Phillip Dampier

While tech fans in Kansas City rejoice over 1Gbps broadband for $70 a month, the average broadband user will think long and hard about the prospect of paying $840 a year for broadband at any speed.

That is why Google Fiber-delivered broadband in and of itself is not a cable/phone company-killing proposition.

We too easily forget our friends and neighbors that seem clueless satisfied with their 3Mbps DSL account from AT&T that they were sold with a phone line package for around $60 a month. Web pages slow to load and constantly-buffering multimedia? In their world, that means “the Internet is slow today,” not their provider.

Phone and cable companies have the internal studies to back up their claims that price matters… a lot. Those who treat the Internet as a useful, but not indispensable part of their life are going to be a tough sell at $70 a month. In fact, it is my prediction many future income-challenged and older customers will splurge on Google’s free-after-paying-for-installation 5Mbps service, satisfied that speed is currently “good enough” for the web browsing, e-mail, and occasional web video they watch on their home computer.

That is why Google was smart to offer the ultimate in “budget Internet.” Free after the $300 installation fee (thank goodness for the interest-free budget $25 payment plan) is far better than $20-25 a month for 1-3Mbps service many cable and phone companies offer their “light users.” It also brings Google’s fiber into the customer’s home, a perfect way to up-sell them later or offer other services down the road.

But the smartest move of all was Google’s very-familiar quasi-triple play package price point — $120 for broadband and television service (they really should bundle Google Voice into the package and cover the phone component for those who still want it). With the phone and cable company charging upwards of that amount already for after-promotion triple-play service, the sticker shock disappears. It’s no longer $70 for broadband, it’s $120 for everything. That is a much easier sell for the non-broadband-obsessed.

It also provides Google a critically-important broadband platform to roll out other services, including those that will appeal to customers who don’t have the first clue what a megabit or gigabit is all about. They don’t really care — they just want it to work and deliver the services they want to use hassle-free.

For Google Fiber to prove a profitable proposition, the search engine giant has to:

• Find a way to manage the huge infrastructure and installation costs, especially bringing fiber lines to individual homes. Middle-mile networks with fiber cables that string down major roadways, but ultimately never connect to individual homes and businesses are far less expensive than providing retail service. Google’s $300 installation fee is steep, but manageable with payments and even better when customers commit to a multi-year contract to waive it;
• Offer the services customers want. An incomplete cable television package can be a deal-breaker for many customers who demand certain sports or movie channels. Although younger customers may not care a bit about cable television service, they also may not be able to afford the $70 broadband-only price. Google will need to attract families, and most of them still subscribe to cable, satellite, or telco TV. They are also the most grounded customers, an attractive proposition for a company dealing with high infrastructure expenses that will take years to pay off. It’s harder to cover your costs selling to a customer still in school and likely to move after they graduate in a few years;
• Sell customers on the hassle and inconvenience of throwing out the incumbent provider in favor of fiber, which will require considerable rewiring. It is one thing to express dissatisfaction with the local cable or phone company, it is another to take a day off from work to return old equipment and have unfamiliar installers in your home to provision fiber service. Some don’t want the hassle or lost time, others won’t switch until they get around to cleaning their messy house or apartment before they invite Google inside;
• Deliver an excellent customer service experience. Google’s current level of support for its web-based services would never be tolerated by a paying broadband/cable customer. Google will have to learn as they go in Kansas City, but first impressions can mean a lot;
• Expansion to get economy of scale. It is highly likely Google Fiber is a marketplace experiment for the company, and one it will study for a long time before it decides where to go next. Google’s “beta” projects are legendary and long, and if their fiber experiment does prove successful (or at least potentially so), the company will need to expand it rapidly to enjoy the kinds of vendor discounts a super-player can negotiate.

