Another ISP Limbo Dance. How low can they go?

Telus, western Canada’s largest phone company, has announced it is slashing usage allowances as much as half and raising prices up to $8 a month on broadband packages, eight months after last summer’s $3 rate hike.

A sample:

• Internet 6 was $37, now $45. Usage cap reduced to 100GB, was 150GB.
• Internet 15 was $42, now $50. Usage cap reduced to 150GB, was 250GB.
• Internet 25 was $52 now $60. Usage cap reduced to 250GB, was 500GB.
• Internet 50 was $75 now $80.

A Telus spokesperson explained the reasons for the rate increases and allowance slashing:

It is only fair for customers to pay for the amount of bandwidth they use and be on a plan that realistically reflects their usage patterns; otherwise, moderate users end up subsidizing heavy users. Even with the change TELUS has some of the most generous usage caps in comparison to many other ISP’s. Most customers use only a fraction of the allotted threshold. Usage limits are put into place so that the small percentage of high usage customers to not impact the internet experience for other users on the network. We currently do not charge for over usage, but the thresholds allow us to ensure that customers are on an appropriate plan for them.

The rate increase is in response to rising costs in providing and maintaining the network. Since 2000, TELUS has invested more than $30 billion in infrastructure across Canada to provide our customers with some of the best communications technology anywhere in the world. These increases affect all clients, from TELUS employees to brand new sign-ups. All the pricing has been adjusted to the higher rate. In terms of price and quality TELUS Internet is very competitive versus our competitors. In most cases, TELUS services will still be less expensive than similar offerings from our competitors.

Most existing clients have already had the benefit of a promotion on sign-up. As with all promotions, including the current new client promotions, they run for a limited time and the discounts they offer expire. We do have loyalty programs in place for existing loyal clients and we do offer existing clients the new promotions in cases where they may not have received anything when they signed up.

Customers are outraged about the changes, particularly because Telus has been raising prices twice a year since 2011. The new rate plans are now comparable to Telus’ largest competitor, Shaw Cable.

Telus has not traditionally enforced usage cap violations on their network, nor have they imposed overlimit fees. But a customer service representative said “Telus can suspend allowance violators for 30 days for repeated violations.”

In North America, virtually every major ISP has watched bandwidth costs decline as connectivity continues to get cheaper. But that does not stop some providers from raising prices and slashing usage limits on a service most Canadians find they cannot live without.

Stop the Cap! reader Paul writes to share his dilemma with AT&T U-verse:

I have had AT&T U-verse broadband for three years and although the company has a 250GB usage cap, they have a completely dysfunctional measurement tool. It has never worked. AT&T tells me I should not be concerned about my Internet use for billing purposes. It seems pretty clear to me AT&T’s -only- interest in capping usage is, in fact, for billing purposes. If you ask customer service about why AT&T caps wired usage, they claim it provides a better user experience for everyone. But nowhere does AT&T ask customers to consider what they are doing with their Internet accounts. If this was really about congestion, why not ask customers to conserve broadband resources?

With AT&T, one of the largest phone companies in the country, it was never about congestion and still is not. This is about money, pure and simple. Their usage meters don’t work right, their billing penalty is a huge $10 fee for 50GB of usage (why not $0.20 per gigabyte?), and their service has tons of capacity once it gets onto their fiber network at the link up the street. Who are they kidding?

Africa’s international Internet connectivity is primarily provided by underseas fiber cables. (Map: Steve Song)

One of the most common arguments pro-capping telecom companies use is since the rest of the world has already adopted consumption billing for broadband, why can’t North American ISPs follow in their footsteps. But ISPs around the world are actually heading away from capped, throttled, or nickle-and-dime broadband pricing towards flat rate, unlimited service.

The Republic of South Africa is a case in point. Located on the southeastern tip of the African continent, South Africa has faced down a number of broadband challenges. Antiquated infrastructure lacking investment in upgrades, political and economic challenges, and very costly, limited capacity international connectivity have all conspired to leave the country with poor broadband service.

