A California company with a novel approach for renting DVDs faces the prospect of a preliminary injunction against the service if a judge agrees the service is skirting copyright law.

Zediva promotes itself as a remote DVD rental service that avoids lengthy delays often imposed on online streaming and pay-per-view services.  The company allows customers to “rent” DVD titles the same they are released, remotely streaming the contents over a broadband connection.  Zediva says it literally has a bank of DVD players which customers can access and remotely control.  When a customer “rents” a DVD, a Zediva employee inserts the disc into a DVD player and gives each customer up to two weeks to watch the movie.  Because Zediva says only one customer can rent the physical DVD at a time, it is not skirting copyright or streaming laws. The service will even mail the DVD to a customer if they don’t want to watch it over their Internet connection.

Zediva argues it is using the Internet as a way to connect the DVD player to a renter’s television.  The company says it should not matter where the player is physically located, and because a customer can exclusively control the actual player during the rental period, it is not violating any laws.

Hollywood disagrees, and the Motion Picture Association of America promptly filed suit in April, claiming Zediva’s business model undermines its licensing agreements with online movie services.  The lawsuit claims Zediva is not paying movie streaming rights like other online movie services, and is not comparable to a traditional movie rental store because the company makes individual titles available for viewing by other parties as soon as four hours after a customer stops watching, even though they can return and watch the movie again for no additional charge for up to two weeks.

This week, the MPAA touted a potential new friend of the lawsuit — Cablevision, which filed its own amicus brief in the case drawing distinctions between its Remote DVR service and Zediva.  Cablevision is in trouble with some rights holders over its new Remote DVR, which records shows on equipment at the cable company’s offices and then streams the programming on-demand to subscribers’ TV sets.  Some contend Cablevision owes “per performance” license payments for every show watched over the service.  Cablevision has consistently argued to the contrary, suggesting the actual location of the storage system should not matter, so long as the recordings are made and watched by only a single customer.

But Cablevision’s brief shows the company has no interest in being connected to Zediva, arguing its Remote DVR service is not comparable to the pay-per-view business Zediva is running.

A judge is expected to hear the case early next week.

[flv]http://www.phillipdampier.com/video/CNBC Zediva Video Streaming Service 3-17-11.flv[/flv]

CNBC and the New York Times’ David Pogue tried out Zediva back when it was introduced in March of this year.  (3 minutes)

Cantor

For all of the bluster about not raising taxes, a group of House Republicans have proposed doing what one telecom organization concludes is exactly that by diverting Universal Service Fund revenue paid by landline and cell phone customers to reduce the budget deficit.

The idea to divert at least $1 billion annually — about 25% of the USF budget, comes from House Majority Leader Rep. Eric Cantor (R-Va.).  USF fees are paid by consumers as part of their telephone bill.

With nearly a quarter of the USF’s $4.5 billion annual revenue diverted to the treasury, phone companies would either have to curtail efforts at rural broadband expansion, now proposed under USF reform efforts, or lobby for an increase in the amount of the fee to cover the diverted shortfall.

Telecom industry groups representing rural phone companies and local utility regulators blasted the proposal, saying it would destroy rural broadband expansion efforts underway by small independent and co-op phone companies.  The Universal Service Fund was designed to subsidize phone service in rural America to ensure equality of access and rates regardless of where Americans live. Without it, many rural phone companies face serious financial difficulties, especially as consumers increasingly look to providers to deliver broadband service.

“While we understand Congress is scrambling to resolve the deficit issue, our lawmakers should not tap into the Universal Service Fund as a last-minute solution. To divert these vital but limited funds from their intended use would be counterproductive and may undermine our national broadband goals,” said National Association of Regulatory Utility Commissioners president Tony Clark. “The Universal Service Fund is funded by fees consumers pay through their telephone company to ensure affordable access to telecommunications service across America. The Universal Service Fund receives no federal monies and should not even be under consideration in this debate.”

John Rose, president of the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), called Cantor’s proposal “a totally new tax.”

The Federal Communications Commission has been working with state and local regulators, members of Congress, and rural telephone interests to transition the fund away from subsidizing basic telephone service, which is now ubiquitous in the United States, and towards a general purpose broadband rollout fund, to help provide capital to expand broadband service into communities deemed by larger providers as unprofitable to serve.

