Among the public interest groups that have historically steered clear of the fight against usage caps and usage based billing is Public Knowledge.

Stop the Cap! took them to task more than a year ago for defending the implementation of these unjustified hidden rate hikes and usage limits.  Since then, we welcome the fact the group has increasingly been trending towards the pro-consumer, anti-cap position, but they still have some road to travel.

Public Knowledge, joined by New America Foundation’s Open Technology Initiative, has sent a letter to the Federal Communications Commission expressing concern over AT&T’s implementation of usage caps and asking for an investigation:

[…] Public Knowledge and New America Foundation’s Open Technology Initiative urge the Bureau to exercise its statutory authority to fully investigate the nature, purpose, impact of those caps upon consumers. The need to fully understand the nature of broadband caps is made all the more urgent by the recent decision by AT&T to break with past industry practice and convert its data cap into a revenue source.

[…] Caps on broadband usage imposed by Internet Service Providers (ISPs) can undermine the very goals that the Commission has committed itself to championing. While broadband caps are not inherently problematic, they carry the omnipresent temptation to act in anticompetitive and monopolistic ways. Unless they are clearly and transparently justified to address legitimate network capacity concerns, caps can work directly against the promise of broadband access.

The groups call out AT&T for its usage cap and overlimit fee model, and ponder whether these are more about revenue enhancement than network management.  The answer to that question has been clear for more than two years now: it’s all about the money.

The two groups are to be commended for raising the issue with the FCC, but they are dead wrong about caps not being inherently problematic.  Usage caps have no place in the North American wired broadband market.  Even in Canada, providers like Bell have failed to make a case justifying their implementation.  What began as an argument about congestion has evolved into one about charging heavy users more to invest in upgrades that are simply not happening on a widespread basis.  The specific argument used is tailored to the audience: complaints about congestion to government officials, denials of congestion issues to shareholders coupled with promotion of usage pricing as a revenue enhancer.

If Bell can’t sell the Canadian government on its arguments for usage caps in a country that has a far lower population density and a much larger rural expanse to wire, AT&T certainly isn’t going to have a case in the United States, and they don’t.

The history of these schemes is clear:

1. Providers historically conflate their wireless broadband platforms with wired broadband when arguing for Internet Overcharging schemes.  When regulators agree to arguments that wireless capacity problems justify usage limits, extending those limits to wired broadband gets carried along for the ride.  Dollar-a-holler groups supporting the industry love to use charts showing wireless data growth, and claim a similar problem afflicts wired broadband, even though the costs to cope with congestion are very different on the two platforms.
2. Providers argue one thing while implementing another.  Most make the claim pricing changes allow them to introduce discounted “light user” plans.  But few save because true “pay only for what you use” usage-based billing is not on offer.  Instead, worry-free flat use plans are taken off the menu, replaced with tiered plans that force subscribers to guess their usage.  If they guess too little, a stiff overlimit fee applies.  If they guess too much, they overpay.  Heads AT&T wins, tails you lose.  That’s a clear warning providers are addressing revenue enhancement, not network enhancement.
3. Claims of network congestion backed up with raw data, average usage per user, and the costs to address it are all labeled proprietary business information and are not available for independent inspection.

There are a few other issues:

In the world of broadband data caps, the caps recently implemented by AT&T are particularly aggressive. Unlike competitors whose caps appear to be at least nominally linked to congestions during peak-use periods, AT&T seeks to convert caps into a profit center by charging additional fees to customers who exceed the cap. In addition to concerns raised by broadband caps generally, such a practice produces a perverse incentive for AT&T to avoid raising its cap even as its own capacity expands.

In North America, only a handful of providers use peak-usage pricing for wired broadband.  Cable One, America’s 10th largest cable operator is among the largest, and they serve fewer than one million customers.  Virtually all providers with usage caps count both upstream and downstream data traffic 24 hours a day against a fixed usage allowance.  The largest — Comcast — does not charge an excessive usage fee.  AT&T does.

Furthermore, it remains unclear why AT&T’s recently announced caps are, at best, equal to those imposed by Comcast over two years ago.  The caps for residential DSL customers are a full 100GB lower than those Comcast saw fit to offer in mid-2008. The lower caps for DSL customers is especially worrying because one of the traditional selling points of DSL networks is that their dedicated circuit design helps to mitigate the impacts of heavy users on the rest of the network. Together, these caps suggest either that AT&T’s current network compares poorly to that of a major competitor circa 2008 or that there are non-network management motivations behind their creation.

AT&T has managed to create the first Internet version of the Reese's Peanut Butter Cup, combining Comcast's 'tolerated' 250GB cap with AT&T's style of slapping overlimit fees on data plans from their wireless business.

