Phillip Dampier

I could spend all day refuting sloppy ‘accepted as true with no fact-checking’-reporting done by news organizations on the issue of Internet Overcharging.  Facts not in evidence:

• Assumptions that what is “fair” in wireless must be fair on wired networks;
• Everyone is doing it around the world so North America should do the same;
• People are not paying “their fair share” for the growing amount of usage.

It’s all a big bucket of wrong, and the only thing getting rolled over month after month are consumers.

Yesterday, it was GigaOM telling us “Comcast DSL” (?) had no usage caps at all.  (They do — 250GB per month, and they sell cable broadband, not landline DSL.)

Today, it’s ComputerWorld‘s Matt Hamblen, who blows it right in the first paragraph:

Data caps on nearly all wireless and wired networks in the U.S. seem likely to be in place soon, despite the latest unlimited data offers from Verizon Wireless and Sprint.

Impressive crystal ball gazing there.  Nearly all networks will be capped?  Even though Sprint is banking its near-future on selling unlimited use plans and the economics of wireless are considerably different than wired broadband, Hamblen boldly predicts near-universal usage caps, even as most providers have no formal caps at all.

Hamblen’s journey starts with a survey of capped broadband offerings on the wireless side.  Spectrum issues and the nature of wireless technology makes providing unlimited use plans more challenging, especially when users consider their mobile broadband service a home broadband replacement.  Some have even left peer-to-peer software running in the background 24 hours a day.  It was this, according to Clearwire, that did in that provider’s unlimited service, which is now heavily speed-throttled in many areas.

Stop the Cap! has argued repeatedly current generation wireless broadband will never be a suitable replacement for traditional wired broadband, unless your use is confined to web browsing, e-mail, and occasional multimedia.  The capacity isn’t there and the technology is susceptible to serious speed loss in congested areas.  That is not to say future wireless technology might not change this reality.  The political debate over re-purposing unused UHF television channel frequencies for wireless broadband is just getting underway in Washington.

But trying to draw arguments from the wireless world for usage caps across wired broadband networks is where the line ends.

Hamblen predicts because AT&T wants to gouge its wired broadband customers (many who are now cancelling service and heading back to the cable company, when possible), now everyone will be going to the Internet Overcharging party:

Data caps on both wired and wireless customers are widespread, even if they annoy some smartphone early adopters in the U.S. Ars Technica listed the policies of 11 different wired network data caps for several different countries.

Hamblen’s report isn’t simply false — it’s sloppy.  Wired broadband usage limits are not widespread in the United States, and despite Ars Technica‘s sampler, the trend globally is away from usage-capped wired broadband, not towards it.  Evidently Hamblen didn’t bother to read Matthew Lasar’s piece, which includes references to BT in the United Kingdom moving towards unlimited use service in the near future, Canadian consumers’ victories against usage-based billing preserving unlimited use plans from resellers, and Australia’s own ever-increasing usage allowances.

In fact, even Lasar missed the fact several Australian ISPs now sell unlimited use plans themselves — something unheard of just a few years ago.  As in Britain, some users who consume over 300GB in a month may find their speeds reduced at peak usage times, but only until capacity improvements allow the throttles to be removed.  Even South Africa, one of the most challenging places to deliver 21st century broadband, has providers delivering unlimited use service.

Hamblen then moves on to another inaccurate argument — consumers will simply reserve their high bandwidth downloads on smartphones for the office Wi-Fi network, that will also face usage caps.

Except virtually every usage cap that does pop up in the United States applies to residential accounts only.  Commercial accounts are exempt, as are the Wi-Fi networks powered by them, especially for cable broadband-based service that is increasingly popular with small and medium sized companies.

Although Wall Street wants usage caps and regularly says they are inevitable, that does not make them reality.  Consumers certainly do not want them and will cancel service with a provider if an uncapped alternative exists.  While certain providers, their backers on Wall Street, and some dollar-a-holler groups defending them all have a financial interest in pushing memes about Internet Overcharging, members of the media should not.

Lynch

Verizon’s ambitions to provide 285 million people with the option of ditching their cable or DSL broadband account for its new LTE/4G wireless network is a dream that will never come true with the company’s wireless Internet Overcharging schemes.  With a usage cap of 5-10GB per month and a premium price, only the most casual user is going to give up their landline cable or DSL service for Verizon’s wireless alternative.

Dick Lynch, executive vice president and chief technology officer at Verizon spoke highly of Verizon’s new next generation wireless network as a perfect platform to deliver broadband service to landline customers, including many of those the company sold off to Hawaiian Telcom, FairPoint Communications, or Frontier.

“[LTE] provides a real opportunity for the first time to give a fixed customer in a home, broadband service — wireless — but broadband service,” Lynch said. “In wireless, I see a great opportunity within the LTE plans we have to begin to service the customers who don’t have broadband today … They will be able to have mobile LTE and also to be able to have fixed broadband.”