Some critics of the program suggest in its present form, it suffers from waste, fraud, and abuse.  Rep. Cliff Stearns (R-Fla.) noted the original fund charged consumers less than five percent of their long distance bill, but subsequent increases have resulted in consumers paying up to 14%.  Stearns said more must be done to reduce the cost of the USF for consumers and has supported prior reform efforts.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Universal Service Fund – Cliff Stearns 11-18-09.flv[/flv]

Rep. Cliff Stearns (R-Fla.)’s opening remarks in a 2009 hearing criticize the increasing costs consumers find on their phone bills for the Universal Service Fund.  (5 minutes)

AT&T warns DSL customers they can watch 10 High Definition movies per month... and use their Internet connection for absolutely nothing else, unless they want to incur an overlimit fee of $10.

AT&T has released a phoney baloney video for their customers purporting to “explain” broadband usage and the company’s completely arbitrary usage limits on DSL and U-verse customers: “A single high-traffic user can utilize the same amount of data capacity as 19 typical households. Lopsided usage patterns can cause congestion at certain points in the network, which can slow Internet speeds and interfere with other customers’ access to and use of the network.”

Too bad these claims are not verified with actual facts.

Meaningless statistics

AT&T’s claim that less than two percent of their customers use 20 percent of available bandwidth is frankly meaningless to the company’s DSL and U-verse hybrid fiber-copper networks.  For years, phone companies made a marketing point that unlike cable broadband’s shared network, their DSL service was never shared with anyone else in a neighborhood.  Therefore, running it at a trickle or full speed ahead should have no impact on any other customer.  The only exception to this rule comes from phone companies that under-invest in their middle mile and backbone networks.  For AT&T, that means trying to serve too many customers on inadequate equipment ranging from a poorly planned network of D-SLAMs, which connect individual customers with a fatter pipeline back to the central office, or an inadequate network between the central office and AT&T’s regional backbones.  Fiber, such as that used by AT&T’s more modern U-verse system, completely solves any capacity issues.  Broadband traffic is only a tiny percentage of the bandwidth consumed by AT&T’s IPTV video service — the one that delivers U-verse TV to your home.  AT&T imposes no viewing limits on customers, of course.

Any actual capacity crunch would only show up during peak usage periods — when AT&T customers of all kinds pile on their broadband connection at the same time. AT&T’s usage cap regime does next to nothing to mitigate that kind of congestion.  Here’s why:

Since AT&T and other broadband companies routinely claim the average use per customer is well under 20GB per month, and only 2 percent of customers are currently deemed “heavy users” by AT&T, that tiny percentage of customers cannot create sufficient drag on AT&T’s DSL network even if they opened up their connections to full speed traffic.  In reality, the 98 percent of “average” users piling on the network during prime time would be the only thing capable of the kind of critical mass needed to create visible congestion.  What uses more capacity?  Two customers using their 7Mbps DSL lines to stream online videos concurrently or 98 customers all using their 7Mbps DSL lines at the same time for virtually any online activity?

The math simply doesn’t add up.

The Congestion Myth

AT&T targets their broadband customers with an unwarranted, arbitrary Internet Overcharging scheme they cannot effectively explain to customers.

As two week’s of hearings this month have demonstrated, Bell Canada’s similar arguments for its usage caps simply come without any evidence of actual congestion.  In fact, company officials modified their position to talk more about peak usage congestion, a problem that cannot be controlled with a usage cap well in excess of the average consumer’s usage.  In fact, only a speed throttle could control network congestion at the times it actually occurred.  AT&T also ignores when its customers are using its network.  Is a heavy user downloading files at 3 in the morning creating a problem for other users?  No.  Are the majority of their average-usage customers all jumping online after school or work creating a problem?  Perhaps, if you believed AT&T even had a congestion problem.

Industry maven Dave Burstein does not, and Burstein talked to two chief technology officers at AT&T who told him wired broadband congestion is a “minimal” problem for the phone company.

Upgrades and Cord-Cutting, Delayed

Two things usage caps can do is help your company delay necessary upgrades to meet customers’ broadband needs, whether they are “heavy users” or not.  AT&T has shown itself historically to be slow to invest, and cheap when it does.  AT&T’s wireless network is bottom-rated by consumers thanks to inadequate network capacity.  The company elected to upgrade on-the-cheap to an IPTV platform that still relies on copper phone lines to deliver service that simply cannot compete in quality and capacity with Verizon’s FiOS fiber to the home network.  But investors love the fact the company counts every penny, even if it means inconveniencing and overcharging customers for their services, usually offered in duopoly or monopoly markets.

