Phillip Dampier

In response to one of our pieces today about AT&T, I replied to a reader’s question about why providers are not subject to oversight when it comes to their traffic meters.  The answer is, providers want all of the benefits their monopoly/duopoly status deliver, with none of the oversight and regulation that is supposed to come along with the deal.

When I am asked by reporters if our group would support the concept of usage-based billing if prices were lower, I know some education is in order before answering.

Frankly, what providers define as “usage-based billing” isn’t really usage-based at all.  It’s simply a double-tiered pricing scheme.  Consumers already pay for broadband service based on speed, which informally includes a usage limit of sorts — your maximum amount of consumption is governed by the speed of the connection you purchase.  Not satisfied with the enormous profits already earned selling broadband that way, some companies want to monetize Internet use by inserting usage limits or inserting a new tier of service based on usage allowances, which generally increase with higher-priced levels of service.

When broadband providers attempt to use the argument consumers already pay for usage of essential services like water, gas, and electricity, they are trying to conflate broadband traffic much the same way.  But apart from the fact broadband carries no generation costs and represents a limitless resource, the “fairness” argument falls apart when you consider the provider is effectively double-charging customers by implementing a use-based pricing scheme on top of a speed-based pricing model.

The equivalent would be charging you today’s prices for gas, electric, or water service, but then adding a surcharge or tax based on how fast or when you are using the service. Here’s the kicker: they are not lowering the price of their speed-based tiers, they are simply layering a use tax on top.  In short, it extra-bills customers for what they already paid for.

A true usage-based billing scheme would carry a monthly minimum charge for infrastructure costs (maintenance of the delivery system, meter measurements, etc.) and a traffic cost.  In a regulated utility environment, most providers are required to sell service at a price verified by regulators to cover costs and a small profit.  No gouging.  No provider dares sell service under these terms because it would dramatically slash the cost most consumers pay for the service.  Instead, they sell “usage tiers” that include arbitrary “allowances” that provide no rollover or discount for unused traffic.

Imagine what would happen if AT&T or Comcast sold broadband like electricity?

CartelCountry Broadband & TV

From coast to coast, we put the cartel in cable!

• Monthly Minimum Charge: $9.95
• Broadband traffic delivery $0.05/GB
• Amount consumed 20GB = $1.00

• Payment Due: $10.95

Thank you for your prior payment of $9.95. We hope you enjoyed your vacation. No broadband traffic consumed equals no broadband traffic charges.

That is why there is no such thing as true usage-based billing. Providers wouldn’t dare because they would lose the enormous income they earn from those “98 percent” of “light users” they keep suggesting are in the majority.

Even “heavy users” probably would not object to this kind of pricing. A 500GB per month user would pay $34.95 at these prices, and providers would STILL be making a profit.

Imagine if your electric utility billed you for service based on a meter that was developed by the company, had no third party verification, no oversight by a Bureau of Weights and Measures, and wrote provisions into the company’s terms and conditions that allowed the company to terminate your service if you complained too much about the resulting bills.

Rethink possible.  AT&T.

When America’s largest phone company implements its arbitrary and unjustified Internet Overcharging scheme this May, it will bring its controversial usage meter to bear on every one of its broadband customers — a meter implicated in wild over-measurements of customers’ broadband usage — usage that will put customers perilously close to, or over the limits AT&T wants to establish.  The result?  Fat additional profits in the form of $10 overlimit penalties for every 50GB AT&T says you consumed for broadband traffic that costs them pennies to deliver.

The broadband usage meter is no stranger to controversy and lawsuits over accuracy issues.  Despite reflexive denials that a particular provider’s usage meter couldn’t be wrong, far too many have had to backpeddle and confess that the meter that should have measured $40 in usage and resulted in $4,000 bills instead “was in error.”

Whether providers are developing meters that are just flat inaccurate or are quietly putting a virtual finger on the scale to increase the opportunity of overlimit profits is unknown, but past history shows the meters typically overmeasure usage, not undercount it.

Without independent verification and ongoing oversight, some customers wonder if AT&T is sticking a virtual finger on AT&T's usage scale.