Verizon FiOS is the largest fiber to the home network in the United States. Their “take rate” of customers willing to sign up for the service has not exactly put incumbent cable companies into bankruptcy, even with $300-500 reward debit rebate cards and ultra-cheap introductory rates. Motivating subscribers to switch has never been as successful as theory might suggest. But Verizon has also shown other providers they can hard-negotiate significant discounts on hardware and equipment, and price cutting sessions have become ruthless.

At least Google has set its targets at reasonable levels. Only between 5-25% of eligible families have to commit to signing up for service in each “fiberhood” for Google to proceed with service rollout in that immediate area. That’s a realistic target with all of the factors necessary to deem the project a success.

Four of the nation’s largest phone companies — two former Baby Bells, two independents — have very different ideas about solving the rural broadband problem in the country. Which company serves your area could make all the difference between having basic DSL service or nothing at all.

Some blame Wall Street for the problem, others criticize the leadership at companies that only see dollars, not solutions. Some attack the federal government for interfering in the natural order of the private market, and some even hold rural residents at fault for expecting too much while choosing to live out in the country.

This four-part series will examine the attitudes of the four largest phone companies you may be doing business with in your small town.

Today: Frontier — “Rightsizing” Our Broadband Revenue in Barely-Competitive Markets, Even When It Costs Us Customers

“We have been very disciplined with our [data] pricing and really trying to make sure that we are moving the prices up in a right direction and looking at customers who are paying way below where they should be,” Donald R. Shassian, chief financial officer and executive vice president of Frontier Communications told investors on a conference call earlier this month. “They are not a valued customer. If we can’t get them up, we are sort of letting them disconnect off, if you would, and it’s enabling us to be more disciplined.”

That “direction” has meant higher bills for some long-standing customers that suddenly lost discounts or service credits. One common example is Frontier’s mandatory broadband modem rental fee, increasingly turning up on customer bills even though they own their own equipment or had previously arranged a fee waiver. Ex-Verizon customers were particularly hard hit when Frontier switched to its own billing platform. Just about every customer has also been impacted by Frontier’s “junk fees,” including company surcharges that effectively raise the price of the service.

As a result of higher pricing and dissatisfaction with the quality of service, some customers have disconnected, and the company recently reported second quarter profits were down 44%, offset by slightly higher earnings from higher bills.

The New Frontier

Frontier Communications has enormously expanded its reach over the past few years. Frontier’s original “legacy” service areas were dwarfed in 2010 by the company’s acquisition of 4.8 million landlines from Verizon Communications.

Frontier’s Combined Service Map — Areas in red are “legacy” Frontier service areas. Those in blue were acquired in 2010 from Verizon. (click to enlarge)

Frontier roughly tripled in size as a result, and the huge spike in customers delivered four straight quarters of triple-digit revenue growth. But the transition for ex-Verizon customers has not been easy. Customers endured billing errors, service plan confusion, and service quality issues as Frontier got up to speed managing Verizon’s landline network. A significant number of those customers have had enough and are switching to other providers.

West Virginia is the best place to study the contrast between Frontier’s failures and successes. A large number of service problems and lengthy outages plagued the state after Frontier took charge of a landline network Verizon treated as an afterthought. Over at least a decade, Verizon allowed its landline network to deteriorate to abysmal condition in several areas of the state. Little was invested to upgrade service, and Verizon ultimately left West Virginia with one of the lowest national broadband service penetration rates — about 60 percent.

Verizon’s priorities were elsewhere: spend millions on FiOS fiber upgrades in larger, urban markets while letting rural landline networks stagnate. Eventually, Verizon’s management team decided it was no longer worth hanging on to these low priority service areas and began selling them off. FairPoint Communications acquired Verizon customers in northern New England and Frontier bought mostly rural midwestern and western territories long struck from Verizon’s priority list.

Wilderotter

Frontier’s key argument for acquiring Verizon landlines was that the company could bank on deploying broadband to a much larger percentage of customers than Verizon ever bothered to serve.