AT&T’s usage caps on U-verse are even less credible than those imposed on their DSL service.  U-verse is a fiber to the neighborhood network with near limitless capacity for broadband and video.  In fact, the only “congestion” comes from the copper phone lines that limit how much bandwidth can be supplied to your individual home.  But no matter how much you use, you will not affect your neighbors because your copper phone line is shared with nobody else.  In fact, the biggest chunk of U-verse’s bandwidth is reserved for their video services, which makes arguments about excessive Internet usage on that pipeline un-credible.

What AT&T’s usage cap does assure is that you will not drop that video package from your U-verse service anytime soon.  That lucrative revenue from expensive video packages cannot be forfeit without a fight, and a nice deterrent in the form of an arbitrary usage cap does wonders to keep that cord cutting to a minimum.

Meters That Don’t Measure

One of the worst ongoing problems with Internet Overcharging schemes like AT&T’s is the broken usage meter.  Stop the Cap! has received hundreds of e-mails from AT&T DSL and U-verse customers who report AT&T’s usage meter is either unavailable, broken, or is wildly inaccurate.  With absolutely no independent oversight, and no consistently accurate usage measurement, charging anyone overlimit fees with a broken meter doing the counting is unconscionable.  Yet AT&T may well try.  The company has already been sued by one law firm for what it alleges is an unfair usage meter on the company’s wireless service — a meter that consistently overcounts usage in AT&T’s favor.

AT&T admits they cannot even accurately measure their own customers' usage.

Once getting over the broken meter, customers are directed to a pointless usage-estimator — the ones that tell you about how many tens of thousands of e-mails you can send and receive under AT&T’s cap regime.  In fact, these statistics are irrelevant for the vast majority of customers who never think of sending 10,000 e-mails or exchanging 2,000 pictures or songs.  That’s because customers do not use the Internet to exclusively do those things.  Even with the guestimator, they are left checking a broken usage meter to ponder whether or not they can watch one more show or download another file without incurring a $10 overlimit penalty (or more).  That “generous” limit AT&T touts suddenly doesn’t look so ample when the company gets to the wildly popular activity of streamed video.  AT&T’s own video warns you can only watch 10HD movies a month over your broadband connection — and absolutely nothing else.  No web browsing, e-mail, or photos or music.  Ten movies a month.  Still thinking of dropping your U-verse video subscription now?

Yet AT&T has the nerve to claim, “Our goal is to provide you with the best Internet service possible.”  Really?

Thankfully, not every member of the investor class is thrilled with nickle-and-diming broadband consumers for usage that costs the providing company next to nothing.

The Economist excoriated AT&T for its unwarranted usage limits on its blog earlier this year:

The use of caps allows providers to dish out bandwidth with one hand and take it away with the other. The companies have vastly increased the capacity of various copper, coaxial and fibre lines, but artificially separate out a portion—at least half and often much more—for video which a set-top box or a broadband modem spits out as an apparently distinct service. Cable firms simultaneously push out hundreds of digital channels, while telecoms firms rely on multiple digital streams from live broadcast or cable TV or on-demand pay-per-view. It is as though the water main were divided as it entered the home and a steady, modest stream was made available for showers and at the tap, while most of it was always at the ready for a coin-operated washing machine.

Increasing speed on the internet portion, which would allow consumers to give up on TV subscriptions, is balanced by capping volume. If a consumer does not monitor usage, his internet access can be withdrawn or, in AT&T’s case, overage fees of $10 charged for every additional 50 GB of usage. […] [That] $10 charge applies whether the limit was breached by 1 MB or a smidgen under 50 GB.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Usage.flv[/flv]

AT&T’s new video on broadband usage is based on facts not in evidence and only adds to consumer confusion about arbitrary Internet Overcharging schemes.  (4 minutes)

Comcast's touch control panel delivers alarm functions, home automation, and even weather updates.

Verizon Communications, Bright House Networks, Comcast/Xfinity, and Time Warner Cable are all on the verge of making a major new push to get customers to consider signing up for home security through their respective bundled offerings.  It’s just the latest new way telecommunications companies are responding to Wall Street’s insatiable quest for growth in the average revenue earned from each customer.  But how good are these services, and how much are they going to cost?