Some recent past history:

• Telstra is Australia was implicated in December for a wireless usage meter that occasionally reported more than three times the usage measured by wireless phone owners’ built-in usage measurement tools.  Company representatives ended up crediting some customers as much as $3500AUD in inappropriate overlimit fees that should never have been charged.  Complaints continue to arrive as late as February about overbilling;
• Telecom New Zealand’s usage meter overmeasured usage this month resulting in overcharges and throttled speeds under the ISP’s “fair use policy.”  One customer was billed for 27GB of usage during one overnight period, despite the fact the computer was switched off;
• BT in the United Kingdom confirmed it overbilled some of their broadband customers in February when their usage meter measured usage for customers who had switched their computers off or took them away on holiday.  As far as BT was concerned, those computers were still at home and still racking up web usage.  Only last week, the company finally confessed their meter was inaccurate — overmeasuring usage that never happened;
• AT&T’s counterpart in Canada — Bell, cannot manage to measure customer usage correctly either, so it suspended its usage tracker tool temporarily.  In February, one customer tired of overbilling proved a point when he took his computer to the United States just to guarantee it could not go near Bell’s network.  The result?  Bell said he used 500MB anyway;
• In February, a class action lawsuit was filed against AT&T for “overmeasuring” wireless usage in some instances by up to 300 percent;
• Last fall, Verizon was forced to refund $25 million dollars for phantom data usage charges for service many customers claimed they never used.

In virtually all of the prior incidents, a common pattern emerges, usually ending when providers fall on their swords, admit error and issue refunds:

• Phase 1: Initial denials from providers there is a problem with the meter, usually blaming the customer, the customer’s measurement tool, or the process used instead;
• Phase 2: Once proven to be an issue, an effort to downplay its significance and impact with claims that only a “tiny” percentage of customers were affected;
• Phase 3: Refusal to submit usage meters, wholesale costs, and other components of Internet Overcharging to third-party verification;
• Phase 4: Refusal to allow an independent audit of customer accounts to verify overbilled customers were properly refunded every penny of excess charges;
• Phase 5: Class action lawsuit or government investigation commences;
• Phase 6: Settlement reached with refunds or low value coupons to customers who take the time to request one;
• Phase 7: Report excess profits from unclaimed refunds on balance sheet.

In too many cases, multi-billion dollar telecom companies that rely on those meters to measure and bill customers for their usage were implicated not for undermeasuring usage, but overmeasuring it — often substantially.

Some AT&T customers are already disturbed with what could be history repeating itself.  A reader of Broadband Reports in Skokie, Ill., compiled his own detailed analysis and found AT&T’s measurement tool grossly overmeasured his usage, and even worse, couldn’t do simple math and overmeasured him again when adding up his daily usage totals:

AT&T said that I had used 361GB in a single month! Surely this couldn’t be right. I’m a heavy user, but every time I even so much as glanced at my usage stats they’ve always been in the 200GB range. Surely something was amiss, so I decided to dig deeper.

It’s an old habit, but the first thing I do when I suspect something is wrong with any bill is enter all the line items into a spreadsheet and add them up myself. It sounds like busywork, but sometimes you’ll catch unlisted charges that have been phantomly added to your bill, or occasionally an outright math error. I couldn’t believe what I found. AT&T’s usage meter results insist I had used 341.39GB down, and 20.18GB up. But when I added all the daily detail entries (the DSL equivalent of a call log), only 332.8GB down and 0.72GB up are accounted for.

AT&T is claiming that I used 361.57GB of data, but according to their own daily data I only used 333.52GB, an 8.5% overcharge.

This AT&T customer discovered AT&T overmeasured his usage far more than it undercounted it. (Lines above the baseline show downstream traffic AT&T overmeasurement; lines below show undercounted usage. Click to enlarge.)

In total, this particular customer reports his usage was overmeasured by a whopping 33 percent. He is not alone.  A robust thread of similar results is active on Broadband Reports.

AT&T’s response to the early criticism follows the same path taken by other providers, starting with denials.

“We’re addressing ways we can make the labels and information on the online metering tool more clear for customers between now and May (when the new policy goes into effect),” said AT&T spokesperson Seth Bloom.  “I can also assure you our team is performing checks everyday to ensure accuracy.  That said, we believe we have an accurate tool.”

“Other tools may measure at different 24-hour periods than we do, and most likely do not take into account the standard network protocols (e.g. Ethernet, IP) that are used to provide applications and content to our customers via the Internet.  As you know, this is fairly standard to incorporate when measuring broadband traffic and is applied by other ISPs who measure usage.”