Frontier places a very high priority on broadband, because the company can significantly boost the average revenue it earns from each customer by providing the service. With Frontier often the only home broadband choice around in its most rural markets, the company can charge whatever it wants for DSL service, tempered only by how much customers can afford to pay. Broadband is also a proven customer-keeper, an important consideration for any company facing ongoing losses from customers dumping landlines for cell phones.

Since its acquisition, Frontier has been aggressively deploying rural broadband in the former Verizon territories — typically the cheapest form it can deliver — 1-3Mbps ADSL service. Frontier considers its legacy service areas already well-covered, claiming around 93 percent of customers can already subscribe to Frontier DSL.

In states like West Virginia, the fact anyone is supplying anything resembling broadband has been well-received by those who have never had the service before. But where competition exists, Frontier has been losing ground (and customers) as cable competitors provide more consistent, higher speeds and quality of service.

The frustration is especially acute in the Mountain State. Steve Andrews, a Beckley resident complained, “This company’s idea of broadband access is up to 3Mbps DSL while nearby states like Virginia and Pennsylvania are getting fiber or cable broadband speeds ten times faster.” Andrews added that on most days his Frontier-provided broadband provides only around 800kbps, not the advertised 3Mbps.

Frontier Admits It Uses Government (Your) Money to Expand Broadband Where It Would Have Expanded Service on Its Own… Eventually

Frontier Communications was by far the most enthusiastic participant in the Federal Communications Commission’s Connect America Fund (CAF). This subsidy program currently covers $775 of the cost to extend broadband service to a currently unserved customer. Frontier agreed to accept nearly $72 million from the program, which commits the company to offering at least 4Mbps broadband service to an additional 92,877 homes and businesses around the country.

But Maggie Wilderotter, CEO of Frontier Communications, admitted Frontier would have eventually spent its own money to extend service to those rural customers without a subsidy:

“Get broadband out faster to a bunch of customers that we would have built anyway, at some point in time. And it also accomplishes the objectives of using the funds that are available from the FCC. We actually could have taken more money…. So we felt good about it. We totally understand why the other carriers made the decisions they made because we didn’t — we’re not building anything on our legacy markets. So it’s the money. It’s all in the acquired properties where we still had pretty low penetration with enough density to support the parameters that the FCC put in place.”

The fund, paid for by telephone customers nationwide through a surcharge on customer bills, will also subsidize a lucrative business opportunity for Frontier, according to Wilderotter.

“These are unserved locations that really are not competitive at all,” Wilderotter told investors. “So there’s no competition in those areas. So we’re pretty excited about it. We think that this is going to be good for Frontier and good overall.”

More than $38 million of the total broadband subsidy Frontier received will be spent in 30 counties in just one state: Wisconsin. Among other locations where Frontier will spend the money:

• 1 Arizona county
• 2 California counties
• 1 Florida county
• 5 Idaho counties
• 25 Illinois counties
• 2 Indiana counties
• 26 Michigan counties
• 2 Nevada counties
• 8 New York counties
• 1 North Carolina county
• 8 Ohio counties
• 5 Oregon counties
• 2 Tennessee counties
• 7 Washington counties
• 25 West Virginia counties

Trying to Hang Onto Customers Frontier Already Has… With Serious Speed Boosts

Frontier’s speed plans through 2013.

One of the loudest and most consistent complaints Frontier broadband customers mention is the slow speeds they receive from Frontier’s DSL. Frontier traditionally offers 1-3Mbps in rural areas, up to 10Mbps in urban areas. But in fact many customers report their speeds are much lower than advertised. Data from the FCC’s national broadband speed measurement program bears this out. Frontier was the only measured provider in the United States that has been losing ground in promised broadband speed and performance.

Frontier officials announced earlier this month the company was shifting some of its capital investments away from broadband expansion towards improving the performance of its broadband service for current customers.

In highly competitive, urban markets Frontier will deploy VDSL2 technology which can support significantly faster and more reliable Internet speeds. In more rural markets, bonded ADSL 2+ will deliver speeds of 10Mbps or better to customers currently stuck with around 1-2Mbps speed.

