South Africa is the latest country on the way to finally discarding Internet Overcharging schemes like usage caps and usage-based billing.

MWEB, one of South Africa’s largest residential broadband service providers, last week “threw down the gauntlet” and unveiled an unlimited broadband option among its various rate plans.

“We realized there’s a major gap in the market. South Africa doesn’t experience the Internet like the rest of the world does. It’s a fantastic opportunity to change the Internet in South Africa,” MWEB CEO Rudi Jansen told News24.

For a country that has never known anything but expensive, slow, usage-capped Internet, MWEB’s announcement is nothing short of a broadband revolution for 49 million South Africans.

“This is not the end. There are still probably three or four big things that have to change in this market and for us, this is the first step. The other things that have to change are we have to get the mobile operators to offer wholesale data. The more competition there is, the better it is for the market,” said Jansen.

For $73.50US per month, MWEB offers 4Mbps DSL service that is truly unlimited, which is a radical notion in a country used to usage caps averaging 3GB per month.  Customers willing to tolerate slower speeds can reduce their unlimited broadband bill considerably — 384kbps starts at $30 a month; 512kbps is priced at $41 a month.  The company does admit to throttling torrent services, but customers have managed to bypass the throttle by encrypting their torrent traffic.

Although these speeds and prices are terrible in comparison to North American broadband plans, for South Africans, MWEB’s announcement was big news.  That’s because the competition charges far higher prices, often for limited service:

• Telkom, South Africa’s state phone company, wants $35US monthly, five dollars more than MWEB’s lowest speed unlimited alternative, for its DSL service with a 3GB usage allowance;
• Paying $39.50US per month buys you 10GB of usage from Afrihost;
• Using 3G wireless mobile alternatives are for the deep-pocketed only.  Paying $65.50US per month nets you less than a 2GB usage allowance;
• South Africa’s ‘Screamer’ offers a pricey unlimited plan at $54US per month for 384kbps service;
• Neotel offers an unlimited service package, but it’s so confusing few customers can be certain what they’re getting.  (Read this South African blogger’s experience with Neotel.)

MWEB hired marketing firm Quirk to generate buzz about the company’s unlimited service option.  Earlier this month, a Facebook group called Free the Web popped up asking consumers what improvements were needed in South Africa’s broadband service.  It attracted more than 15,000 followers in just two weeks.

What were South Africans complaining about?  Usage caps. Broadband users despise them, especially in a country where 5-10GB allowances are considered ‘generous.’  But the lack of competition for monopoly state-owned phone company Telkom also featured prominently.  Most South Africans rely on DSL service that first starts with renting a line from Telkom.  Telkom prices those in accordance with its monopoly status, and requires consumers to pay line rental fees combining both data and voice services, even if a customer only intends to use the line for data.  Because ADSL broadband speed is totally dependent on the phone company, and Telkom has no incentive to upgrade, few in South Africa can expect to see broadband service exceeding 4-8Mbps.  Most obtain considerably less, often well below 1Mbps.

“Telkom has to allow users of ADSL to split the line rental for the telephone line and the line rental for ADSL. That absolutely has to happen; then this market will grow,” Jansen said.

Jansen

MWEB hopes the unveiling of unlimited broadband will transform South Africans use of the Internet and bring prices down.

“Ubiquitous broadband is what this country needs to grow. We want to do our part in getting South Africa there,” said Jansen. “I hope [our competitors] follow us because I think as a country we desperately need it.”

Jansen may have his wish.  Hours after MWEB announced unlimited broadband, its competitors began to follow suit, meaning South Africans can finally follow Australians and New Zealanders discarding hated Internet Overcharging schemes.

Mybroadband.co.za took note of several broadband package changes coming as a direct result of MWEB’s new service (One South African Rand = 13.6 US cents):

Vox Telecom responded quickly and announced that @lantic will be launching bundled ADSL offerings – which include both ADSL access and an uncapped ISP account.  Pricing starts at R339 for a DSL384 bundle while a 512 Kbps service will cost R589 and a 4 Mbps solution R889.  This undercuts MWEB’s bundled pricing by R10 per month.

