DirecTV wants people out of reach of its satellite service to enjoy unlimited viewing of NFL football games, and today announced it would test providing them over broadband connections.  For $100 more a year than subscribers pay now for the satellite-delivered football game coverage, DirecTV will will offer New York City viewers as many NFL games they can watch over their broadband connection for $349 a year.

DirecTV claims it will sell the service only to those who cannot obtain satellite service from the company, which presumably will limit the broadband content to apartment dwellers and other urban residents who can’t mount a satellite dish.  But in a city like New York, that can easily mean tens of thousands of potential new customers, all watching video content delivered by Cablevision, Time Warner Cable, RCN, or Verizon’s broadband services.  USA Today covered the story this morning:

DirecTV has few customers [in New York City] because skyscrapers block signals coming from satellites orbiting the equator. Also, many landlords and co-op boards don’t allow residents to get a satellite service.

“A lot of the buildings (that can’t get DirecTV) we already have in databases because they’ve got exclusive contracts with cable guys,” says Derek Chang, executive vice president for content strategy and development.

To see the games, broadband customers will download a special video player and punch in a code. Users can install the software on multiple computers, but only one will be able to stream the games at any particular time.

Games with New York’s Jets and Giants, which air on broadcast TV, will be available only when the customer’s computer is outside the New York area.

Cable operators won’t just play defense in the battle for football fans. Comcast will announce today that it will offer the NFL Red Zone Channel to customers of its Sports Entertainment Package. On Sundays, the channel will display football statistics with audio from Sirius XM Radio‘s program “Around the League” — and go live to certain games when the ball is within 20 yards of the goal.

While Cablevision, RCN, and perhaps even Verizon may not express concern about the prospect of carrying NFL games across their networks without “compensation,” Time Warner Cable, which continues to express an interest in Internet Overcharging schemes, may not be so tolerant, especially if the test is successful.  ISPs who support Internet Overcharging routinely use online video growth as a justification for usage caps and consumption pricing.  Will the NFL become part of the Re-education of their customers?

Another question to ponder – would such a service even launch in a broadband marketplace infested with usage caps and limits?

While researching some stories this afternoon, I spoke with an executive at one of the major broadband providers serving consumers with Internet service who told me the company was simply tearing its proverbial hair out over how much online video services like Hulu were costing them — at least $1-2 per gigabyte.  He also said it was putting serious strain on their broadband network.  He didn’t agree to go “on record” putting his name with his views because he was not authorized by company officials to do so, but he was well armed with talking points that said online video is such a problem, Canada, South Africa, Australia, and New Zealand couldn’t take it any longer and they adopted usage allowances to limit customers watching Hulu and other online video services “like from the BBC.”

These Amateur Hour talking points written at company headquarters will work with a bobblehead-like nodding reporter at a local station getting a 10 second unchallenged sound bite, but they don’t work here.

My industry friend didn’t agree to be on the record, so he’ll remain anonymous, but the points raised are on the record so here we go:

Myth: Hulu is costing broadband providers a ton of money – at least $1-2 per gigabyte.

Truth: Hulu, and other online video services like it, do generate a considerable amount of broadband traffic in the United States.  That online video has posed a potential threat to my provider friend, who faces the prospect of some consumers deciding to disconnect their cable TV service and stick solely with broadband for online video.  However, my friend ignores the fact his company has a way to solve this traffic issue by considering upgrades to DOCSIS 3 technology.  After all, his bosses are actively seeking a way into the online video marketplace themselves.

Dave Burstein, DSL Prime

His employer is testing an online video delivery platform that could easily dwarf Hulu.  Of course, they don’t happen to own or control Hulu, open to any American.  The establishment of an industry-controlled service, available exclusively only to “authenticated” subscribers, really blows the talking point about online video straining their broadband network out of the water.  If Hulu is threatening to do them in, what do they think will happen when their even bigger endeavor launches for millions of users?  Then again, as I told him, such online video drives new subscriptions and they could always take some of that money and invest it in network expansion.

