Phillip "I've heard this all somewhere before" Dampier

Shaw Communications today suspended its Internet Overcharging scheme as Canada’s firestorm over Internet Overcharging continues.  Western Canada’s largest cable company is taking a page from Time Warner Cable’s 2009 failed playbook and promising a ‘listening tour’ to “hear the views” of their customers on the subject of usage-based billing.

Evidently, the half-million Canadians signing Openmedia’s petition rejecting this kind of pillage pricing out of hand isn’t sufficient, nor are polls showing overwhelming opposition to the end of flat rate usage plans in the country.  So in a bold PR move, Shaw is throwing the doors open to listen to their customers.*

It’s all just wonderful….  Hey, wait a minute.  Is that a speck on my monitor?  What is that spot at the end of the sentence up there?

Uh oh, it’s an asterisk.  I’d better scroll down to find out what that is all about:

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Are you still with me?  We’re on a tour of our own….

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This part of the tour is brought to you by Shaw.

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(*- If you want to be involved in the discussions, which are being held face to face – then you’ll need to email [email protected] to ask for an invite.  Use “Please send me an invitation to attend the Internet usage discussion” as the subject line.)

Oh.  You have to be “invited” to attend.  Because I need permission to speak my mind about Shaw’s overcharging schemes.

Yes folks, it’s all very reminiscent of the Tweeting Trio at TWC back in 2009, who promised us they’d value our feedback, right up until we learned they deleted it, unread.

It’s really quite simple.  The overwhelming majority of Shaw customers are already paying good money for the service they receive today, and they don’t want to pay a penny more.  Shaw is not hurting financially — Internet Overcharging just adds more sugar to the quarterly financial reports.

But Shaw persists in writing replies like this to those writing them on the subject:

Thank you for your interest in voicing your opinion over this controversial topic.

We will be posting a detailed signup form within the next week or so once we get venues arranged. Times will also be posted once venues are established. At this point in time though, only customers like yourself will be invited to attend. Please check back on the 14th of February (Monday) for the posted meeting dates and times. The site to visit will be: http://shaw.ca/Internet/New-Data-Usage/

In its current form, UBB has been put on hold until we can determine the more customer friendly approach to this topic. It will still be rolling out as the objectives are the same – increase overall effectiveness of the network, manage the high users, and improve overall functionality/customer experience with our products. As the current model has caused all kinds of backlash from our customer population, your input as to what would make the process amicable to you would be appreciated.

If you have any other questions or concerns, please don’t hesitate to contact us.

Cheers,

Neil – Rep 7368

eCare Team

Shaw Cablesystems GP

The “customer friendly approach” to Internet Overcharging is not to engage in it.  The “signup form” and meeting dates provide Shaw with a nice list from which to handpick those selected to attend.  What they’ll be treated to is a circus of slides showing why Shaw simply must overcharge Canadians for their Internet service.  There is no surprise why ordinary citizens have caused all kinds of backlash.  These wounds are self-inflicted.

A better idea is to set up an independent debate on the subject, say with representatives from Shaw and Openmedia.ca and let the truth prevail.  Throw the doors open to anyone who wants to attend.  If Shaw wants to really listen, let them hear.

Unfortunately, I fear Shaw is not in a listening mood, otherwise they would scrap their usage based billing schemes and deliver quality service at a fair price, no invitation required.

Bell is pulling out all the stops trying to defend its justification for Internet Overcharging through so-called usage-based billing.  In a published debate between the telecom giant and TekSavvy — a small independent ISP trying to preserve flat rate broadband service in Canada, Bell claims Canadian broadband is the third best in the world, ahead of the United States, all of Europe, and just barely trailing Japan and Korea:

At the same time, Canada has increasingly become a world leader when it comes to broadband. When it comes to actual download speeds, Canada ranks third in the G20, behind only densely populated Korea and Japan. And prices are low — in fact, for higher-speed services, lower than in both the U.S. and Japan.

Michael Geist, a popular columnist fighting against Canadian Internet Overcharging, scoffs at the notion:

I’m not sure where these claims come from – Canada does not appear in the top 10 on Akamai’s latest State of the Internet report for Internet speed and no Canadian city makes Akamai’s top 100 for peak speed. The OECD report ranks Canada well back in terms of speed and price as does the Berkman report.  The NetIndex report ranks Canada 36th in the world for residential speed. Moreover, the shift away from the OECD to the G20 has the effect of excluding many developed countries with faster and cheaper broadband than Canada (while bringing in large, developing world economies that unsurprisingly rank below Canada on these issues). While there is probably a report somewhere that validates the claim, the consensus is that Canada is not a leader.