Time Warner Cable has offered security monitoring in a number of legacy markets inherited from their former owners.  But now the company is beta testing an entirely new suite of home security applications in cities like Rochester, N.Y., with the hope of introducing the service later this year in additional markets.

Time Warner Cable and Bright House seem to be jointly testing a similar system, designed to compete with 24/7 home alarm monitoring providers like ADT or GE Home Security.  Although price points have not yet been announced, Stop the Cap! has learned the cable company intends to test a basic package of home monitoring including a limited number of monitored doors and windows for between $25-30 a month, not including upfront costs and installation.

Like other alarm providers, additional services and protected points of entry will cost extra.  The next generation of home security from Time Warner Cable will be controllable from apps for iPad and smartphones, in addition to a touchscreen control panel supplied with the system.  By integrating the system with your home broadband connection, you can stream video from security webcams and configure alerts for any number of events.

Bright House’s proposed system, for example, would let you set a text message alert when the kids got home from school.  Want to know if someone sneaked out of the house in the middle of the night?  The security system can alert you to that as well.

Comcast/Xfinity has been rolling out a similar system in some of their markets. XFINITY^® Home Security also delivers monitoring services, and provides remote access over the Internet.  It will also let you remotely control home appliances, lighting, and any installed web cameras.  Away from home and want to see if your spouse is up to no good?  Now you can quietly spy on anyone in your home while you are away.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Comcast Home Security.flv[/flv]

XFINITY Home Security System from Comcast is explained in this promotional video from Comcast.  (3 minutes)

Comcast’s basic monitoring package doesn’t include many of the coolest add-ons like video monitoring and access to a modern touch-based control panel that also serves up weather forecasts and even sports scores.  Many customers end up with the “Preferred Package” because it delivers a much wider range of protective services.  The service tested successfully in Houston and is now also available in Philadelphia, Portland, Jacksonville, Sarasota/Naples, Chattanooga and Nashville.

Comcast didn’t reinvent the wheel with their security system.  They rebranded iControl Networks’ Open Home automation and security platform.  Pricing?  $199 for the “basic package” that didn’t impress us, or $299 for the “preferred” package which comes with the bells and whistles.  Installation is sometimes included in those prices, but a $50 “activation fee” also applies.  Expect to pay $30 for basic monitoring, $40 for “preferred” monitoring each month for a minimum of three years — an early termination fee applies if you cancel early.  Also expect to pay more for any optional extras you add.

Verizon's alarm system was promoted at this year's Consumers Electronics Show.

Verizon Communications’ new ominously-named “Home Monitoring and Control” system is powered by its fiber to the home FiOS service.  Introduced at this year’s Consumer Electronics Show, Verizon has teamed up with lock-maker Schlage, who manufactures the “smart door locks,” and Motorola, which throws in 4Home, their home automation platform.  Trane even includes a smart-thermostat, remotely controllable.

Unlike systems sold by cable competitors, Verizon’s is budget-minded, priced at just $9.99 per month.  But the system package at that price is not remotely monitored and was designed to be sold to the do-it-yourself type. For ten bucks, you get to control everything through your television set top box, smartphone, or tablet computer.  If you want more, you pay more.  An upgraded package includes remote door locking/unlocking and remote controllable webcams that you can pan and zoom.

The deluxe package throws in the remote monitoring service and a smart-home energy use suite that let’s you monitor and control energy consumption of your home appliances.

“The more services they can get someone to sign up for, the stickier that customer is to them,” said Bill Ablondi, director of home systems research for the Parks Associates market research firm.

Most systems will come with a term contract of 12-36 months, and many could fetch discounts for heavily-bundled customers.  Most insurance companies also provide up to a 15 percent discount on homeowner policies for remotely monitored burglar and fire detection systems.

For the cable and phone companies, home security could easily bring another $40 a month in revenue and put many cable bills north of $200 a month in combined services.  Since virtually all of the systems were developed by third parties, development costs are low, and since existing broadband service in most homes provides ready connectivity to an alarm monitoring center, the costs to provide the service are minimal.

For existing security companies, the pending threat of big cable and phone companies eating their business for breakfast isn’t one they are taking lying down.

ADT is developing its own suite of home automation and security monitoring, and didn’t waste anytime taking a swipe at the cable companies.