Daniel J. McCarthy, president and chief operating officer:

• We expect our 20Mbps service to move from 28% of residential households today to 42% by year-end and then 52% by the end of 2013;
• The 12Mbps services planned to increase from 33% of homes today to 51% by year-end and 60% by 2013;
• And the 6Mbps service is planned to increase from 57% of homes today to 74% by year-end and 80% by 2013.

The new speeds will not come free of charge. Customers will be marketed speed upgrades for additional monthly fees.

Customers will also discover Frontier has been simplifying its packages and moving away from high-value promotional offers that bundled a free laptop, television, or satellite dish in return for a lengthy contract. Today, the company is emphasizing increasing discounts for customers subscribing to two or more services that include telephone/long distance, broadband, and satellite television.

Speeds Going Up, Employees (and their salaries) Going Down

Finally, Frontier executives told investors they are scouring the company looking for cost savings. They appear to have identified around $100 million worth, a good portion of which will come from employees facing job cuts or salary reductions.

Wilderotter said she is focusing on call center workers, retiree positions, and “tech op” savings.

“We still have some bubble workforce in the call centers that will continue to go away,” Wilderotter told Wall Street. “We have a number of employees, too, that are going to be retiring over these next several months. And our goal is not to replace any of those retirees either.”

One of the best examples of this cost savings, according to unions representing Frontier employees, is the forthcoming closure of an Idaho-based call center in Coeur d’Alene. More than 100 workers, average age 55, will lose their $15-21/hour jobs Sept. 18 while Frontier prepares to leverage cheaper labor in South Carolina.

Frontier’s new call center employees in Myrtle Beach will receive $11 an hour while training, $12/hour after training — with a five year wage freeze. Benefits will be considerably leaner for South Carolina employees as well, according to union officials.

America’s worst-rated cable company is facing an apparent customer backlash on two fronts — its introduction of usage caps and at least one disgruntled unidentified citizen who mailed Mediacom a white powdery substance that forced a temporary closure of one hospital and left two Mediacom employees and two Washington County, N.C. sheriff’s deputies quarantined Wednesday.

Deputies launched an investigation after Mediacom employees handled and opened a plain envelope that was found to contain an unknown substance. Employees unintentionally exposed two sheriff’s deputies to the material after they responded to the incident. As a precaution, Mediacom’s Plymouth office was evacuated and both employees and police were decontaminated in an area hospital also placed on lockdown.

All are reportedly doing fine and the unknown substance was sent to Raleigh for further examination. Authorities won’t release further details about the envelope or its contents as the investigation is ongoing, but did say the substance turned out not to be harmful.

Earlier this month the cable company announced it was introducing variable usage caps for customers who either add or change broadband services after August 1. Current customers will be grandfathered under Mediacom’s informally uncapped usage plans, but cannot make changes to their packages without choosing one of several new usage-limited plans. (Thanks to Stop the Cap! reader Curt for sending along the details.)

The caps range from 150GB for Mediacom’s lightest-use plan Launch, which offers 3Mbps downstream, 250GB for the popular 15/1Mbps Prime plan, to 999GB for the company’s 50/5 Ultra and 105/10Mbps Ultra Plus plans.

A Mediacom representative explained the company’s reasons for the usage caps:

“We’ve implemented the usage allowances to ensure we can deliver on our promise of Always Faster Internet,” said “Chad” — from Mediacom Social Media Relations in Gulf Breeze, Fla. “In reality, only 2% of our users exceed our usage allowances. This 2% can use over 19 times what the average household would use, and this can dramatically impact the service you experience in your home. It could cause us to raise our rates for everyone, just to accommodate the excessive use of a few.”

Unfortunately, not every Mediacom customer currently has access to a company-developed usage measurement tool. If a customer exceeds their limit, Mediacom will charge a flat $10 for every 50GB segment over that amount.

Mediacom’s need to implement usage caps is open to debate, however.