Openweb also joined the price war by announcing that they will resell MWEB accounts at the same rates as MWEB.

This is however not where it ends.  Afrihost said that consumers can look forward to their uncapped ADSL services next week, and G-Connect also indicated that they will respond to MWEB’s recent announcement with a competing service.

Even the state monopoly phone company Telkom has started talking about offering unlimited service.

“Uncapped speed-locked ADSL service consumer offerings are in development. However, no time-frames, offering specifications or price points can be disclosed at this stage. In the development process, Telkom is striving for optimal quality, reliability and affordability,” said Ajith Bridgraj, Telkom Senior Specialist for Media Relations.

MWEB expects a surge of new customers, which leads some to worry if the company can sustain its network under the burden of throngs of new customers.  Jansen says they can, noting their connectivity ultimately comes from Seacom, which is an important provider of international connectivity between Africa, Europe, and beyond.

Early tests by Mybroadband appear positive:

MyBroadband got its hands on an uncapped 4 Mbps test account to take the service through its paces – and early test results are very promising.

For basic email and surfing the MWEB uncapped account performed well, and results from Speedtest.net were on par with SAIX and IS based offerings.

Local Speedtest.net downlink speeds ranged between 3.28 Mbps and 4.13 Mbps while local uplink speeds ranged between 0.26 Mbps and 0.42 Mbps.

International Speedtest.net results – tested with servers in London, New York and Brussels – ranged between 2.96 Mbps and 3.61 Mbps while international uplink speeds were fairly steady at between 0.3 Mbps and 0.32 Mbps.

Local latency was fairly consistent and ranged between 17 ms and 41 ms in tests to Johannesburg and Cape Town based servers.  International latency was however less consistent, and ranged between 285 ms and 528 ms to the UK and US.

The MWEB uncapped account performed well with all bandwidth intensive applications.

YouTube videos streamed without any buffering, but some buffering was needed when moving to high definition video streaming (480p and more specifically 720p).

Standard file download speeds were quite consistent at between  2 Mbps and 3.4 Mbps while multi-threaded FTP and HTTP downloads sat at around 3.2 Mbps.

Good news for those keen on torrent services is that the MWEB uncapped account seems torrent friendly.  We selected 10 of the most popular torrents, and total download speeds ranged between 2.8 Mbps and 3.2 Mbps.

American broadband providers contemplating Internet Overcharging schemes of their own often point to usage limits and usage-based billing schemes that exist in other countries, implying they are well-tolerated by consumers abroad and should be likewise domestically.  The truth is, such pricing schemes are as despised abroad as they are domestically, and most countries seeking to improve broadband consider eliminating them a top priority.

[flv width=”448″ height=”356″]http://www.phillipdampier.com/video/Carte Blanche Consumer – No Broader Than a Band.flv[/flv]

South African news program ‘Carte Blanche’ provides this general overview of the current state of broadband in South Africa, and the challenges that must be faced to improve it. (10 minutes)

[flv width=”384″ height=”308″]http://www.phillipdampier.com/video/News24 MWEB Unveils Unlimited Broadband 3-19-10.mp4[/flv]

South Africa’s News24 network reported on MWEB’s unlimited broadband package including an interview with MWEB CEO Rudi Jansen. (3 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/South African Broadband.flv[/flv]

As part of MWEB’s social marketing campaign, ordinary South Africans talk about their broadband experiences, what the Internet has done for them, and the things they hate the most about South African Internet Service Providers. (9 minutes)

Last week, Stop the Cap! considered the challenges America faced developing universal electric service — so much of that debate echos in today’s struggle to provide universal broadband service.

Although hindsight allows us to recognize the benefits universal electrification has brought Americans over the past 100 years, the transformational benefits from universal broadband are bit more mysterious because many applications haven’t even been envisioned yet.