As Stop the Cap! has always argued, usage caps are highly arbitrary.  Providers always believe their usage caps are the best and most fair around, whether it was Frontier’s 5GB usage limit or Comcast’s 250GB limit.

AT&T experimented with usage limits in Reno, Nevada and Beaumont, Texas and found customers loathed them.  Comcast’s customers tolerate the cable company’s 250GB usage cap because it is not strictly enforced — only the top few violators are issued warning letters.  AT&T has established America’s first Internet pricing version of the Reese’s Peanut Butter Cup: getting Comcast’s tolerated usage cap into AT&T’s wireless-side overlimit fee.  The bitter aftertaste arrives in the mail at the end of the month.

Why establish different usage caps for DSL and U-verse?  Marketing, of course.  This is about money, remember?

AT&T DSL delivers far less average revenue per customer than its triple-play U-verse service.  To give U-verse a higher value proposition, AT&T supplies a more generous usage allowance.  Message: upgrade from DSL for a better broadband experience.

Technically, there is no reason to enforce either usage allowance, as AT&T DSL offers a dedicated connection to the central office or D-SLAM, from where fiber traditionally carries the signal to AT&T’s enormous backbone connection.  U-verse delivers fiber to the neighborhood and a much fatter dedicated pipeline into individual subscriber homes to deliver its phone, Internet, and video services.

A usage cap on U-verse makes as much sense as putting a coin meter on the television or charging for every phone call, something AT&T abandoned with their flat rate local and long distance plans.

Before partly granting AT&T’s premise that usage limits are a prophylactic for congestion and then advocate they be administered with oversight, why not demand proof that such pricing and usage schemes are necessary in the first place.  With independent verification of the raw data, providers like AT&T will find that an insurmountable challenge, especially if they have to open their books.

[flv width=”640″ height=”368″]http://www.phillipdampier.com/video/Bell’s Arguments for UBB 2-2011.flv[/flv]

Canada’s experience with Usage-Based Billing has all of the hallmarks of the kind of consumer ripoff AT&T wants Americans to endure:

• A provider (Bell), whose spokesman argues for these pricing schemes to address congestion and “fairness,” even as that same spokesman admits there is no congestion problem;
• Would-be competitors being priced out of the marketplace because they lack the infrastructure, access, or fair pricing to compete;
• Big bankers and investors who applaud price gouging and are appalled at government checks and balances.

Watch Mirko Bibic try to rationalize why Bell’s Fibe TV (equivalent to AT&T U-verse) needs Internet Overcharging schemes for broadband, but suffers no capacity issues delivering video and phone calls over the exact same line.  Then watch the company try and spin this pricing as an issue of fairness, even as an investor applauds the company: “I love this policy because I am a shareholder.  That’s all I care about.  If you can suck every last cent out of users, I’m happy for you.”  Finally, watch a company buying wholesale access from Bell let the cat out of the bag — broadband usage costs pennies per gigabyte, not the several dollars many providers want to charge.  (11 minutes)

Remember when Bell’s head of government affairs Mirko Bibic told Parliament usage-based billing was necessary because he didn’t think it fair that all Canadians should pay for “heavy users” of the company’s Internet service?  That was a few months ago.  This is April — time for a rate increase that will jack Bell broadband service rates up an additional $3 a month, effective in May.  That’s a rate increase every customer will pay, and comes with Bell’s everyday Internet Overcharging scheme — usage caps and overlimit fees.

Stop the Cap! reader Alex in Quebec sent a copy of his bill showing Bell’s “Price Update.”  They don’t even want to call it a rate increase.

Bell's notification to customers in Quebec their bills are going up.

“Bell Canada will increase their Internet rates by as much as 15% (for Québec ”Essential” users),” Alex says. “Although $3 may seem like a negligible charge, it especially affects those with budget Internet plans, such as Essential, E Plus, and Performance ‘Fibe’ 6.”

Bell’s website cannot even get the story straight, originally telling customers their overlimit fees would now be rounded to the nearest gigabyte, instead of megabyte.  A Bell spokesperson tells Stop the Cap! that is a typo — they really still mean megabyte.

Bell is one of the few phone companies out there actually increasing their long distance calling rates as well, Alex tells us.  The original announcement came around the same time as the earthquake in Japan, underlining how essential long distance can be during natural disasters.  Many cable companies have waived long distance fees to Japan altogether.  Not Bell.

