The Internet video revolution will increasingly be blocked by Internet Service Providers who will leverage their duopoly markets with restrictive usage limits to keep would-be video competitors from ever getting their business plans off the ground.

William Kidd, industry forecaster for iSuppli, an industry analyst group, sees a future of Internet Overcharging schemes like usage caps, overpriced pay-per-use pricing, and other limitations designed to erect roadblocks for online video content, which increasingly threatens the cable-TV products of both cable and phone companies.

The latest scheme to limit usage of streaming media come not from concerns about bandwidth costs but rather the “unknown risks” online video could have for cable and phone companies’ other products.

Such risks, Kidd believes, will compel broadband providers to increasingly implement caps in order to mitigate any long-term gambles that providers might have to take to make streaming media available to home and mobile environments.

At present, content can be streamed over TV from online service offerings such as Hulu and Netflix, or accessed through a device such as the PlayStation from Sony Corp. In addition, new-media business models continue to emerge with the introduction of new platforms that circumvent services currently provided by traditional cable or satellite pay-TV providers.

The caps planned for implementation will sink virtually all of the video streaming services that are not partnered with cable and phone companies.  Kidd notes the caps he’s seen offer limited viewing — as little as three hours for wireless 200kbps video streams or standard definition video streamed on wired networks for up to 25 hours per month.  True HD viewing is simply not going to happen with caps on many providers planned to cut off viewing after only seven hours.

Business plans and would-be investors must take notice of what providers have in store for would be competitors, Kidd argues.  Since the phone and cable companies maintain a near-monopoly on broadband, they ultimately control what Americans can do (and see) on their broadband accounts.

Rogers reduced usage allowances on several of its broadband plans days after Netflix announced a streaming service for Canadians.

One need only look to Rogers Communications in Canada for a timely example.  Rogers promptly lowered usage limits on some of its broadband plans just days after Netflix announced a video streaming service for Canadians that could directly compete with the cable giant’s video rental stores and cable pay per view services.

“These new-media business models imagine that they don’t have to pay the network through which their data traverse,” he said. “However, such a theory is directly at odds with the ambitions of cable and satellite-TV operators, which increasingly are unwilling to provide heavy data access through their networks for free—especially if a way can be found to monetize ongoing data traffic into viable revenue streams.”

In addition, new Internet-born content providers wrongfully take for granted that the way their largely free content has been consumed now also will apply in the future to premium services. The assumption is a bad one, Kidd observed, because in order for consumers to consider the Internet as a true substitute for their big-screen TV, content would need to be comparable in both technical quality and entertainment value. And to achieve the same level of value, such content necessarily would be extremely bandwidth intensive.

As a result, for any number of these emerging TV-substitute models to work someday, one has to assume that the picture quality being proffered is acceptable for viewing on large-screen TVs.

But providers have a trick up their sleeves by implementing seemingly tolerable usage caps as high as 250GB per month, which seem generous by today’s usage standards.  But they will be downright paltry tomorrow, especially if they do not increase over time, as online video increases in quality and size.

“By implementing caps now that don’t impinge on the way subscribers use the Internet today, cable and telco operators are able to create for themselves an advantageous situation,” Kidd said. “Under these circumstances, emerging media competitors must work more directly with the network owners before getting their services off the ground—as opposed to around them, as they may have previously hoped.”

That means giving them exactly what they want — a piece of the action and control over the content that crosses over their wires to broadband consumers.

“The World Company is complimented that a number of companies have expressed interest in its Sunflower division over the years. This continues today. There is no definitive agreement concerning Sunflower with any company at this time.” — Dolph C. Simons Jr., Chairman, The World Company

Those words were reported Wednesday in a brief story published by the Lawrence Journal-World is response to an article published by cable trade magazine Multichannel News that Sunflower Broadband was close to a sale to Knology.

The denial of a definitive agreement does not mean the company isn’t close to reaching one, which was the original claim in the article written by Mike Farrell.

The non-denial denial didn’t dampen excitement by several Sunflower Broadband customers who were delighted to learn of the potential ownership change for the usage-capping broadband provider.

Some have stayed with AT&T’s DSL service just to escape Sunflower’s pricing, which one reader called “insane.”

Another claims AT&T’s upgrades have helped improve broadband service: “AT&T service has improved greatly…not to mention the price blows Sunflower away. Though AT&T will not tell you that you don’t have to have their modems. Go to Best Buy and get a third party modem.”