IBM is a proponent of two revolutionary concepts universal broadband makes possible: The Internet of Things and The System of Systems.  The company produced a video to consider the implications of improved connectivity and how that will impact our daily lives:

[flv width=”641″ height=”380″]http://www.phillipdampier.com/video/IBM – The Internet of Things.flv[/flv]

IBM Social Media produced this video explaining The Internet of Things, one of the concepts made possible with universal broadband. (5 minutes)

Now imagine the implications if the platform which makes this all possible remains in the hands of a broadband duopoly intent on securing big profits earned from high pricing, limits on service, and other cost-controlling measures.  Transformational broadband — for the right price as long as you don’t use too much, brought to you by big cable and telephone companies.

Stop the Cap! reader Michael writes to alert us he found AT&T’s U-verse online Account Overview now includes a section called “Usage & Recent Activity” that includes a placeholder for a future usage meter.

“I canceled my U-verse TV and bumped my Internet speed up to 12Mbps last weekend, and I remember checking to see if my account updated sometime around the middle of last week.  The old website was still in use then.  Today was the first time I got redirected to the new site, which includes this new placeholder for a usage meter,” writes Michael.

Stop the Cap! reader Michael sent us a screen shot of his AT&T U-verse account, showing this placeholder for a future usage meter. (Click to view the full screen shot)

While customers like Michael are currently being told their “internet plan provides you with unlimited usage — there are no usage details to display,” the potential for usage meters can set the stage for future Internet Overcharging schemes down the road.

AT&T alienated many of its customers in Beaumont, Texas and Reno, Nevada when an extended usage cap trial was underway.  Complaints were filed against AT&T with the Better Business Bureau over dubious marketing practices that sold customers on unlimited broadband, only to dispatch letters to newly signed customers telling them it wasn’t unlimited… after signing up for service.

Stop the Cap! learned the Beaumont/Reno experiment was coming to a close this April.

Internet Overcharging schemes are vastly unpopular with consumers.  A 2008 study found an overwhelming majority of customers (81 percent) opposed to usage limits or usage-based billing, with 51 percent willing to take their business to another provider if implemented.

In Beaumont and Reno, customers threatened to cancel service when they learned of the experimental overcharging scheme being tested.  Some managed to get exempted from the trial.

Customers routinely reject the notion that a company already earning billions in broadband profits today needs to set the stage for even higher pricing and profits tomorrow.

AT&T has spent millions lobbying for the introduction of their U-verse system on favorable franchise terms with the promise it would deliver more competition and lower prices for millions of Americans.

For customers like Michael, usage meters are the first step towards breaking that promise.  When followed with formal usage limits or usage-based billing, higher broadband bills are a sure thing.

AT&T customers should contact AT&T and put them on notice — any effort to impose usage limits or usage-based billing will result in immediate cancellation of your AT&T account.

Stop the Cap! will continue to closely monitor AT&T and we’ll recommend further action should conditions warrant.

Update 3:00pm EDT 3/23 — AT&T tells Broadband Reports that whatever users are seeing, it’s some kind of website glitch, and that the company has no plans to implement a usage meter. “We did do some upgrades to our account management portal this weekend, but we haven’t been able to recreate this screen,” according to AT&T spokesman Seth Bloom.

While that’s good news for AT&T customers, we are unsure exactly how such a glitch could occur with such depth, including wording that specific Internet plans providing unlimited usage.  Further, specifying “U-verse Internet Usage” on the tab above it seems surprisingly specific for a “glitch.”

Barring any new evidence, we’ll take AT&T’s word for it, but readers should continue to report any further “glitches” they might encounter.  If possible, include the URL with any screen shots, which we’ll happily provide to the company in any effort to recreate the page.

American Salt Company's salt pile in Hampton Corners, just south of Rochester, N.Y.