Dave Burstein, a well regarded expert on broadband networks, who writes DSL Prime, obliterates the cost estimate inflation for online video in a short piece titled, HD Video Delivered: 5-8 U.S. cents per hour (SD – 2-4 cents):

Microsoft, Cachelogic and I demo’ed full 6 megabit HD video over the net at Web Video Summit, and the stars are now aligned for HD to become first practical and then common – unless the carriers succeed in taxing the net outrageously. That’s cheap enough that even HD TV over the net can be supported by ads, and it becomes a no-brainer for any movie service that charges to offer true HD.

Dan Rayburn, the guru of the streaming media world, reports “The lowest price I saw in Q1 was two and a half cents per GB delivered for over 500TB of traffic a month. When I questioned many of the major CDNs about this price, nearly all of them told me they don’t price delivery that low, but the contracts say otherwise. That price is not the norm as 500TB a month in delivery is a very large customer.” Repeat: This is not a typical price, even at that large volume. Dan reports more normal prices are 2-4 times this level. So U.S. cents 15-25 is more typical for full HD.

Hulu doesn’t even specialize in HD video programming, so the $1-2 per gigabyte estimate on that talking points handout apparently mistakes a dollar sign for a cents sign.

Myth: Online video is such a problem, Canada, South Africa, Australia, and New Zealand adopted usage allowances to limit customers watching Hulu and other online video services “like from the BBC.”

Truth: My industry friend is apparently unaware Hulu restricts access to the majority of its content outside of the United States.  If you are watching from Canada, Australia, or South Africa, you’re more likely to encounter an error message telling you this content is not licensed for your area.  I’m not sure how that is supposed to impact on overseas ISPs.  The BBC’s iPlayer not only doesn’t provide broadband video content outside of pre-authorized UK-based Internet Service Providers, it offers lower quality streams outside of the UK for what content is available.  It’s a very common complaint heard by the BBC, but they do not have the resources to offer high bandwidth streaming to the entire world.

Most broadband providers won’t use the word “limit” when it comes to controlling subscribers’ access, because that puts them right in the line of fire.  It’s always been our contention that this is about protecting business models and less about “costs.”

There are tremendous differences between online video content services in the United States versus Canada or other usage-capped countries.  In New Zealand, online video services have been shut down because of usage limits.  In Canada, Australia, and South Africa, they’ve never truly gotten off the ground because “bit caps” make them unsustainable.

South Africa this week celebrated the opening of a new underseas cable to bring additional global connectivity to the continent of Africa.  Broadband service in South Africa today has very little video content at all – usage caps are punishingly low across the region because unlike in the USA, international connectivity has traditionally been obscenely expensive.  Many South African ISPs distinguish themselves by placing heavier limits on sites hosted outside of the country than on those hosted domestically, a nod to the connectivity reality.

The truth is that some ISPs in the United States are looking for arguments to justify Internet Overcharging to maintain high profits and keep demand in check.  Consumers are not buying these industry talking points at any price.

In a sorry development, Canada’s telecommunications regulator, the Canadian Radio-television Telecommunications Commission, today issued a rubber stamp approval of Bell’s proposal to impose Usage Based Billing and overlimit fees and penalties for “excessive use.”

The CRTC apparently breezed its way through Bell’s application, deciding it sounded good enough for them, and made only minor adjustments.  The CRTC’s short-sighted consumer protection angle was to demand that before Bell implemented any Internet Overcharging scheme on its wholesale customers (using the Gateway Access Service), namely those who purchase connectivity to provide independent ISP service to Canadians, they must first stick it to their own retail customers.

Like that represented a problem.

The Commission  approves on an interim basis the Bell companies’ proposed two new Gateway Access Service (GAS) speed options and rates. The Commission also approves on an interim basis their proposal to introduce UBB for GAS, effective 90 days from the date of this order.  The Commission further approves on an interim basis their proposal to introduce an excessive usage charge for GAS of $0.75 per GB in excess of 300 GB, effective the date the Bell companies notify the Commission in writing that they apply an excessive usage charge of $1.00 per GB in excess of 300 GB to all their retail customers on UBB plans.