Customers and columnists alike are worried about AT&T's new data limits. This Milwaukee Journal-Sentinel columnist is not thrilled, and neither are customers who overwhelmingly want unlimited broadband access.

“In the end, AT&T expects the caps to impact only the aforementioned 2% [that comprise its heaviest users].”

With the right level of over-measurement, virtually anyone can be a member of the “2% Club.”  One customer told Connected Planet AT&T was already overmeasuring her DSL account by as much as 4,700%.

How can you measure your usage to compare against AT&T?

“It’s not hard to maintain independent usage statistics to double-check AT&T’s numbers,” says the Broadband Reports reader in Skokie. “If you have a DD-WRT compatible router, it will keep your upload and download history automatically. If you don’t have a compatible router, you can still run WallWatcher or MRTG to get the total bandwidth used by your router. Finally, if your computer is connected directly to your DSL modem without a router, you can run software like Net Meter to track your internet usage.”

Customers inconvenienced by unnecessary usage meters which threaten to expose them to unjustified overlimit fees is just one more reason why we call out these Internet Overcharging schemes.  Call AT&T and let customer service know you intend to switch providers if AT&T implements their usage cap scheme in early May.  Tell them regardless of what kind of usage you incur each month, you cannot afford the chance AT&T’s apparently inaccurate usage meter could expose you to a higher bill.  Tell them you don’t want the hassle, and the only way you will remain as a customer is if they do away with the entire scheme.

Netflix continues to get a lesson on broadband economics from the Internet Service Providers out to scare their customers away from spending too much time watching the company’s online streaming service.  As some Canadian ISPs lowered usage caps in response to Netflix’s imminent arrival, the video streaming service just announced it was letting customers turn down the bit rate of online videos to conserve their monthly usage allowance.

Neil Hunt, Netflix Chief Product Officer, told customers about the bit rate reduction in a company blog post:

Starting today, watching movies and TV shows streaming from Netflix will use 2/3 less data on average, with minimal impact to video quality.

Now Canadians can watch 30 hours of streaming from Netflix in a month that will consume only 9 GBytes of data, well below most data caps.

We made these changes because many Canadian Internet service providers unfortunately enforce monthly caps on the total amount of data consumed.

In the past, viewing 30 hours of Netflix could consume as much as 70 GBytes, if it was all in HD, and typically about 30 GBytes. While there is some lessening of picture quality with these new settings, the experience continues to be great.

Video compression reduces data consumption, but also sacrifices video quality and enjoyment. An example of high video compression on the left can be more than noticeable.

Unfortunately for Hunt, providers can continue to lower data caps to the point where Netflix would have to present their video library as a slideshow to keep customers under their limits.

Stop the Cap! responded directly to Hunt imploring Netflix to get involved in the battle that consumers have thus far fought alone:

While some customers appreciate Netflix for turning down the video bitrates, I am here to tell you it’s not nearly enough.

For nearly three years, our consumer group — Stop the Cap! has fought Internet Overcharging schemes in both Canada and the United States.

Whether it’s Bell’s proposal to eliminate flat rate broadband across all of Canada, Time Warner’s 2009 pricing experiment to limit broadband users to just 40GB of usage per month, or AT&T’s 150-250GB cap taking effect this spring, your competitors are on a mission to scare customers away from using your online video streaming service.

[…] The fact is, Netflix MUST engage in this fight. Consumers cannot do it alone, especially when up against billion dollar companies spending millions on lobbyists trying to convince lawmakers usage caps are about “fairness” when they are really about monetizing broadband traffic and scaring off cord-cutting.

Bell's Broadband Shell Game (image: Dave Blume)

The digital equivalent of a Trojan Horse was laid at the feet of Canadian telecom regulators Monday when officials from Bell, Canada’s largest phone company, announced they were withdrawing their controversial proposal to mandate usage-based billing on all wholesale broadband accounts.

The original proposal would have mandated that independent Internet Service Providers bill each of their individual customers a monthly fee based on their Internet usage in addition to the wholesale access rates paid to Bell all along.  The pricing proposal would have forced every ISP in Canada to abandon flat rate Internet service, raise prices, reduce usage allowances, and increase overlimit penalties.