Bell’s Magic Pony-stories are at best exaggerated and at worst, phoney-baloney from the telco’s government relations department.

Stop the Cap! compared prices across several providers and found no value for money in broadband plans from all of the country’s major phone and cable companies.  Without fail, all were heavily usage limited, most throttled broadband speeds for peer-to-peer applications, engaged in overlimit fees the credit card industry would be proud to charge, and simply were almost always behind their counterparts to the south — in the United States.  In fact, some consumers are importing their broadband from the USA when they can manage it.

“Bell can’t win the argument on the merits, so it is making things up,” writes London, Ontario resident Hugh MacDonald.  “I have had Bell DSL for years now, and there isn’t anything fast or cheap about it.”

MacDonald’s broadband service from Bell tops out at around 4Mbps.

Mirko Bibic, senior vice-president for regulatory and government affairs at Bell claims consumers have to pay more to fund infrastructure expansion, and even challenges our long-standing assertion that telephone network comparisons don’t apply:

Bell provides all our customers with the best possible Internet experience available — the result of heavy and ongoing investment to expand our network capacity both to meet fast-growing demand and to manage the congestion that threatens everyone’s Internet experience.

Internet congestion is a fact and it cannot be wished away. Network providers like Bell must, like hydro utilities, build our networks to handle the heaviest usage times, not just an average of usage over time. At 8:30 in the evening, demand is at its absolute peak. And we have to deliver based on the volume at that time.

Keeping up with growing volume obviously means these network investments are not one-time costs. Between 2006 and 2009, Internet usage more than doubled, and Bell has invested more than $8-billion in the last five years in network growth and enhancement to keep pace. Yet at the same time, the CRTC has found that the average price per gigabyte downloaded has actually declined by 20%.

That’s why the long distance analogy, so often used by those with an interest in confusing the issue, is fundamentally misleading. In the case of long distance, it’s the simple transmission of voice over long-established legacy networks.

But Bibic ignores several important facts and doesn’t disclose others:

What broadband network does not have to make regular investments to expand to meet demand?  Cable and telephone company DSL business models, in place for at least a decade, priced network expansion, infrastructure return on investment, and data transmission into pricing formulas.  While data demands are increasing, the costs to meet those demands are, as Bell openly admits, declining.

What amount of revenue and profit has been earned from selling broadband service to Canadian consumers and the wholesale market and how does that compare to the dollar amount invested?  Bell Canada’s financial report for the third quarter of 2010 shows the company will earn an estimated $3.5 billion in revenue from its broadband Internet division alone.  Bell’s capital spending numbers also include network investments for its fiber to the neighborhood service, Fibe.  Bell’s revenue from selling the video side of that service were on track to deliver an additional $1.5 billion in revenue in 2010.  Not including the enormous wholesale broadband market, Bell will earn at least $5 billion a year from its broadband division.

In fact, Bell’s financial report also openly admits much of its capital spending increases have been spent on deploying its IPTV network Fibe in Ontario and Quebec, not on Internet backbone traffic management.

What are some of Bell’s biggest risks to a happy-clappy shareholder report for investors next quarter?  To quote:

• “Our ability to implement our strategies and plans in order to produce the expected benefits;
• Our ability to continue to implement our cost reduction initiatives and contain capital intensity;
• The potential adverse effects on our Internet and wireless businesses of the significant increase in broadband demand;
• Our ability to discontinue certain traditional services as necessary to improve capital and operating efficiencies;
• Regulatory initiatives or proceedings, litigation and changes in laws or regulations.”

Bibic

As for Bell’s claims about the “long distance analogy,” it’s only slightly ironic that a telecommunications company considers today’s voice networks radically different from data networks.  Analog transmission of voice calls went the way of the telegraph around a decade ago, with the last analog, step-by-step telephone switch in North America in Nantes, Quebec switched off in late 2001.  Today, telephone traffic is digital data, no different than any other kind of data transported across the country.

Bell cannot afford to have comparisons made between the telephone company’s move towards flat rate billing for phone calls and their broadband service moving away from it, because it torpedoes their entire argument.

Bibic then argues UBB is the right way to go because… major providers already charge it:

UBB has been the established framework for Internet services in Canada for years. Bell, for example, offers standard Internet service packages ranging from 25 gigabytes up to 75 gigabytes per month. As well, customers can sign up for 40 GB more for $5 per month, 80 GB for $10 or a whopping 120 GB more for $15. Keep in mind that 120 GB will get you 600 hours of standard definition video streaming or 100 hours of HD video streaming.