After all, if you are going to overcharge some people for broadband access, why not overcharge them all!

Bell serves both the wholesale needs of independent service providers and retail consumers subscribing to DSL service.  Last year, Bell suddenly began throttling the speeds of their wholesale customers without notification, killing a major marketing benefit independent providers offered potential subscribers – a non-throttled broadband experience.  The remaining independent service providers that compete against Bell and many cable companies in Canada by offering unlimited access now find that marketing angle also rapidly becoming unavailable.  Such actions benefit the larger providers by making independents uncompetitive and force Canadians into all of the classic Internet Overcharging schemes, with no alternatives.

The result has been outrage by Canadians who have discovered, yet again, the CRTC represents the interests of large corporate telecommunications companies and not the common sense needs of ordinary Canadians for affordable, open Internet access.  While the CRTC continues to act like the cable and telephone industry’s BFF, Canada’s former leadership in broadband rankings continues its rapid deterioration, falling further and further behind other industrialized countries, all for the benefit of providers and their profits.

The CRTC remains impotent in promoting effective competition and consumer-friendly policies.  Broadband Reports notes that may be by design. Many staffers at the CRTC have past histories with the providers they are supposed to independently regulate.  They point specifically to vice-chairman Leonard Katz, whose amazing lack of consumer concern may partly result from his more pressing need to consider the interests of his former employers – Rogers Cable (17 years) and Bell (11 years).

Canadians can and must demand an end to the CRTC-Telecom Industry Friendship Festival that seems to be ongoing at their expense.  Contact your member of Parliament and demand some top to bottom changes in regulatory policy that are front and center focused on the needs of Canadian consumers, not on the interests of a handful of big telecom companies.  An investigation into possible conflict of interest is also warranted.  Exactly how many CRTC staffers come to the agency from the companies that are regulated by it, and how many find nice jobs waiting for them at those companies when they leave government service?

Stop the Cap! readers have seen the differences in broadband pricing between Japan and the United States.  The CRTC approval of Bell’s request makes a bad situation even worse across Canada, particularly in areas where there are no alternatives to Bell’s DSL service.

How low can they go?

Chiehyu Li and James Losey at the New America Foundation have completed an excellent comparison between broadband service overcharging schemes in the United States (and the slow speeds and high prices that accompany them), with broadband service in Japan, where download usage caps are unheard of, speeds reaching 1Gbps are priced at under $60 a month, and bandwidth throttling of peer to peer applications is uncommon at best.

Although services offered by Japanese ISPs are more expensive than these “economy plans,” they are not only much faster but offer considerably more flexibility in terms of bandwidth consumption. In Japan, the lowest cap for residential Internet of the companies we researched is 150GB per month for upstream only, implemented by i-revo, a nationwide fiber ISP that provides up to 100Mbps symmetrical access. BB Excite, SoftBank and Internet Initiative Japan (IIJ) also imposed 420GB to 450GB bandwidth per month only on the upload side.

Although pricing is higher for some of the “economy” plans in Japan, customers there have no risk of running into overlimit penalties and fees punitively placed on customers’ bills when they exceed the paltry caps usually found on Internet Overcharging “economy” tiers.  With some charging $2-10 per gigabyte, it’s easy to send bills much higher with very little usage.

The report “demonstrates that bandwidth caps in the U.S. are more restrictive than in Japan. ISPs in Japan only cap upstream traffic, if at all, and few impose network management practices to limit bandwidth consumption. The results of this report should encourage policymakers to investigate market conditions in Japan to determine how and why their networks supports far more per-customer throughput than comparable networks in the U.S. Additionally, regulators and policymakers need to investigate why Japanese high-speed Internet subscribers get faster speeds at lower prices, with fewer limitations than subscribers in the U.S.”