However, the broader implications of a sale of the cable company are worrying some Lawrence residents pondering the future of the hometown newspaper, the aforementioned Journal-World.  Sunflower Broadband and the LJW share a common owner — The World Company.  While the cable industry remains very profitable, many newspapers are not.

Phil Cauthon added his views to the Lawrence Broadband Observer on the topic:

I can’t see how this is anything but ominous for the Journal-World. Sunflower has a been a boon to the otherwise sinking newspaper ship. Unless some of the money from this sale is set aside as a foundation to support the newspaper over the long term, I don’t see how the Journal-World survives post-Knology sale. That Dolph Simons is still alive during a sale bodes well for that kind of prospect. Otherwise, I hope the Kansas City Star sees fit to serve Lawrence as a primary market—maybe even purchasing the LJW—with more than just a page or two of “metro” coverage.

Tim Conway's "Old Man" character from the Carol Burnett Show would be right at home using the Internet in these areas.

Nick Saint at the Business Insider has been sifting through some of the raw data released last week by the Federal Communications Commission regarding broadband service in the United States.  He’s managed to identify the 10 worst counties in America for broadband service based on statistics from 2008.  But two of those probably should have never been on the list.  More on that later.

Harrison County, Mississippi — A single pond in Harrison County is the only known habitat of the critically endangered dusky gopher frog.  It doesn’t have broadband, and neither do most of the residents of this beleaguered part of southern Mississippi.  The cities of Gulfport and Biloxi are in Harrison County, an area torn up by hurricanes from Camille to Katrina.  Now, the beaches are coated in BP oil.  Harrison County can’t get a break. Cable One and AT&T are the primary providers.  Cable One’s dreadful service only reaches well-populated areas and AT&T has taken its sweet time expanding DSL service in the area.

Imperial County, California — The nation’s lettuce basket, Imperial County communities live on a very low fiber-optic diet.  While the soil is rich for crops, the people who plant and harvest them are not.  El Centro, the biggest city, has some broadband available, but with the city having the nation’s highest unemployment rate (27.3 percent), many can’t afford it.  Once in farm country, cable doesn’t offer service and DSL is hard to come by.

Corson County, South Dakota — Representative of the pervasive problem of broadband unavailability on Native American lands, a large part of Corson County includes the Standing Rock Indian Reservation.  Saint notes the FCC found just 12.5 percent of Native Americans subscribe to broadband service, compared to 56 percent of the rest of us.

Ector County, Texas — Odessa’s hometown America-charm was put on display for all to see on NBC’s Friday Night Lights, which celebrated small town high school football.  The reality is less exciting.  Like Harrison County, Ector residents are stuck with Cable One, which loves Internet Overcharging schemes and spied on its Alabama broadband customers.  Good ole AT&T grudgingly provided DSL, if you could get it, until mid-2009 when U-verse finally started to show up.  Now large parts of the county outside of Odessa can’t get that either.

San Juan, Puerto Rico — Usually considered an afterthought by American telecommunications companies, Puerto Rico has long suffered with low quality service.  Caribbean Net News: “Puerto Rico’s broadband penetration rate is unacceptable, with less than 40% of households subscribing to broadband services”, said Carlo Marazzi, President of Critical Hub Networks. “While there are many factors at play, broadband in Puerto Rico is simply too expensive and too slow, when compared to the rest of the nation.  Broadband Internet service in Puerto Rico is 60% more expensive and 78% slower than the United States national median. In a report published this year by the Communication Workers of America (CWA) which ranked broadband speeds in the 50 states, Puerto Rico and the District of Columbia, Puerto Rico was ranked in last place (52nd place).

Jasper County, Missouri — Saint noted 18 percent of Jasper County lives below the poverty line, which is not exactly attractive to broadband investment.  Jasper County’s broadband needs are barely met by a cable provider, AT&T, and for some, an electric utility operating a Wireless ISP, providing service where cable and DSL don’t go.  For Jasper County residents, the challenge can be cost as much as access.

Appomattox County, Virginia — Every student known Appomattox was the last stand of Confederate leader Robert E. Lee during the Civil War.  Today, residents there are worked to their last nerve because they can’t easily obtain high speed Internet.  There is no DSL service from the phone company and only limited cable service.  But at least the county is trying.  Let’s let John Spencer, assistant county administrator, tell you in his own words what Appomattox County is doing to deliver broadband for its 14,000 residents:

Bristol Bay Borough, Alaska — The epitome of rural America, large swaths of Alaska are dependent on subsidies paid from the Universal Service Fund for basic telephone service.  Outside of large cities, cable television is a theory.  Telephone company DSL service and wireless are the predominate broadband technologies in rural, expansive Alaska.  For many areas, both are awful.  Bristol Bay Borough is known as the “Red Salmon Capital of the World,” if only because there are far more salmon than there are fishermen to catch them.  Internet access for many of the area’s 953 residents means a trip to the Martin Monsen Library, which offers free Wi-Fi for limited access. If you want Internet at home, it will cost you plenty:

The days may be numbered for Sunflower Broadband

A Kansas cable system notorious for Internet Overcharging is nearing a deal to be acquired by a cable overbuilder that does not usage cap broadband customers.

