Netflix, Apple, and Amazon — are you paying attention? This is your future, as your business plans go up in flames should Internet Overcharging schemes get a foothold in the United States.

Sky Television is New Zealand this week announced it was throwing in the towel on Sky Online, its broadband video on demand service for New Zealand.  It’s not that the service wasn’t popular and keenly sought by broadband customers in the country.

John Fellet, Sky New Zealand

Chief Executive John Fellet said the fault was entirely with broadband providers who annoyed customers with broadband usage caps.  In the end, “the service does not make sense in the current New Zealand broadband market.”

Subscribers got unlimited access to Sky Online for $5 a month, but they quickly learned the $5 charge was just the beginning.  Once customers consumed their paltry usage allowance, their speeds were dropped to dial-up for the rest of the month.

“It has not been a great viewer experience,” Fellet told The New Zealand Herald.

Fellet told the newspaper he thought these kinds of usage limits detracted from one of the primary selling points for broadband service in the first place — video content.

Fellet has fielded several customer complaint calls daily about the situation, something he considers the tip of the iceberg.

Until Sky can secure an arrangement to exempt usage caps from their video service, an unlikely proposition, the entire service will be put on hold.

The Herald provides an update on what other services are facing in the south Pacific:

Sky – which has invested heavily in online rights to its programmes – has not been alone in looking to open up the market.

Hybrid Television Services holds Australasian rights to TiVo, which has download capabilities and wants to offer an internet download service. Hybrid, one-third owned by TVNZ, has been talking to Kiwi telcos.

Sky launched its On Demand service this time last year, about 15 months after TVNZ had launched TVNZ ondemand.

Sky has been unable to make it work under a pay TV model. But TVNZ head of emerging markets Jason Paris says that TVNZ ondemand – funded through advertising attachments to programme downloads – has been profitable since March.

Unlike Sky, Paris insisted yesterday that TVNZ had received no complaints from viewers about breaching data caps.

TVNZ was the first broadcaster in Australasia to launch a full online catch-up service and nearly all of of its prime-time shows are available through this service. Each week nearly 250,000 New Zealanders stream 1.5 million shows to their homes, Paris says.

Some TVNZ traffic has been through a relationship with the state-owned ISP Orcon, which has allowed its subscribers to access the TVNZ ondemand website without affecting data caps.

The quest for fiber-based broadband service from consumers has reached the point where many have decided to accept or decline offers to purchase property in new housing developments based on whether they’ll have access to fiber or not.  Those were the findings in a study from the Fiber to the Home Council, which surveyed more than 600 existing fiber-to-the-home (FTTH) customers and 600 other broadband customers nationwide.

The results clearly show consumers love fiber optic broadband, far more than cable modems or DSL service from the phone company.

For example, 67% of FTTH users were very satisfied with their broadband speed compared to 58% of cable modem users and 46% of DSL users. A total of 70% of FTTH users were very satisfied with their Internet service up time compared to 64% of cable modem users and 55% of DSL users.

Consumers also reported that FTTH service was faster… much faster than competing technologies.  The median tested download speed from FTTH users was 10.4Mbps. FTTH tested download speed was 51% higher than cable modem service and 593% higher than DSL (DSL has abandoned the speed war, having lost that race to competing technologies, and now prevails only on price and where other alternatives are not available).

Upload speeds offered by FTTH users blew away the competition.  The average subscriber had 2.4Mbps of upload speed, which is 380% higher than cable modem users and 500% faster than DSL.

The survey also showed that robust competition, with at least one provider bringing true fiber to the home service to consumers, meant an average of six percent lower broadband bills.

Some cable and telephone industry executives downplay the lust for speed by consumers, claiming that most don’t understand the differences in speed, and don’t utilize services where speed matters most.  But the FTTH survey found entirely different results.  Not only are FTTH customers extremely loyal and happy with their service, they are reluctant to move to places that don’t offer it.

When asked to imagine purchasing a new home and given a list of five real estate development amenities, both current and non FTTH broadband users rated “Very high speed Internet from a direct fiber line” more important than other amenities such as green space/walking trails, 24 hour neighborhood patrol, a community pool, and a fitness center/club house. 69% of non FTTH users and 82% of current FTTH users said “Very high speed Internet” would be an important factor in buying a new home.

Even in this difficult economy, 49% of FTTH users said their broadband service would be the “last thing” they would give up.  Only 11% said it would be among the first things to go.