Of course, it’s no mystery why American providers are seeking to impose various overcharging schemes on their customers — they want fatter profits, and will leverage the barely competitive broadband market to get them, especially if they think policymakers won’t respond with the appropriate oversight and regulation, where necessary, to protect consumers from monopoly/duopoly-leveraged pricing.

Even comparing the higher bandwidth caps in the two countries, including the highest priced residential plans, bandwidth caps in the U.S. are drastically lower and more restrictive than those in Japan. Chart 2 shows service options with the highest bandwidth cap in the two countries. U.S. ISPs such as Cox, Charter, Comcast and Cable One cap bandwidth from 20 GB to 250GB per month for combined up and downstream traffic for their higher-priced Internet services. Among these ISPs, Cox has the highest monthly caps, offering 300GB for downstream and 100GB for upstream to Ultimate Package subscribers (50Mbps/5Mbps). Comcast caps bandwidth at 250GB a month, combined upstream and downstream, for all tiered Internet services. Continuing the U.S. trend towards more restrictive Internet service, AT&T has proposed bandwidth caps of 20-150GB a month. In addition, some of these ISPs have imposed network management on users’ Internet traffic.

The United States has one major multiple cable system owner that has sworn off these schemes – Cablevision.  A few competitors, including Grande Communications, found in Texas, also advertise they will not impose limits or schemes on their customers.  Frontier Communications has promised its customers it will not enforce any limits on its broadband customers until further notice either (although we’d prefer they eliminate the 5GB Acceptable Use language from their terms and conditions).  Verizon is perhaps the most important non-capper, at least for now.  It has no current plans to implement Internet Overcharging schemes on its customers.

Once again, the United States is heading backwards in broadband pricing, speed, and freedom for customers to use their service as they see fit.  Instead, providers with Internet Overcharging schemes seek to limit broadband usage to extract maximum potential profits, and protect their video business from online competition.  The fundamental question for the future will be, who controls America’s Internet?

Earlier this year, some Stop the Cap! readers in North Carolina who attended the hearings on a pro-telecom (actually it was written by them) piece of legislation designed to stall statewide municipal broadband competition encountered strange protests from conservative groups arriving on buses.  They were there to stop “Obama’s government takeover of the Internet.”  The communities of Wilson and Salisbury, which have municipal broadband projects in progress, also encountered resistance from outside groups.  Salisbury residents even began receiving biased phone polls that turned out to be sponsored by a conservative political action group that was also involved in the conservative “tea party” movement.

"Critics say .... it appears that the group was a 'mouthpiece' for hire." -- St. Louis Post-Dispatch

These groups loaded mostly retirees, recruited from talk radio and websites, onto buses and sent them to the state capital with generic anti-government talking points and signs.

FreedomWorks, which is currently in the news for organizing protests at town hall meetings over what they call “Obamacare” health care reform, has also been busy adopting the industry-friendly position of opposing government involvement in broadband.  They oppose anything resembling regulation, any government involvement in the pricing or availability of broadband service, and recite industry talking points about the free market assuring Americans of the world’s best Internet service.  Unfortunately, these talking points come at the same time the United States slips further and further behind in international broadband rankings, and true competition in most markets is limited at best.

FreedomWorks’ position on broadband policy will sound eerily familiar:

The broadband market is dynamic and fast paced; new FCC regulations could hamper this growth and reduce the vital capital investments required to expand the nation’s broadband networks.  Rather than attempting to apply old monopoly based models to today’s competitive markets, the FCC should focus on removing barriers to competition, implementing competitive solutions to policy questions, and allowing the private sector to more effectively allocate scarce broadband resouurces [sic] to the most highly valued uses.  In addition, efforts to establish “net neutrality” should be avoided, because they threaten the ability to manage dynamic networks effectively.

That is paraphrased directly from the talking points the industry has presented about broadband policy for years.

Now many of these groups are attempting to recruit those who dislike the current administration to provide free shilling services for the broadband industry’s agenda, supporting positions that are directly opposite  consumers’ best interests.