Faithful Stop the Cap! reader Lance dropped us a note this afternoon alerting us that Syracuse is the latest Time Warner Cable city getting the benefits of increased speed from Time Warner Cable’s DOCSIS 3 Wideband upgrade.

While those in the Salt City can now sign up for 50Mbps broadband service, Time Warner Cable tells residents of the Flower City to go pound salt — there are no upgrades for you!

Why?

Thank Frontier Communications anemic (read that barely-existent) competition against Time Warner Cable in Rochester.  While the rest of upstate New York is being wired for fiber-to-the-home service from Verizon, Frontier Communications is relying on decade-old DSL service… indefinitely.  For residents like myself, that topped out at a whopping 3.1Mbps. That fails the FCC’s newly-proposed minimum speed to even be considered “broadband.”

Buffalo has been Wideband ready since early this month, and New York City launched service last year.

The Rochester Democrat & Chronicle must have noticed nearby cities were getting speed increases, but Rochester was not, so they contacted Time Warner Cable to find out why:

While those DOCSIS 3.0 products — called Wideband and Road Runner Extreme — are being made available in Buffalo and Syracuse, the company “has just begun its national launch of this product across its entire footprint, but with no additional locations determined at this time,” said spokesman Jeff Unaitis.

The company, however, does plan to roll out a wireless broadband product for the Rochester market before the end of 2010, he said.

(*) - As long as you don't live in Rochester, N.Y.

That’s the nice way of saying Rochester isn’t getting the speed increases because there is no competitive reason to provide it.  With Rochester left off the upgrade list, and no real incentive to run to Frontier (which can’t beat Road Runner’s existing speeds), this community falls behind the rest of the state in broadband speed.

To think last April Time Warner Cable was promising dramatically upgraded service, if the community agreed to accept their Internet Overcharging usage-based billing scheme.  Apparently no other upstate city was required to commit to ripoff pricing, and speed upgrades came anyway.  The fact Rochester is bypassed this year proves our contention their pricing experiment came to Rochester only because they faced no real competitive threat from Frontier then, and they still do not today.

As for the wireless product coming to Rochester, that will come courtesy of rebranded Clearwire service, which has had very mixed reviews.  Time Warner Cable and Comcast are both major investors in Clearwire, and are using their service to provide a wireless add-on.  It won’t come cheap, however, if North Carolina’s pricing also applies here:

• Road Runner Mobile 4G National Elite gives unlimited access to both Time Warner Cable’s 4G Mobile Network and a national 3G network (Sprint, presumably), for use when traveling.
  o $79.95 per month for Road Runner Standard or Turbo customers.
• Road Runner Mobile 4G Elite gives customers unlimited access to the Time Warner Cable 4G Mobile Network.
  o $49.95 per month for Road Runner Standard or Turbo customers.
• Road Runner Mobile 4G Choice gives light users 2GB of service on the Time Warner Cable 4G network each month.
  o Available for $39.95 per month to customers of at least one other Time Warner Cable service.  Additional $5 off if you have a  bundled service package.

As for Wideband pricing, Syracuse residents should expect to pay:

• 30/5Mbps: $25 more than standard Road Runner service;
• 50/5Mbps: $99 per month, but ask about promotional pricing, which may be available.

In Syracuse, Road Runner speed now matches Verizon FiOS on the downstream side, although Verizon can deliver better upload speed at 20Mbps.  Formerly, Road Runner maxed out at 15Mbps in central New York.

About 30 percent of the central New York division of Time Warner Cable is now Wideband-ready, including the entire city of Syracuse.  By October, the company expects to have the faster service available in 70 percent of the central New York area.

Dampier

Yesterday, the Federal Communications Commission formally introduced its omnibus National Broadband Plan to America, Congress, and the telecommunications industry.  The FCC seeks nothing less that a transformation of broadband to better meet the needs of Americans for years to come.