The company’s latest 10-Q report filed with the Securities & Exchange Commission, Mediacom admits it has already increased rates for its broadband customers – heavy users and otherwise. At the same time, Mediacom admits its costs to operate its broadband service have dropped 18.7%, principally due to lower connectivity costs.

In fact, the largest costs Mediacom faced included:

• Field operating costs, which grew 13.7% as the company increasingly relies on outside, third-party contractors;
• Marketing costs increased 13.8% to pay for the company’s rebranding, junk mail marketing, and advertising;
• Employee costs increased 23.5%, primarily to beef up its marketing and direct sales to potential business customers.

Nothing in Mediacom’s required declarations to the SEC show any impact by so-called “heavy users” on its broadband service costs or revenues. If they represented any potential threat to the company’s value to investors, disclosure as a “risk factor” is required by law.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WNCT Jacksonville Investigation continues following Mediacom Powder 8-8-12.flv[/flv]

WNCT in Jacksonville, N.C. covers a potential anthrax scare when an unidentified person mailed a plain envelope to Mediacom in Plymouth containing a white, powdery substance.  (2 minutes)

Otero

When a former labor leader suddenly starts advocating for the interests of AT&T and other super-sized telecommunications companies, even as AT&T’s unionized work force prepared to strike, the smell of Big Telecom money and influence permeates the air.

Jack Otero, identified in the Des Moines Register as “a former member of the AFL-CIO Executive Council and past national president of the AFL-CIO’s Labor Council for Latin American Advancement,” penned a particularly suspicious love letter to deregulation that might as well have been written by AT&T’s director of government relations:

[…]Industries — like broadband Internet — are thriving and creating innovations. Tossing a regulatory grenade into these businesses could wreck markets that create value for consumers and jobs for workers.

The United States is one of the most wired nations in the world. More than 95 percent of households have access to at least one wireline broadband provider, and the vast majority can connect at speeds exceeding 100 Mbps. And monthly packages start as low as $15. That means more families can go online to improve their job skills, look for work or help the kids with their school assignments.

More choices and higher speeds — the signs of a vibrant market — are the product of private investment, not public dollars. Internet service providers have invested over $250 billion in the last four years alone. This has created roughly half a million jobs laying fiber-optic and coaxial cable.

But some squeaky wheels are demanding heavy-handed regulations that would move our broadband Internet to the European model, where taxpayers have to subsidize outdated networks with slow speeds. Some want broadband providers to be required to lease their networks to competitors at discounted prices — as they do in Europe. But lawmakers in both parties agree that this policy, tried in the 1996 Telecommunications Act, failed miserably.

Others argue that broadband Internet providers should not be able to impose a small surcharge on the tiny percentage (less than 1 percent) of consumers who download hundreds of movies and tens of thousands of songs every month — effectively the data usage of a business. They say these fees discriminate against online video companies like Netflix. But that’s silly. More than 99 percent of users can watch plenty of Apple TV or Netflix without approaching the lowest data allotment. Without tiered pricing plans, the rest of us would have to underwrite these super-users.

Okay then.

Otero’s Fantasy World of Broadband sounds great, only it does not exist for the vast majority of Americans. Are most of us able to connect at speeds exceeding 100Mbps?

If you happen to live in a community served by a publicly-owned broadband provider Otero effectively dismisses, you can almost take this fact for granted.

Some of America’s most advanced telecommunications providers are actually owned by the public they serve in dozens of communities small and large. EPB Fiber, Greenlight, Fibrant, Lafayette’s LUS Fiber, among others, deliver super-fast upload and download speeds at very reasonable prices while the giant phone and cable companies offer less service for more money.

The only major telecommunications company with a wide deployment of fiber-to-the-home service is Verizon Communications.

You cannot easily buy residential 100Mbps service from Time Warner Cable, AT&T, CenturyLink, Frontier, FairPoint, or a myriad of other telecom companies at any price, unless you purchase an obscenely expensive business account. From the rest, 100Mbps service typically sets you back $100 a month.

