competition arrives, it would be a disservice to stockholders not to monetize every possible aspect of broadband service in the United States.

The check against this naked aggression on consumers’ wallets is from consumer groups who are fighting against these big telecom interests.

Before dismissing Net Neutrality “zealotry,” Reardon should experience the Internet in Canada and then get back to us, and more importantly those consumer groups she flicks away with disdain, and join the fight.

The firebrand Rep. Alan Grayson (D-Florida), normally a plain-spoken kind of guy, has managed to tie himself into a human pretzel over the issue of Net Neutrality.  In less than a week, he’s adopted every side of the issue as his own.

Grayson shocked many of his supporters last week when he signed on with AT&T, Verizon, and Comcast to pressure the Federal Communications Commission not to regulate Internet principles like Net Neutrality.

Grayson’s increasingly high profile in the Democratic party and his hero status among many progressives made his allegiance to big telecom stick out like a sore thumb.  Liberal blogs immediately blasted Grayson’s decision to side with the “you can’t use my pipes for free” crowd.  Some bloggers called his position “curious” while others accused him of selling out.

Grayson has been engaged in damage control ever since.

His letter to the FCC echoed earlier letters from Democrats hostile to broadband reform (but receptive to campaign contributions from the phone and cable companies).  But Grayson insists he has been misunderstood.

The Orlando Democrat told the Huffington Post that he is in favor of Net Neutrality and that his alliance with the telecom industry is a coincidental case of “strange bedfellows.”

“I say in the letter that I support the policy of Net Neutrality. I don’t know how I could be more explicit than that,” he told HuffPost. “There is a question, though, of how to reach that conclusion, and it’s a legitimate question. My own feeling is that we should not allow a matter like this to be resolved by regulation, because regulations can be changed very easily. We saw this all the time with the Bush administration. I think it is preferable to have the principle of net neutrality enshrined in statute.”

Grayson

Grayson’s position does not make sense to many Net Neutrality advocates who do not understand why Grayson cannot be supportive of both regulatory reform and legislative changes.

“I think Grayson is mistaken to think that good Net Neutrality legislation could come out of this Congress. And certainly he’s mistaken to think that good Net Neutrality legislation would come out of the next Congress,” said Tim Karr of Free Press.

Karr told HuffPost he hoped Grayson would note conservative bloggers are in love with the congressman’s position on Net Neutrality and rethink his position. “Given that Grayson is considered a progressive lion in the House of Representatives, that the people who routinely vilify him are now seeing him as a champion should make him think twice,” he said.

Grayson argues that getting the FCC to reform broadband and make Net Neutrality a formal agency directive would be a waste of time because Republicans would simply throw it out the next time they occupy the White House.

For many Net Neutrality advocates, that kind of defeatist attitude is symbolic of a problem Democrats have long faced — the impression they’ll cave-in when challenged by Republicans.

Marvin Ammori, a law professor at the University of Nebraska:

“What he’s implying is that Republicans actually do what they want to do and implement the policies they want and Democrats don’t,” said Ammori. “It sounds like they’re unwilling to change regulations because they’re worried Republicans will change them back… It just highlights that Republicans are willing to change the law and Democrats aren’t.”

Perhaps most upsetting to Net Neutrality supporters is Grayson’s belief that many phone and cable companies support Net Neutrality, at least how they define it.

Ammori thinks that is nonsense, and easily dismissed as lip service when one considers the actions of the telecom industry.

“If they supported Net Neutrality, we’d have it by now,” he said. “They’ve spent hundreds of millions fighting against Net Neutrality… This is part of their pitch: ‘We don’t plan on blocking anything on the Internet. We just want the right to do so’… He’s essentially crediting their PR claims.”

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/MSNBC Alan Grayson on Net Neutrality.flv[/flv]

Grayson faced questions about his position on MSNBC about his Net Neutrality views, and was lectured by progressive talk show host Cenk Uygur.  Grayson called the FCC “a fundamentally corrupt organization.”  (2 minutes)

Almost two years to the day Frontier Communications quietly introduced language in its customer agreements providing a monthly broadband usage allowance of just 5GB per month, the company has quietly removed that language from its terms and conditions.

The 5GB usage allowance was deemed generous by Frontier CEO Maggie Wilderotter.  Frontier claimed most of its 559,300 broadband subscribers (2008 numbers) consumed less than 1.5 gigabytes per month.  But news of the cap angered customers anyway, particularly in their biggest service area — Rochester, N.Y.  In fact, Frontier’s usage cap was what sparked the launch of Stop the Cap! in the summer of 2008.

While never universally enforced against the company’s DSL customers, Frontier has used that portion of its acceptable use policy to demand up to $250 a month from some “heavy users” in Mound, Minn.

Frontier’s usage limit language also played a role in a major controversy in April, 2009 when Time Warner Cable planned usage limits of their own for western New York customers already faced with Frontier’s 5GB usage limit.

The phone company used Time Warner’s planned usage cap as a marketing tool to switch to Frontier DSL service.

Frontier used Time Warner Cable's usage cap experiment against them in this ad to attract new customers in the spring of 2009.

This website has pounded Frontier for two years over its continued use of the 5GB language as part of its broadband policies.  We raised the issue with several state regulatory bodies as part of Frontier’s purchase of Verizon landlines in several states.  Several state utility commissions raised the usage cap issue with Frontier as a result, deeming it negative for rural broadband customers who would effectively endure rationed broadband service from a de facto monopoly provider.

We also criticized Frontier for promoting its MyFitv service, little more than a website containing Google ads and embedded videos already available on Hulu, while not bothering to tell its customers use of that service on a regular basis would put them perilously close to their 5GB allowance.

In the end, Frontier itself denied they would strictly enforce the 5GB limit, making its continued presence in the company’s terms and conditions illogical.

Now, the company has returned to the earlier language it formerly used, reserving the right to shut you off if you use the service excessively or abusively.  This resembles similar language from most broadband providers.  While not absolute in defining those terms, Frontier doesn’t commit to a specific number either.  Today’s “generous usage allowance” is tomorrow’s “rationing.”

If Frontier cuts off customers for using only a handful of gigabytes a month, deeming it excessive, we want to know about it.

Stop the Cap! opposes all Internet Overcharging schemes like usage caps, speed throttles, and so-called “consumption billing.”  We believe such limits retard the growth and potential of broadband service and are unwarranted when considering the ongoing decline in costs to provide the service.  We do not oppose providers dealing with customers who create major problems on their networks, but believe those issues are best settled privately between the company and the individual customer.

Providers must also be honest in recognizing that broadband is a dynamic medium.  They have a responsibility to grow their networks to meet demand, especially at current pricing which provides major financial returns for those offering the service.  We also believe broadband tiers should be limited to speed, not consumption.  Customers with higher data demands will naturally gravitate towards higher-priced, faster-speed tiers, providing higher revenue to offset the minimal costs of moving data back and forth.

Broadband customers will be loyal to the providers that treat them right.  We applaud Frontier Communications for finally removing the last vestiges of its infamous 5GB usage allowance.  Hopefully, going forward, Frontier will spend its time, energy and money improving its broadband service instead of trying to convince customers to use less of it.