The demand is there, but the competition is not in many American communities.  Unless consumers reside in an area where an aggressive provider such as Verizon is willing to deploy fiber to the home, the chances of service arriving anytime in the near future is dismally low.  Few telephone companies are interested in deploying widespread fiber networks to consumers, and most cable operators believe their existing hybrid fiber/coaxial cable networks are “good enough” for consumers.  Only when a third player arrives in town, be it a private competitor or a municipally-owned fiber network, do telephone and cable providers get interested in performing their own fiber upgrades.

AT&T believes in its own copper-wire-based U-verse technology.  Smaller independent telephone companies are doing only limited experiments with fiber deployment, primarily to multiple dwelling units like apartment buildings and condos, and other uniform, expansive new housing developments.

Until prevailing attitudes among providers change, consumers hungering for fiber may simply have to pack up and relocate to the lucky communities that already have it, or will soon.

This represents another consumer victory, and comes thanks to the hard work of Free Press, which has been a strong advocate for creating robust, equitable access to broadband services throughout the United States, available to those in rural locations as well as economically disadvantaged inner city neighborhoods.  This assures that no grant applicant can take public tax dollars and build discriminatory networks that violate Net Neutrality.

The National Telecommunications Information Administration, along with the Rural Utilities Service, today unveiled grant guidelines for the $7.2 billion allocated for broadband deployment in the American Recovery and Reinvestment Act, signed into law by President Barack Obama in February.

The criteria, or “Notice of Funds Availability,” create a detailed system for prioritizing grant applications and outline how the agencies will distribute $4.7 billion in broadband money for the NTIA’s Broadband Technology Opportunities Program and $2.5 billion for RUS loans and grants. Under the rules announced today for the BTOP programs, applicants that provide wholesale access to their networks at reasonable rates will be given preference for funds. Preference will also be given to networks that offer affordable services and community partnerships, among other public service goals. All recipients will have to operate their networks in a manner consistent with the FCC’s Internet Policy Statement as well as agree to “not favor any lawful Internet applications and content over others.”

In March, Free Press released a broadband stimulus grant scorecard that outlined criteria policymakers should use to score potential broadband deployment projects. Many of the factors identified by Free Press in March, such as Net Neutrality, broadband adoption, affordability, speed and job creation, are reflected in the criteria released today.

“Today, the Obama administration reaffirmed its commitment to Net Neutrality by ensuring that public funds will not be used to build closed and discriminatory networks,” said S. Derek Turner, research director for Free Press and author of the scorecard. “These broadband programs are first class examples of public policy serving the public interest. They will use public dollars to build out Internet access as a public service infrastructure.”

“To those large corporations that say public interest requirements are too restrictive, we say step aside and make way for the thousands of other companies, non-profits and municipalities that are eager to bring the transformative benefits of the open Internet to the millions of Americans left on the wrong side of the digital divide,” said Turner.

Along with the release of grant guidelines, leaders from the three federal agencies charged with collaborating and overseeing the national broadband plan were joined by Vice President Joe Biden in Erie, Pa., this morning to discuss funding. Commerce Secretary Gary Locke, Agriculture Secretary Tom Vilsack and newly appointed FCC chair Julius Genachowski discussed broadband stimulus plans and the importance of providing high-speed Internet to rural America.

“These agencies have set the bar for our nation’s digital future,” said Turner. “The success of the national broadband plan hangs heavily on how these federal dollars are doled out and these guidelines will help ensure that funds are allocated in a fair and efficient manner consistent with the priorities set forth by Congress and the president.”

The RUS and NTIA will begin accepting applications and reviewing them over the coming months. The first round of grant awards are expected to be issued in December.

Joost Signs Off

Joost, the online video service that preceded Hulu but has since been overshadowed by it, has announced it is shifting priorities away from serving online video to consumers, to serve cable operators and other media companies with their own ready-made online video platforms instead.

Joost’s failure comes as a result of the difficult advertising marketplace.  Like Hulu, and many other ad-supported websites, the ongoing recession has made it difficult to attract advertisers to support the costs of licensing and distributing television shows and movies.  As a result, the company today announced it would be refocusing itself on selling its services to other media providers.  Joost tried to market itself to cable companies earlier this year, reportedly talking with Time Warner about buying out the service.  But no deals were forthcoming, and the financial picture at Joost appeared bleak.