The 376-page plan recognizes broadband is no longer a novelty.  It’s now becoming one of the essential utilities of life — joining power, telephone and water service as something virtually every American will eventually have in their home.  But while the Commission lays the general groundwork for future regulatory policy to help achieve that goal, it ignores the historical reality that made universal service for utilities possible.

I am a strong believer in reviewing past mistakes to avoid repeating them in the future.  That is why Stop the Cap! occasionally turns back the clock and reviews history.  Railroad robber barons, telephone company monopolies, and electric service providers all abused their positions and consumers paid through the nose for service until the government finally broke up the anti-competitive trusts that limited competition.

Just like today’s broadband players, in the early 20th century, electric companies asked for and received favorable treatment by Congress.  The industry argued such treatment was required to make investors comfortable with the enormous amount of investment required to construct power generation facilities, run wiring to homes, and obtaining easy access to American streets and backyards.  Regulations must be kept to a bare minimum, providers demanded.  Anything else, they claimed, would discourage critical private investment, would create job losses, and slow deployment of service to millions of Americans.  Sound familiar?

By the time the American public realized electric companies were abusing their monopoly positions to charge outrageously high prices, the half-measures legislators proposed to control rates and improve service were often ineffective.

Just as with electric service, any broadband plan that seeks to tinker around the edges of the problem will not solve the problem.  Providers will find loopholes, lobbyists to help water down the provisions they dislike, and lawyers to mount endless legal challenges to stall reform.

The warning signs are already apparent in the FCC plan.  The agency seeks to cooperate with some of the biggest players in the industry that are responsible for what the FCC calls “the critical problems that slow the progress of availability, adoption and utilization of broadband.”

That ultimately means working with existing providers instead of creating the right conditions to welcome new players into the market.

America's broadband duopoly - just four percent of Americans have more than two providers to choose from

The anti-competitive, de facto duopoly pricing power available to cable and telephone companies has created an enormous digital divide for rural Americans who cannot pass “Return on Investment” means tests, prices broadband service out of reach for many, and seeks even higher pricing while proposing to limit service with Internet Overcharging schemes like “usage-based billing” and “usage limits.”

Where one lives is often the most important factor when considering broadband speed and service quality.  It’s the luck of the draw.  A customer on one side of the street may have the option of Verizon FiOS, a true fiber-to-the-home service providing equal upstream and downstream speeds far higher than the national average.  Across the street, a customer may only be served by another telephone company offering 1Mbps DSL with no alternatives.

Other Americans live within viewing distance of a utility pole where cable or telephone broadband service stops, giving them the choice of paying $10,000 to extend service, or living with dial-up or satellite fraudband.

Few phone or cable companies will ever consider invading another’s turf, even if customers begged.

But it gets worse.

The service customers can obtain from a provider varies even within its service area.  Verizon FiOS and AT&T U-verse is available in some neighborhoods, but not others.  What stops or slows service expansion?  Anything from a management decision on a whim to concerns by private investors, market conditions, cost controls, or changing revenue expectations that inhibit uniform service across the community.  Local governments used to manage this problem with franchise agreements that made approval conditional on supplying service across an entire community, but companies like AT&T lobbied their way to statewide franchising reforms that can eliminate local oversight.

The cable television industry has a better track record of providing uniform broadband service to customers in their respective service areas, but at what cost?  Time Warner Cable COO Landel Hobbs recently told a group of investors pricing for its Road Runner service can be increased at the company’s whim.  Comcast has already increased prices on its broadband service. Both companies have either tested or implemented usage limits and restrictions on their customers.

What makes these things possible?  Limited competition and insufficient oversight.

The FCC’s solution to limited competition includes vastly expanding wireless frequencies available to mobile broadband providers.  But here’s the problem.  The government will auction those frequencies off to the highest bidders, which are most assuredly the dominant industry players AT&T and Verizon.  For millions of Americans, that means no extra competition at all because their phone, broadband, video, and wireless service all come from these two companies.  The only way smaller players can compete in a bidding war is through consolidating mergers, which reduce the number of competitive choices in many cities.  If the government wants competition, it should provide incentives to spur its development.