Not a bad deal when you consider average usage on our network is 16 GB per month and half of our customer base uses just five GB a month.

Most Canadians don’t see the “good deal” Bell says they will get from dramatically increased broadband prices. In fact, polls reveal the only groups in Canada that support such pricing are Big Telecom executives and the CRTC.

A new Angus Reid/Toronto Star poll illustrates what we’ve found to be true wherever ripoff “usage-based” pricing appears: people despise it, no matter how much Internet they use:

In the online survey of a representative national sample of 1,024 Canadian adults, three-in-four respondents (76%) disagree with the recent decision from the Canada Radio-television Telecommunications Commission (CRTC), which set the stage to eliminate unlimited use plans.

Bibic can relax as long as the current panel of commissioners at the CRTC, largely drawn from telecommunications companies, remain in place.  They continue to agree with Bell’s point of view and ignore the citizens they are supposed to represent.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Raines Broadcasting CRTC Editorial 2-2-11.flv[/flv]

Chris Raines from Raines Broadcasting offered his take on Usage-based billing and Canada’s telecom regulator in this commentary.  Raines calls Bell, Rogers, and Shaw bad actors in Canada’s broadband marketplace, caught throttling and overcharging their customers. (3 minutes)

Have we got a deal for you!

You’ve heard all the excuses:

• Internet traffic has grown and unlimited pricing threatens to make broadband unprofitable;
• We need these pricing schemes to help pay for improved infrastructure to handle traffic;
• If we don’t adopt this pricing now, a great data tsunami — an exaflood — will wash broadband down the sink;
• It’s not fair to make light users pay for heavier users.

Despite the fact provider financial reports show a trend towards reduced spending on infrastructure, data transport costs continue to drop, and debunking of exaflood horror tales, providers persist in demands for this so-called “fairer pricing” for broadband service.

But what is fair?

As Canada contends with an Internet Overcharging scheme that limits consumption to an average of 40-60GB per month, with $1-5 per gigabyte in overlimit fees, does this represent fair pricing?

The Toronto Globe & Mail decided to investigate, and the results will come as no surprise to readers here.

Fact: Usage is growing exponentially, especially among users streaming online video.  Canadians, just like Americans, are swarming towards multimedia-rich content from YouTube to Netflix.  Usage growth of 50 percent per year is not out of line.  But as the newspaper discovered, extraordinary growth alone does not deliver the whole story.  The capacity to handle that Internet traffic has not only kept up with growth, it has exceeded it, at levels of unprecedented efficiency.

The Globe & Mail notes:

[…] Processing power, hard disk densities and transmission rates grew at rates closer to 60 per cent per year over the same period. In addition, the servers and routers and other electrical equipment that are the backbone of the Internet are much more energy efficient than they were ten years ago, which has dramatically reduced the cost of operations.

In simple terms, the bandwidth explosion is real, but it’s been more than offset by more powerful and more energy-efficient machines. So, we can reject the notion that increased usage is the a significant rationale for huge Internet price increases and usage-based billing.

Costs down, but prices going up?

Among virtually every provider, the percentage of average revenue spent on broadband network expansion per customer has dropped.  Even Verizon, which suspended expansion of its fiber to the home network, has not faced an avalanche of new costs to deliver large amounts of data to FiOS customers.

But what about the “fairness” proposition.  Should light users pay less than heavy users?  Historically, even in countries where usage-based pricing is the norm, usage-limited customers still pay comparatively high prices for broadband service, particularly when measured on cost per megabit per second against the usual lower caps cheaper plans provide.  So-called “light usage” plans also have natural usage caps built-in — they come with far slower speeds that, at their worst, discourage use of high bandwidth services.

The Globe & Mail concluded: “Rather than ensuring consumers receive fair Internet pricing, the Canadian Radio-television and Telecommunications Commission seems content to line the pockets of cable and telecommunications companies by forcing Canadian consumers to pay Internet data rates that have no basis in reality.”

Here’s why:

Wholesale Data Costs

The “fairness” argument falls apart when the truth is revealed about the wholesale costs large providers pay for their Internet connections.  Assuming the providers’ arguments that pay-per-use pricing is fair, the prices they ask Canadians to pay for that use certainly are not.

The Globe & Mail again:

Approximately four years ago, the cost for a certain large Telco to transmit one gigabyte of data was around 12 cents. That’s after all of its operational and fixed costs were accounted for. Thanks to improved technology and more powerful machines, that number dropped to around 6 cents two years ago and is about 3 cents per gigabyte today.