Unfortunately, Verizon’s LTE network comes with usage limits and a premium price — $50 a month for 5GB or $80 a month for 10GB.  At those prices, rural America will have two bad choices — super slow 1-3Mbps DSL ($30-60) with allowances ranging from 100GB-unlimited or LTE’s 5-12Mbps (assuming the local cell tower is not overloaded with users) with a usage cap that guarantees online video will come at a per-view cost rivaling a matinee movie ticket.

Still, Verizon is likely to test market the service as a home broadband replacement, particularly in territories they no longer serve.  Verizon has done much the same thing pitching a home phone replacement product that works with their wireless network to residents of Rochester, N.Y., and the state of Connecticut, neither currently served with landlines from Verizon.

Despite the pricing and cap challenges, Deutsche Bank — one of the Wall Street players that follows Verizon — thinks the company’s DSL-replacement has merit, if:

1. If you are a regular traveler that needs a wireless broadband service anyway;
2. You use broadband exclusively for web browsing, e-mail, and very occasional multimedia access;
3. You are wealthy enough not to care about the overlimit penalty.

For everyone else, sticking with traditional DSL service will continue to be the most affordable option, assuming usage caps are kept at bay.  Where available, cable broadband service from companies that serve smaller communities, including Comcast Cable, Time Warner Cable, and Cablevision, among others, will probably continue to deliver the most bang for the buck in rural America.

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Party time in Kansas City, Kansas

Kansas City, Kansas is creating some jealousy across the river in the much larger Kansas City, Missouri in reaction to Google’s announcement yesterday that it was bringing its 1 gigabit per second fiber to the home network to KCK.

Local bloggers called Google’s announcement “a game changer” for the city’s software developers and health care providers, who represent a large part of the city’s high tech economy. The announcement also thrilled local schools and universities, who will be able to deliver broadband service that rivals world leader South Korea in as little as one year from today.

Speculation about why Google chose the Kansas-based suburb of Kansas City has been rampant.  Among the biggest theories is that the local utilities, with whom Google must negotiate for space to accommodate its fiber cables, are owned by the local municipality, not private corporations.  With local government officials eager to cut red tape and avoid political or economic minefields which could delay the project, having public utilities as a partner may have made a decisive difference in the final decision.

The 'Kansas City' in the smaller type represents the Kansas suburb of the much larger Kansas City, Mo.

Demographics experts suggest Google might have chosen KCK because it represents classic middle-America with a growing digital economy — a perfect laboratory to watch what comes from ultra high speed Internet access.

The presentation by Google rivaled a glowing Hollywood production, one TV news team remarked.  Live-streamed on the web to a global audience, company officials vaguely promised the choice of KCK was the beginning of a potentially broader fiber network not just limited to a single Kansas city, although company officials seemed to restrain themselves out in the parking after the event, suggesting the network could be expanded regionally, saying nothing about other cities further afield.

Local newscasts told the Google story to Kansas City viewers in varying degrees of intensity, often relegated to pointless outdoor live stand up shots scattered around the city.  There isn’t much to show for a network that exists only in the form of a website.

A Silicon Valley expert echoed the sentiment that faster broadband can bring dramatic development to the communities that have it, sometimes in surprising ways.  It’s less about what one can do with 1Gbps service today and more about the possibilities for tomorrow.  But CNBC’s Jon Fortt added some applications may have only limited national appeal if the rest of the country lives with slower broadband service than cannot support the latest online innovations.

Still, excitement is easy to find among the journalists, local politicians, and other community members across the range of local news coverage.

It brings to mind just how ironic it is that a city like KCK will soon have some of the fastest broadband connections in the country while states like North Carolina are on the cusp of enacting legislation that will guarantee they will never be a part of the transformative broadband revolution — at least those who don’t live in Wilson or Salisbury.  Every member of the legislature in that state should watch and learn.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/KSHB Kansas City Google to KCK 3-30-11.flv[/flv]

KSHB-TV Kansas City’s NBC station devoted the most time to Google’s arrival, including a special interview by satellite with CNBC reporter Jon Fortt, discussing the implications of 1Gbps broadband for KCK.  (11 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KCTV Kansas City Google to KCK 3-30-11.flv[/flv]

KCTV-TV Kansas City’s CBS affiliate spent more than five minutes in their newscast covering Google’s gigabit network, including interviews with a local blogger and health care expert.  (7 minutes)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/WDAF Kansas City Google to KCK 3-30-11.flv[/flv]

WDAF-TV, the Fox station for Kansas City, emphasized what Google will do for area students in bringing faster, more reliable broadband to the region.  (7 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KMBC Kansas City Google to KCK 3-30-11.flv[/flv]

KMBC-TV, Kansas City’s ABC station, tries to explain what 1Gbps broadband represents with a water faucet.  The station’s coverage continues with the impact fiber broadband will have on local health care.  (4 minutes)

Phillip Dampier

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

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

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

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

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

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

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

CartelCountry Broadband & TV

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

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

• Payment Due: $10.95

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

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

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