Wall Street certainly won’t help much.  They loathe heavily competitive markets now, because inevitable price wars limit their returns.  Getting initial investment to construct new networks is problematic because investors don’t want excessive competition.  Providers howl it’s unfair for government to help their competitors, but their incumbency provides them with built-in benefits unavailable to new entrants.

The FCC recognizes the importance of broadband service as America’s next utility, but is afraid to regulate them as such.  They may have good reason not to try.  Comcast is presently suing the Commission in federal court, claiming they don’t have jurisdiction over broadband policy.  Should Comcast prove its case, the National Broadband Plan could be just another thesis for improved broadband, with no backing authority to implement its recommendations and regulatory changes.

That brings us to Congress.  While the FCC may bring its best intentions to the table with the National Broadband Plan, it’s very likely lobbying will force changes to what finally gets implemented, if anything.

The telecommunications industry never has a problem finding financial resources to hire lobbyists and spread lavish campaign contributions all over Washington.

They’ve already bought and paid for an enormous astroturf group called Broadband for America with 200 member organizations, virtually every single one backed by AT&T or Verizon money or personnel, or equipment providers who stand to earn substantially from broadband improvement.  They are running TV ads telling viewers private providers should be left alone to get the job done, something they’ve had a decade to accomplish with insufficient progress in key areas.

Many in Congress, especially on the Republican side of the aisle, will agree with BfA’s “hands-off” advocacy.  Early reaction from Republicans regarding the Broadband Plan is not favorable.  Rep. Cliff Stearns (R-Florida), the ranking Republican on the House Energy and Commerce communications, technology and the Internet subcommittee, told the Washington Post he wants the agency to stay focused on bringing access to people who don’t have it.

“I am concerned, however, that the plan may contain stalking horses for investment-killing ideas, such as so-called net neutrality mandates or a return to outdated, monopoly-era regulation,” he said.

Many Democrats with large telecommunications companies headquartered in or near their districts are likely also to advocate caution.

Regardless of what the FCC recommends, Congress will ultimately control the outcome.

Here are our recommendations you should consider sharing with your elected officials:

Congress and the FCC must be willing to stand up to the telecommunications industry which is not delivering world-class broadband service.  The United States is falling behind in access, pricing, and speed.  Simply accepting the provider argument that they should be left alone in an unregulated, duopoly marketplace is not an option;

Congress must deliver to the FCC clear authority to regulate broadband service and enforce Net Neutrality.  Recent court cases argue the Commission presently lacks that authority.  Congress should take every possible step to ensure the courts this isn’t the case.

Increased oversight of the broadband industry is essential.  Why does an industry making billions in profits need to consider usage limits and usage-based billing designed to deter residential use of broadband service?  Such limits are designed to protect cable-TV revenue that could disappear if Americans dump their television channel packages in favor of watching everything online on their existing broadband account.

Congress should not stand for an unregulated duopoly controlling a service that is becoming as essential as water, energy, and the telephone.  As broadband becomes an essential utility, why is the government not stepping in when the COO of the nation’s second largest cable company — Time Warner Cable, tells investors he can raise broadband prices on a whim?  Is this the 21st century version of the Robber Baron Era?  Robust competition guarantees no executive can make such a statement.  Congress must act to bolster competition, including financial and tax savings incentives for new providers willing to enter markets of all sizes;

Wireless mobile broadband spectrum auctions do not promote competition because the biggest incumbent players are sure to win the bulk of the frequencies, guaranteeing more of the same anemic competition.  Some of the newly available blocks of frequencies should be reserved for bidders who do not currently serve the market where those frequencies are available.  Only that guarantees new competition in wireless;

Free or deeply discounted access to basic Internet service at broadband speeds should be a part of any National Broadband Plan, to ensure access to every American who wants it.