Otero’s quote of affordable $15 broadband is not easy to come by either. It usually requires the customer to qualify for food stamps or certain welfare programs, have a family with school-age children, a perfect payment history, and no recent record of subscribing to broadband service at the regular price.

The only people who believe America is the home of a vibrant market for broadband service are paid employees of telecom companies, paid-off politicians, or their sock-puppet friends and organizations who more often than not receive substantial contributions from phone or cable companies. The fact is, the United States endures a home broadband duopoly in most communities — one cable and one phone company. They charge roughly the same rates for a level of service that Europe and Asia left behind years ago. Broadband prices keep going up here, going down there.

Simply put, Mr. Otero and actual reality have yet to meet. Consider his nonsensical diatribe about the impact of the “heavy-handed” 1996 Telecommunications Act, actually a festival of mindless deregulation that resulted in sweeping consolidation in the telecommunications and broadcasting business and higher prices for consumers.

Otero is upset that big companies like AT&T and Verizon originally had to open up their networks in the early 1990s to independent Internet Service Providers who purchased wholesale access at fair (yet profitable) prices. Those fledgling ISPs developed and marketed third-party Internet service based on those open network rates. Remember the days when you could choose your ISP from a whole host of providers? In some markets, this tradition carried forward with DSL service, but for most it would not last.

The telecommunications industry managed to successfully lobby the government and federal regulators to change the rules. Phone companies did not appreciate the fact they had to open their networks for fair access while cable operators did not. So in 2005, the FCC allowed both to control their broadband networks like third world despots. Competitors were effectively not allowed. Wholesale access, where available, was priced at rates that usually guaranteed few ISPs would ever undercut the cable or phone company’s own broadband product.

The lawmakers who believed open networks represented awful policy were almost entirely corporate-friendly or recipients of enormous campaign contributions from the telecom companies themselves.

So which market is actually on the road to failure?

The LCLAA couldn’t do enough to help AT&T swallow up competitor T-Mobile USA.

The American broadband business model is a firmly established duopoly that charges some of the world’s highest prices and has rapidly fallen behind those “failures” in Europe.

In the United Kingdom, BT — the national phone company, is required to sell access at the wholesale rates Otero dismisses as bad policy. As a result, UK consumers have a greater choice of service providers, and at speeds that are increasingly outpacing the United States. Nationally backed fiber to the home networks in eastern Europe and the Baltic states have already blown past the average speeds Americans can affordably buy from the cable company.

Even Canada requires Bell, the dominant phone company, to open its network to independent ISPs selling DSL service. Without this, Canadians would rarely have a chance to find a service provider offering unlimited, flat rate service.

Otero’s final, and most-tired argument is that data caps force “average” users to subsidize “heavy” users. In fact, as Stop the Cap! reported this week, that fallacy can be safely flushed away when you consider the largest ISPs pay, on average, just $1 per month per subscriber for usage, and that price is dropping fast. The only thing being subsidized here is the telecom “dollar-a-holler” fund, paid to various mouthpiece organizations who deliver the industry’s talking points without looking too obvious.

The Des Moines Register omitted the rest of Mr. Otero’s industry connections. We’re always here to help at Stop the Cap!, so here is what the newspaper forgot:

• Mr. Otero is a board member of Directors of the U.S. Hispanic Leadership Institute (USHLI), a group funded in part by AT&T and Verizon;
• He is the past president of the Labor Council for Latin American Advancement, a group that enthusiastically supported the anti-competitive merger of AT&T and T-Mobile USA;

Mr. Otero has a side hobby of penning nearly identical editorials with largely these same broadband talking points. One wonders what might motivate him into writing letters to the Des Moines Register, the Lexington Herald-Leader, the Gainesville Sun, the Star-Banner, and the Ledger-Inquirer.