Are these valid numbers? After the recent CRTC decision regarding UBB, it was announced that effective March 1st, Bell will be charging Third Party Internet Access (TPIA) providers $4.25 for a 40 GB block of additional data transfer.

The fact that Bell is able to sell 40 GB of data to wholesalers for $4.25 and still make a profit demonstrates that the true cost of data transfer is well below the 10.5 cents per gigabyte they are charging wholesalers. One TPIA provider agreed the 3 cents per gigabyte figure is probably close to the true cost.

So why are Internet service providers charging consumers $1 or more per gigabyte of data used beyond their respective data caps? That’s a good question.

The “good answer” is: profits.

With providers charging overlimit fees from $1 per gigabyte on Bell’s most generous plans to $5 per gigabyte for Rogers’ Ultra-Lite plan, this represents overcharging of at least 10-50 times what it actually costs the providers to deliver that data.

Broadband costs in the United States are dramatically lower than in Canada, in part because of a larger marketplace and because of greater capacity and more competition, yet proposals from some American providers sought similar limits and overage pricing.

But considering the true cost of the service, charging closer to 10 cents per gigabyte — not $1 or more — would represent a fair price.  So long as regulators like the CRTC cater to providers, consumers will pay considerably more.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/CTV Usage Based Billing 2-1-11.flv[/flv]

CTV News explores Usage-Based Billing, and why it will makes an expensive broadband experience even more costly in the days ahead.  (6 minutes)

Verizon Wireless isn’t entirely rolling out the welcome mat for new iPhone customers.  PreventCAPS, one of our regular readers, dropped us a note indicating Verizon quietly added something new to the terms and conditions for new customers as of Feb. 3rd, which just so happens to coincide with the date the company started taking orders for the Apple iPhone — it reserves the right to throttle your speeds and “optimize” your browsing experience with caching and network management techniques that could reduce the quality of online videos and other bandwidth-intensive graphics.

Important Information about Verizon Wireless Data Plans and Features

As part of our continuing efforts to provide the best experience to our more than 94 million customers, Verizon Wireless is introducing two new network management practices.

We are implementing optimization and transcoding technologies in our network to transmit data files in a more efficient manner to allow available network capacity to benefit the greatest number of users. These techniques include caching less data, using less capacity, and sizing the video more appropriately for the device. The optimization process is agnostic to the content itself and to the website that provides it. While we invest much effort to avoid changing text, image, and video files in the compression process and while any change to the file is likely to be indiscernible, the optimization process may minimally impact the appearance of the file as displayed on your device. For a further, more detailed explanation of these techniques, please visit www.verizonwireless.com/vzwoptimization

If you subscribe to a Data Plan or Feature on February 3, 2011 or after, the following applies:

Verizon Wireless strives to provide customers the best experience when using our network, a shared resource among tens of millions of customers. To help achieve this, if you use an extraordinary amount of data and fall within the top 5% of Verizon Wireless data users we may reduce your data throughput speeds periodically for the remainder of your then current and immediately following billing cycle to ensure high quality network performance for other users at locations and times of peak demand. Our proactive management of the Verizon Wireless network is designed to ensure that the remaining 95% of data customers aren’t negatively affected by the inordinate data consumption of just a few users.

These kinds of “network management” techniques, which include speed throttles, reduced quality graphics, and caching (which can result in stale web pages being served to your mobile device), are all made possible by the Federal Communications Commission’s failure to implement Net Neutrality protections for wireless providers.  While Verizon stresses it will treat all content to the same network management techniques equally, the “improved” broadband experience Verizon claims to offer is more likely to improve the company’s bottom line from reduced spending on network upgrades.

Like most providers, Verizon isn’t willing to be specific about what amount of usage is likely to trigger the throttle, why it needs to be maintained for the remainder of the billing cycle even when network congestion is not a problem, and what speed customers will be stuck with for the rest of the month.

Broadband Reports reached out to Verizon for specifics and discovered the provider has not actually implemented these measures… yet:

“The notice yesterday simply reserves the right for new customers or renewing their contracts,” Verizon spokesman Jeffrey Nelson tells Broadband Reports. “We’re reserving the right to actively manage the network in specific ways should that need exist – and only for customers who are under contract that includes that provision,” he says. “Because this is down the road – if at all – it’s too early to tell what those triggers might be, or what throughput limitations would look like.”

Verizon may be concerned about the potential impact millions of data-craving iPhone customers will bring to its network in the coming weeks.  Existing customers with Android devices or Blackberry handsets are safe for now — the provision only impacts customers who sign new contracts as of last Thursday.

Verizon says it will retain its unlimited data option (with the right to throttle service) for a “limited time only.”