The biggest problem domestically is deteriorating landline infrastructure, leaving most South Africans with slow speed ADSL service. Wireless mobile broadband has proved less costly to deploy, but connectivity costs remain high regardless of how customers obtain service because of international bottlenecks.

South Africa’s problems are similar to those faced in South Pacific nations like Australia and New Zealand. Data caps have been a fact of life for years, primarily because there has never been sufficient capacity on underseas fiber and satellite links to sustain anticipated traffic if the caps were removed. But those problems are starting to ease as new high capacity backbone connections continue to come online.

Heavily capped broadband transforms how people use the Internet. In all three nations, many people do their heaviest web surfing at work over business connections. Some ISPs ease their usage caps or speed throttles during low-demand overnight hours, leaving many to hold off on significant file transfers and software updates until most people have gone to bed.

Regardless of whether you live in Johannesburg, Adelaide, or Wellington, people hate data caps and speed throttles and cannot wait to be rid of them.

That day has come in South Africa. Telkom, the former state-owned telephone company, has announced dramatic price cuts and relaxation of speed throttles for customers choosing its unlimited ADSL offerings. The company has announced a 40% price cut for residential customers and a 35% cut for business customers that took effect Feb. 1. Speed throttles that used to block international traffic when customers were deemed to be “using too much” are also being removed, although Telkom can still reduce speeds for their heaviest users.

Speeds are still very slow compared to what most North Americans can receive, but the average South African can now purchase unlimited 4Mbps ADSL for around $42 a month. A 10Mbps account remains out of reach for many at an unaffordable $157 a month. Some of Telkom’s competitors sell unthrottled and unlimited 1Mbps service for a budget-priced $22 a month.

South African ISPs are managing to achieve speed increases, but the primary bottleneck remains Telkom’s aging copper wire infrastructure. The answer is more fiber links further out in telephone exchanges and reducing the amount of copper customers have between their homes and Telkom’s central exchange offices. Although urban residents in relatively prosperous areas can achieve faster speeds, South Africa’s large expanse of low income areas often rely on prepaid wireless services because wired infrastructure is often sub-standard.

International capacity concerns will continue to ease as new underseas fiber cables are brought online. By 2014, one new underseas fiber cable will be able to carry more Internet traffic than all of the currently operational cables preceding it combined.

[flv width=”480″ height=”288″]http://www.phillipdampier.com/video/Post-Standard Time Warner Cable Modem Lease Fee 1-30-13.flv[/flv]

A reporter from the Syracuse Post-Standard is featured in this video explaining how to swap out your leased Time Warner cable modem for one you can buy yourself. It will save you $3.95 a month. One piece of advice: If the coaxial cable you plan to use has a push-on style connector, toss it for one that screws on. The push-on connectors are not recommended, even if your cable modem comes with one. You can also use the cable Time Warner originally supplied if it has a superior screw-on connector. Time Warner does not need the cables returned with the cable modem or the original box. Just return the cable modem and power cord to any Time Warner Cable store location and make sure they print, and you keep, the returned equipment receipt. (4 minutes)

Moffett

Craig Moffett, who regularly questions telecom executives about why they have not implemented consumption billing or usage caps as a broadband revenue enhancer, has exited Wall Street’s Sanford Bernstein after a decade.

Moffett is one of the most quoted Wall Street telecommunications analysts in the business and financial press, and his regular browbeating of executives for higher prices on broadband service have earned him a reputation of being pro-cap and anti-consumer.

Moffett is also one of Wall Street’s biggest critics of infrastructure upgrades, particularly Verizon’s fiber to the home network FiOS, which he called too expensive and not worth the investment. In a battle between cable operators and phone companies, Moffett regularly takes the side of the cable industry. Cable operators have enjoyed lower capital costs and have successfully raised prices on profitable broadband service, even as providers move to limit customers’ monthly usage.

The Wall Street analyst is reportedly launching his own Wall Street research firm sometime this spring and has poached several employees of Sanford Bernstein to get started.