Otero may have a case for plagiarism, if he chooses to pursue it, against Mr. Roger Campos, president of the Minority Business RoundTable (the top cable lobbyist, the National Cable & Telecommunications Association is labeled an MBRT “strategic partner” on their website). Campos uses some of the exact same talking points in his own “roundtable” of letters to the editor sent to newspapers all over the place, including the Ventura County Star, the Leaf Chronicle, and the Daily Herald.

An Australian Internet Service Provider that caps customer usage and charges extra if you want to exceed your allowance has taken to the company’s blog to argue that usage caps are fair, even as their customers start departing for competitors offering unlimited service.

iiNet chief technology officer John Lindsay defends the company’s usage-based billing scheme, which charges more than $30 a month for DSL service with a 20GB usage cap.

“Service providers in favour of a two-speed Internet argue that there is limited capacity on the Internet and that those using the most bandwidth by delivering rich content or transferring large files should pay more,” wrote Lindsay. “In Australia, we have a different business model for the Internet. ISPs operate on a pay-as-you-go model, which also shapes the consumer market. Here, consumers can choose a plan with upload and download quotas to fit their usage and pay according to their needs – the more you use, the more you pay.”

Lindsay

Unfortunately for Lindsay, an increasing number of Australians don’t agree and are switching to providers like TPG and Dodo, which have become enormously popular selling flat rate, unlimited broadband service.

Lindsay warns that if Australia adopts the flat rate service model popular in the United States, a Net Neutrality debate will be sparked as customers discover ISPs are unable to handle the traffic and start prioritizing their own content.

“Operating a quota based business model ensures we’re not responsible for policing activity online – our customers pay a fair price for the services they receive and we can focus on more important issues than where their traffic is coming from,” Lindsay argues. “While US providers argue about a two-tier system, our priority is to provide awesome customer service and ensure our customers enjoy a seamless experience online, whatever it is their Internet connection means to them.”

Of course, Lindsay’s characterization of the American broadband landscape is fact-challenged, because most broadband providers have plenty of capacity to deliver content. Some simply want to earn a new revenue stream from content producers for managing that traffic, even though paying customers already compensate them for that service.

Australia’s data caps have traditionally been onerous because of the higher costs and limited capacity of underseas cables that handle traffic inside and out of the Pacific Basin. But Australians have complained about the low caps for years — so loudly that the Australian government has made construction of a super-capacity fiber to the home network a national priority for the country as international capacity also increases.

Customers were not fooled by Lindsay’s rhetoric.

“This is nonsense,” wrote Lachlan Hunt. “Australia’s model of capped usage limits with higher prices for higher caps, and of ISPs including yourself offering free zones where such data doesn’t count towards the monthly quota is exactly the problem that Net Neutrality advocates aim to deal with. It treats data from companies who choose to partner with you to get their content in the free zone as privileged compared with everyone else, and similarly with other ISPs.”

Hunt complains iiNet’s caps were “ridiculously low” and interfered with his career in the web development industry. Today he lives and works in Europe, where usage caps are increasingly a thing of the past.

“I’m really hoping that you will eventually wake up and realize that usage caps go together with Non-Neutral internet, and with the introduction of the [national fiber to the home network], which brings both higher speeds and capacities, you should be able to lower prices, abolish usage caps and offer a fair model with pricing tiers based on the chosen speeds.”

Stop the Cap! also addressed Lindsay:

[…] We have learned dealing with this issue for several years that ISPs are terrified of their own argument if carried to its fullest extension. If iiNet wants customers to fairly pay for only what they use, they should be billing them on exactly that basis. A flat charge per gigabyte — no allowances/quotas, no penalty overage fees or speed throttles, no wasted, unused quota at the end of the month.

But they don’t dare. If you charged $1/GB (still a crime-gouge compared to the wholesale price), those customers currently paying $30 for up to 20GB service might suddenly be paying $5-15 instead.

[…] If you asked your customers whether they prefer unlimited service or your current cap system, most will clamor for unlimited, even if it costs them a bit more, just for the peace of mind of never facing overage charges or speed throttles.

This argument has never been about capacity. It’s about what it always is about: money.