Sunflower Broadband, an independent cable system providing cable, phone, and broadband service to 30,000 Lawrence residents, is expected to be acquired by Georgia-based cable overbuilder Knology, which has been on a buying spree of late.  The asking price – $127 million dollars, according to a report in the cable trade journal Multichannel News.

Sunflower has been overcharging their broadband customers for years with schemes like usage caps and a flat rate service plan that delivers speed throttled broadband service to customers.  Sunflower has remained a hot topic for Stop the Cap! because we hear so many complaints from their long-suffering customers.  In fact, no independent cable operator has generated more reader complaints than Sunflower Broadband, almost all targeting the company’s unjustified usage caps.

Broadband Reports reminds us Sunflower was among the first to implement the idea of low caps and high overages ($2 for each additional gigabyte).  Customers also routinely complain about Sunflower’s stingy upstream speeds, maxed out at just 1Mbps for their $60 Gold tier.

None of the details about Sunflower Broadband’s impending sale can be found in the local newspaper — the Lawrence Journal-World or the local “Channel 6” news operation.  That’s ironic, considering the same parent company that owns Sunflower Broadband, The World Company, also happens to own the newspaper and Channel 6.  It took a cable trade publication based hundreds of miles away to break the story — not exactly a shining moment for journalism in Lawrence, especially considering an LJWorld reporter need not break a sweat to chase the story.

Part of the reason for the sale may have been AT&T bringing U-verse competition to Lawrence.  U-verse does not have customer unfriendly usage limits.  With AT&T ready to usher away many of Sunflower’s customers, management may have decided now was a good time to sell.

The good news for Lawrence residents is that none of Knology’s cable systems engage in Internet Overcharging schemes, so Sunflower’s usage caps may be gone after the sale.

Still, some Lawrence residents are concerned about the implications of a Knology takeover.  The Lawrence Broadband Observer is among them:

I browsed Knology’s corporate web site and was actually pretty unimpressed. To put it mildly, Knology is well behind Sunflower both geographically and technically. Knology offers service in rural areas much smaller then Lawrence, like Storm Lake, Iowa and Dothan, Alabama. They also offer service in a few towns that are equal or larger then Lawrence like Charleston, South Carolina.

Technically, Knology is well behind Sunflower in what they offer customers in other cities. Top internet speeds (albeit cap-free) are only in the 8-10 megabit range, five times slower then Sunflower’s new DOCSIS 3 offerings. On the television side, while it varies from city to city, Knology generally offers only 30 or so HD channels, which is less then half of what Sunflower offers. Knology offers a rudimentary DVR, but nothing like Sunflower’s multi-room options.

Perhaps Knology is interested in buying Sunflower to learn how to offer more advanced services, knowledge they can take to their other markets. I don’t know, but it seems like this is a case of a large buggy-whip manufacturer buying out a smaller company that makes automobiles.

Most of Knology’s network of systems have been acquired from other companies and providers.  Technically, they are a cable “overbuilder” because they do overlap other providers in some areas, such as Knoxville, Tenn., where they compete with Comcast.  In many communities, they are most common in rental parks and apartments.

Knology’s customers in other cities have usually suffered some transitional glitches (Knology uses a more “advanced e-mail system” they eventually forced their PrairieWave customers to join), but overall they have usually increased broadband speeds in their markets and add lots of new HD channels.  Knology is aggressively deploying DOCSIS 3, something Sunflower already has, so few changes should be expected there.  They do not have a history of downgrading customers.

Clues about the impact of a Knology buy can be found in communities like Rapid City, S.D., who saw their cable system switched from Black Hills FiberCom to PrairieWave to Knology.  Rapid City residents first saw changes to the cable system’s technology and billing.  That was followed by the introduction of new services and packages, and then finally the name change to Knology.

With the anticipated sale, existing Sunflower customers (and ex-customers) might want to impress on the new owner that Internet Overcharging schemes like usage caps and throttled speeds are unacceptable, and you want an immediate end to both.

Remember too it could be worse — Mediacom could have been the buyer.