Joost still will maintain its website with some of the content it continues to hold licensing agreements to stream to viewers.  But once those agreements expire, the future of the site itself becomes an open question.

In simplified terms, Joost plans to sell a ready-to-run video platform to any media company that wants to deliver online video to customers, subscribers, or the public.  The media company simply has to customize its website’s look, and Joost’s streaming technology will run underneath it.  Joost already uses copy protection and authentication technology to “pre-authorize” viewers to permit them to access content based on their Internet address and location (licensing agreements often are for individual countries only, not worldwide), so their platform is already capable of restricting access to authorized viewers only.

Joost was the brainchild of Niklas Zennström and Janus Friis, the duo that also founded the music swapping service Kazaa and the popular Skype calling service.  All three services originally relied on a peer-to-peer distribution platform, which meant while you swapped music on Kazaa, make phone calls on Skype, or watch videos on Joost, the software quietly shared some of your bandwidth with other users to help transport music, phone calls, or video.  Joost required users to download a software application to access the service, something that proved unpopular with the Internet masses.  Hulu soon appeared and allowed people to watch video right from their browsers and quickly overran Joost in popularity.

By the time Joost came up with their own browser-based service, dumping the peer-to-peer distribution model, it was too late.  Most major networks and content producers had already signed their allegiance to Hulu, and Joost’s content selection stayed largely stagnant.  At one point, Joost tried to bring in user-created content and short form video, but most viewers weren’t interested.

It’s the second failure among online video services this month.  Microsoft announced in mid-June it was “scaling back” Soapbox, its attempt to rival YouTube with user-generated video content.  Soapbox had actually been around since 2006, but was often used to post copyrighted video content hassled off of YouTube.  By 2007, Microsoft stopped accepting new users until it got copyright violations under control, but by the time it returned, nobody outside of Microsoft’s Redmond, Washington campus cared.  The service now primarily exists to host Microsoft-generated video content.

While residential customers face the threat of Internet Overcharging schemes designed to ration their use of the Internet with excessive pricing combined with usage limits, business customers are finding the opposite:  providers rolling out several new innovative services designed to control costs and increase broadband flexibility.

Verizon Business‘ Ethernet Virtual Private Line Service customers, who enjoy enormously fast speeds over a fiber-based network, will now have the ability to customize their bandwidth on-demand, through an online control panel.

Verizon EVPL Dynamic Bandwidth enables customers to raise or lower their broadband speeds as needed, and pay for their broadband service based on the speed they select.  The service is designed to maximize savings for businesses that have a periodic need for higher bandwidth, but don’t feel justified paying for a higher tier of service that will go unused at other times.  A customer accesses an online control panel, reviews pricing for different levels of speed, and then selects the option that best meets their needs.

Customers can raise or lower both the upload and download speeds once every 24 hours.  The requested capacity is provided within 60 minutes, and the control panel lets customers schedule bandwidth needs in advance.

The Dynamic Bandwidth service supports speeds between 1Mbps all the way up to 1000Mbps, depending on available facilities in your area.

“There is an insatiable hunger for bandwidth as technologies such as video transmission become more widely adopted by enterprises,” said Blair Crump, worldwide president of sales with Verizon Business.  “Our self-service dynamic bandwidth capability allows our EVPL and Private IP customers to make the most of their networks, at their convenience.”

David Hold, senior analyst, network services with Current Analysis, said: “Verizon Business is delivering a unique value proposition to the Ethernet services market with their new dynamic bandwidth capability.  With the proliferation of sophisticated, bandwidth-intensive applications, most organizations are demanding greater network capacity, and this new capability will help customers improve their return on investment in EVPL by only paying for greater speed when needed.”

Speed-based tiered pricing is familiar to consumers, and does not raise the same level of concern that consumption-based billing schemes do.  It is based on the premise that those heavy users of broadband will naturally gravitate towards higher speed, more expensive tiers of service to enjoy faster speeds.  The provider’s premium pricing also guarantees premium profits.

While residential customers bear the brunt of Internet Overcharging experiments based on data consumption, most business-class customers curiously escape such limits and fees.  Indeed, if the rationale for such pricing is based on demands placed on the network infrastructure, business customers, who face pricing commensurate with their anticipated higher usage, should be the natural first candidates for experimentation, not the ones exempted from it.

Verizon Business’ new speed based tiering demonstrates that there is money to be made providing customers with their choice of speed, without alienating them with unwarranted usage limits and the penalties and fees that follow those who exceed them.