FreedomWorks is hardly new at this.  Back in 2006, Fiona Morgan, writing for the Independent Weekly (North Carolina), covered another bandwagon of protesters who showed up at an arcane meeting of the North Carolina House Revenue Laws Study Committee, all wearing FreedomWorks t-shirts:

The details of telecom legislation like this are wonky, complicated and jargon-filled. But that hasn’t dampened the passions of citizens fed up with the de facto monopoly of TimeWarner, with its astronomical rates for “packages” of unwatched channels. Dozens of people from across the state showed up to a meeting in April of the House Revenue Laws Study Committee wearing T-shirts for FreedomWorks, a group clamoring for the proposed state franchises. FreedomWorks, which is connected with the anti-tax conservative group Citizens for a Sound Economy, is funded by telephone companies pushing for the bill–what you might call an Astroturf (phony grassroots) organization, but the passion of its members is very real.

With astroturfers like FreedomWorks, deregulatory principles that might garner legitimate debate and consideration are tainted when it turns out that advocacy is bought and paid for by directly connected business interests who have a dog in the fight.  That’s why FreedomWorks hardly represents the “grass roots.”  It’s an astroturfer that has a corporate-sponsored agenda, but hides behind good American conservative citizens who find themselves proverbially loaded onto buses and taken for a ride.

Those consumers had a right to be fed up with paying for unwatched cable channels, but their appearance at that meeting was the lowest form of manipulation, because the legislation under review had nothing to do with the issue those people were concerned with.

Instead, their presence was used by the telecommunications industry as illustrative of consumer discontent, and de facto support for their real agenda, which was removing oversight of the video service franchising process from local government and turning it over to an industry-friendly state body.  That would have created statewide cable and “telco TV” franchises that take away local control and oversight.

Chad Johnston of the People’s Channel, Chapel Hill’s public access station said all the passion around TV service is being used to mislead the bill’s supporters. “It’s funny, because many of the comments that the FreedomWorks folks brought up in this meeting were things that aren’t even included in this bill, like being able to chose your channel lineup–that’s a whole different issue,” Johnston says. “This notion that it’s going to bring us gobs of choices and lower prices it totally false, based on everything we know about deregulation and the telecom industry.”

Heartland Institute: "By not disclosing our donors, we keep the focus on the issue."

Now, another astroturf group that shares “researchers” with FreedomWorks, the so-called Heartland Institute, has an Op-Ed Tuesday in the conservative Philadelphia daily The Bulletin.  Of course, the Heartland Institute also has close ties not only to big telephone companies, but is a dependable friend of big cable as well.  Those close ties are, predictably, omitted from the article.

A typical horror story involves an ISP, at peak usage hours, gently slowing down a tiny number of bandwidth hogs so the vast majority of its customers can surf the Web and send emails at the speed they expect. Insisting such a policy is unfair is not only counterintuitive, it’s counterproductive to demand the government stop it.

The Internet Freedom Preservation Act of 2009 is poorly named because it would do nothing to preserve freedom. HR 3458 would strip ISPs of the right to manage traffic on the networks they have spent billions to build, market and manage. In their place would emerge a cadre of detached government bureaucrats—hardly an improvement on the status quo.

The takeaway word from the first section is “story,” as in fiction, because that is what that talking point represents.  Once again, the Us vs. Them strategy reveals itself, with stories of some guy next door sucking the neighborhood Internet lines dry downloading.  The true horror is some providers continue to earn healthy profits on their broadband revenue, complain about the growth of traffic on their networks, and actively reduce investment to expand that network.  That, of course, helps build the case for “controls” when consumers notice the slowdowns created by those neglectful policies.

The Heartland Institute advocates the provider be given the enviable role of the fox guarding the hen house.  Providers manage profits quite effectively, and just as some try to tweak pricing models to extract extra revenue from consumers, you can count on those same providers creating new revenue streams from “premium” prioritization of Internet traffic, for a price, while leaving everyone else in the slow lane.  Their own products and services carried on those lines will enjoy beneficial priority for free while direct competitors find they can’t obtain that level of service at any price.