Now Bell has told the Globe & Mail newspaper it wants to introduce something called “Aggregated Volume Pricing” instead — a plan Bell claims will shift financial penalties for “high usage” away from individual customers and onto the ISPs themselves. Bell also slashed the proposed overlimit fee from a heavily-defended-as-fair $2.50 per gigabyte to a more modest $0.30/GB, perhaps echoing AT&T’s forthcoming overlimit fee.

In fact, Bell’s revised plan is the same Internet Overcharging scheme under a new name.

The radical reduction in overlimit fees only further illustrates the “phoney-baloney” of providers attempting to monetize broadband usage under the guise of “fairness” and “congestion relief.”  Last week’s ’eminently fair’ $2.50 is this week’s ‘more than reasonable’ $0.30.

Bell exposed their hand — showing they have been bluffing about congestion all along.  An analysis of the proposed rates shows the company is still trying to target “heavy users.”  But instead of penalizing them into reducing their consumption, Bell is now seeking to monetize that usage, not control it.  By shifting aggregate usage costs to the wholesale market, Bell hopes individual customers will blame independent ISP’s for higher bills, not them.  Independent providers have to pass along their wholesale costs as part of the retail price of their service.  It’s a high tech shell game, one that consumers will always lose.

Despite this, Bell assumes the revised plan will take the bipartisan heat off its backside since it first proposed doing away with flat rate Internet service in Canada.

“With our filing today, we are officially withdrawing our UBB proposal,” said Mirko Bibic, Bell’s head of regulatory affairs. “Let’s move on, in my view, and use the CRTC hearing as an opportunity to approve those principles and get the implementation details right.”

"We don't like (Bell's proposal)."

Several Canadian officials were not impressed and one — Industry Minister Tony Clement — said exactly that.

Canada’s consumer groups and politicians have the giant telecom company on the run after using Bell CEO George Cope’s own words against him.  Cope openly admitted in conference calls with investors UBB had everything to do with monetizing broadband usage for profit.

Bell’s attempt to serve warmed-over Internet Overcharging from a new recipe isn’t flying among consumer groups either, who recognize it as more of the same leftovers, just under a new name.

Bill Sandiford, who heads a coalition of wholesale ISPs called the Canadian Network Operators Consortium, told the Globe & Mail Bell was simply presenting its usage-based pricing model in a more acceptable guise.

“We don’t think this is an about-face. It’s the same thing, just dressed up differently,” Mr. Sandiford said. “We don’t like it. It’s still wholesale UBB.”

Openmedia.ca, an online activist group, said Bell’s new proposal shows consumers are having an impact, but the fight is by no means over.

“We’re pleased that Canadians will now have the option to use indie ISPs like Teksavvy and Acanac to access the unlimited Internet,” said OpenMedia.ca’s Executive Director Steve Anderson. “This is a giant step forward for the Stop The Meter campaign, and a victory for those who support competition and choice in Canada’s Internet service market.”

“While this is a positive move, it is only a Band-Aid solution to a much larger problem. We at OpenMedia.ca hope the CRTC takes Bell’s submission as a sign that widespread usage-based billing is not an acceptable model for Internet pricing, and that it creates policy to support the affordable Internet.”

AT&T’s forthcoming changes to their broadband service include more than just an Internet Overcharging scheme.

As the Los Angeles Times reporter David Lazarus discovered, AT&T now reserves the right to terminate your service if you excessively annoy the company’s employees, perhaps while calling to complain about the company’s new 150-250GB usage limits.

Lazarus reports AT&T’s contract now stipulates the company can cancel your service “if you engage in conduct that is threatening, abusive or harassing” to the company’s workers, or for “frequent use of profane or vulgar language” when dealing with service reps.  At least they won’t wallop you with an early termination fee if they pull the plug on you.

But that’s not all.  AT&T also followed Verizon’s lead telling their existing DSL customers once something better arrives from the company, they can stop selling DSL. For AT&T, this means they can switch your standalone DSL service to U-verse with or without your permission, billing you for a potentially more expensive broadband service.

While U-verse delivers a much improved broadband experience over traditional DSL, some budget-minded AT&T customers tough it out with DSL because it often carries a lower price and does not require an expensive bundle of video and phone service to win substantial discounts.  U-verse does.

AT&T spokesman John Britton told the newspaper he couldn’t imagine the company actually doing this to customers, but he acknowledged that this is what the new contract says.  More than a few AT&T customers couldn’t image the nation’s largest phone company would need to cap broadband usage of their customers because of alleged “congestion” problems either.