“We’ve been in this business for 135 years,” said ADT spokesman Bob Tucker, starting with telegraphs and personal security. As for Bright House and Verizon, he said, “Would you really want to trust the security of your home and family to the same people that install HBO?”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Verizon Makes a Connected Home a Reality.flv[/flv]

Verizon’s forthcoming home security and automation system is promoted in this company-supplied video.  (1 minute)

Phillip "No Data Tsunami Over Here" Dampier

As the Canadian Radio-television and Telecommunications Commission enters into the second week of hearings on Internet Overcharging, there have really only been a few minor surprises.

First, and most importantly, when voting consumers pay attention, regulators start asking questions and get aggressive.  This is the same commission that only a year ago gave the green light to wholesale usage-based billing (UBB) — a practice that would guarantee every ISP in Canada dropped flat rate Internet service.  After a half-million Canadians signed Openmedia.ca’s petition opposing UBB, the Harper government (and the opposition parties) got interested, and the Commission got an earful from Industry Minister Tony Clement, who was simply appalled at this kind of Internet pricing.

Second, this round of CRTC hearings has found Bell — UBB’s biggest proponent — largely unrepentant.  It still supports charging people for their usage, even as the company’s foundation for that premise — bandwidth congestion — erodes away.  Providers can claim anything they like, but they cannot invent facts.  By Friday, most of the commissioners realized what consumer advocates had been saying all along — there is no great bandwidth crisis in Canada.  No data tsunami. No exaflood in the zettabyte era.  Growth is exponential to be sure, and Canadians have a passionate affair with their Internet connectivity, but one that remains easily managed when providers make regular, affordable investments in upgrading their networks.

Bell’s week-long contention that congestion pricing was paramount to managing Canada’s bandwidth finally fell apart when CRTC Chair Konrad von Finckenstein noted Bell’s trinity of regional entities managed Internet usage completely differently, even though the traffic passed through the exact same network:

• 1) Bell Aliant, which provides service in the Atlantic provinces, has no usage caps at all.
• 2) Bell Quebec provides service with a considerably more generous usage allowance than given to those customers in Ontario, even those just on the other side of the border.
• 3) Bell Ontario’s usage cap is downright stingy compared with Quebec, most likely because it competes in Ontario with an equally stingy provider — Rogers Cable.

With these facts in evidence, Bell was finally forced to concede it was “competition” not “congestion” that brought three different treatments of Internet usage.  So much for “network congestion.”

Bell’s competitors also hung the telecom giant out to dry when it was their turn to testify.  Each in turn would claim that congestion presented no problems for their respective networks.  Telus, Rogers and Shaw all denied they shared Bell’s usage problems.  That is not to say any of them were in favor of restoring flat-rate Internet access.

Instead, they argued, UBB represented a combination of “stimulating investment” in broadband networks (already insanely profitable for all-comers) and “peak usage pricing,” a hybridized argument about congestion during peak usage periods.  Since some wholesale broadband services are priced at peak capacity requirements, some argue UBB helps keep that peak usage manageable during prime time.

Unfortunately, the peak usage pricing argument undermines itself because Canadian providers enforce usage limits 24/7, not only during peak usage periods.  This means there is no incentive for users to offload their heaviest usage to times when the network experiences low demand.  Independent providers continue to argue “peak usage pricing” may be defensible in certain circumstances, but it’s not even a possibility under Bell’s proposed wholesale UBB scheme.

The record being constructed from Canada’s hearings have direct implications for Americans, as the basic business models for cable and phone providers are similar in both countries.  The death rattle of the “congestion” myth is good news for North American broadband users who have long rolled their eyes at hysterical arguments about data floods and capacity crises.

The CRTC still needs to hear from some additional speakers, and we are under no illusion they will completely reverse themselves on Internet Overcharging schemes, but this represents a clear-cut case that consumers need not simply sit back and take abusive pricing.  Consumer activism can make a real difference in the broadband policies of both the United States and Canada.  It takes a concerted effort, but once a critical mass of consumers is achieved, the ability for providers to simply do as they please becomes a virtual impossibility.

That’s good news for all of us.

[flv width=”640″ height=”368″]http://www.phillipdampier.com/video/CBC UBB 7-11-11.flv[/flv]

CBC News covers the start of the CRTC hearings and what UBB pricing is doing to Canada’s Internet experience.  (2 minutes)