The so-called “cadre of government bureaucrats” is anything but.  The truth is, there will be one set of clearly defined standards that will protect the level playing field the Internet deserves.  The piece makes it sound like there will be a government court to render judgment on every policy and practice, which is false.  The only thing Net Neutrality protects IS the status quo, a free and open Internet.

Today, if a broadband customer does not approve of the way an ISP manages Web traffic, he can readily switch to a competitor more to his liking. ISPs have an enormous financial incentive to retain existing customers and attract new ones, so the free market encourages best practices.

Tell that to Canadians who are enduring not only Internet Overcharging schemes like usage caps and consumption billing, but also throttled speeds that artificially reduce (by up to 99%) the advertised speed for certain applications, all for “good network management.”  Don’t like the throttle from Bell on your DSL line?  Switch to Rogers Cable and get more of exactly the same thing.  A free market cannot truly exist from the monopoly most rural residents face for broadband, and the duopoly most of the rest of us endure.  The current market doesn’t encourage “best practices;” it encourages informal collusion by providers who learn not to rock the boat, especially on competitive pricing.

ISPs have an enormous financial incentive to find ways to increase profits, which is precisely what Internet Overcharging is all about.

But under HR 3458, if a broadband customer is not satisfied, what near-instant recourse will he have? None after government forces every ISP to operate “equally” by replacing market-based incentives with bureaucratic mandates. This would ensure an inevitable slide to “equally” shoddy service.

One would assume a provider would want to make their service as robust and up to date as possible, yet in a world without codified Net Neutrality protections — the free market at work under today’s reality — we’re seeing continued evidence of price increases and a decline in investment in networks, and some providers continue to drag their feet on upgrades.  The only market based incentive at work here is the demand from Wall Street for greater revenue and return from providers, who face challenging times in their video and telephone businesses, but can always leverage the success of the broadband division.  Broadband continues to maintain customer loyalty, and the potential for greater return from price increases and forcing costs down by limiting service.

Net neutrality advocates want the government, not “the public,” to control the fate of the Internet. The ordered chaos of market forces may scare those who don’t understand it. But the market is efficient, quickly responsive to the needs and wants of consumers, and—in the proper sense of the word—free.

Actually, Net Neutrality advocates want the government to protect the “chaos” of the online world as it exists today.  Those who want to “organize” or “order” the online world aren’t Net Neutrality advocates, they are providers who don’t want people using “my pipes for free,” or cable interests who want to “organize” online video around a model they own and control, or who simply want to throw a Money Party by inventing new ways to charge people more money for exactly the same service they get today.

The claim that the market is “quickly responsive” to the needs and wants of consumers is demonstrably false for any consumer living in Wilson or Salisbury, North Carolina, where a duopoly of providers refused to provide the level of broadband service consumers and small business clamored for, so local municipalities finally threw up their hands and decided to build networks themselves.  Residents of Rochester, New York are threatened with a broadband backwater because the incumbent telephone company Frontier Communications has shown little interest in providing a fiber optic based 21st century broadband platform similar to one being constructed in virtually every other city of size in New York.  Customers even signed petitions begging Verizon to overbuild the Flower City to provide the service Frontier will not.

In April, Time Warner Cable “responded to the needs and wants of consumers” by attempting to ram an Internet Overcharging experiment down the throats of customers in four American cities, where not one consumer either needed or wanted such massive price increases.  Over a period of weeks, this provider did everything but respond to customer needs, until a wholesale consumer revolt erupted and Congress intervened.

The free market is working well for groups like FreedomWorks and The Heartland Institute, who enjoy healthy support from the telecommunications industry.  In return, finding where the telecommunications industry positions end and FreedomWorks’ positions begin is like staring into a mirror and trying to ascertain the differences between the reflection and yourself.