The rate increases mean customers like ‘Jackorama’ in Hamilton will pay $56.90 for “up to 7Mbps” ‘Performance DSL’ service.  After HST fees, he’ll pay $64.30 just for broadband service, with a 60GB monthly usage limit.  If he exceeds that, he’ll pay even more — $2.50 per gigabyte, or, if he knows he’ll exceed the cap in advance: $5/month for 40 GB, $10/month for 80 GB, or $15/month for 120 GB.

That also assumes Bell can count usage correctly, and there is every indication they cannot.  The company has admitted its usage meter is prone to errors — misreads they are still prepared to bill their customers.

Bell's Broadband Shell Game (image: Dave Blume)

The digital equivalent of a Trojan Horse was laid at the feet of Canadian telecom regulators Monday when officials from Bell, Canada’s largest phone company, announced they were withdrawing their controversial proposal to mandate usage-based billing on all wholesale broadband accounts.

The original proposal would have mandated that independent Internet Service Providers bill each of their individual customers a monthly fee based on their Internet usage in addition to the wholesale access rates paid to Bell all along.  The pricing proposal would have forced every ISP in Canada to abandon flat rate Internet service, raise prices, reduce usage allowances, and increase overlimit penalties.

Now Bell has told the Globe & Mail newspaper it wants to introduce something called “Aggregated Volume Pricing” instead — a plan Bell claims will shift financial penalties for “high usage” away from individual customers and onto the ISPs themselves. Bell also slashed the proposed overlimit fee from a heavily-defended-as-fair $2.50 per gigabyte to a more modest $0.30/GB, perhaps echoing AT&T’s forthcoming overlimit fee.

In fact, Bell’s revised plan is the same Internet Overcharging scheme under a new name.

The radical reduction in overlimit fees only further illustrates the “phoney-baloney” of providers attempting to monetize broadband usage under the guise of “fairness” and “congestion relief.”  Last week’s ’eminently fair’ $2.50 is this week’s ‘more than reasonable’ $0.30.

Bell exposed their hand — showing they have been bluffing about congestion all along.  An analysis of the proposed rates shows the company is still trying to target “heavy users.”  But instead of penalizing them into reducing their consumption, Bell is now seeking to monetize that usage, not control it.  By shifting aggregate usage costs to the wholesale market, Bell hopes individual customers will blame independent ISP’s for higher bills, not them.  Independent providers have to pass along their wholesale costs as part of the retail price of their service.  It’s a high tech shell game, one that consumers will always lose.

Despite this, Bell assumes the revised plan will take the bipartisan heat off its backside since it first proposed doing away with flat rate Internet service in Canada.

“With our filing today, we are officially withdrawing our UBB proposal,” said Mirko Bibic, Bell’s head of regulatory affairs. “Let’s move on, in my view, and use the CRTC hearing as an opportunity to approve those principles and get the implementation details right.”

"We don't like (Bell's proposal)."

Several Canadian officials were not impressed and one — Industry Minister Tony Clement — said exactly that.

Canada’s consumer groups and politicians have the giant telecom company on the run after using Bell CEO George Cope’s own words against him.  Cope openly admitted in conference calls with investors UBB had everything to do with monetizing broadband usage for profit.

Bell’s attempt to serve warmed-over Internet Overcharging from a new recipe isn’t flying among consumer groups either, who recognize it as more of the same leftovers, just under a new name.

Bill Sandiford, who heads a coalition of wholesale ISPs called the Canadian Network Operators Consortium, told the Globe & Mail Bell was simply presenting its usage-based pricing model in a more acceptable guise.

“We don’t think this is an about-face. It’s the same thing, just dressed up differently,” Mr. Sandiford said. “We don’t like it. It’s still wholesale UBB.”

Openmedia.ca, an online activist group, said Bell’s new proposal shows consumers are having an impact, but the fight is by no means over.

“We’re pleased that Canadians will now have the option to use indie ISPs like Teksavvy and Acanac to access the unlimited Internet,” said OpenMedia.ca’s Executive Director Steve Anderson. “This is a giant step forward for the Stop The Meter campaign, and a victory for those who support competition and choice in Canada’s Internet service market.”

“While this is a positive move, it is only a Band-Aid solution to a much larger problem. We at OpenMedia.ca hope the CRTC takes Bell’s submission as a sign that widespread usage-based billing is not an acceptable model for Internet pricing, and that it creates policy to support the affordable Internet.”

Cope

In another example of providers telling the public (and lawmakers) one thing, while saying something very different to their own shareholders, Bell Canada’s CEO made a remarkable admission about why the company imposes Internet Overcharging schemes on its customers:

“As we see a growth in video usage on the Internet, making sure we’re monetizing that for our shareholders through the bandwidth usage charges,” CEO George Cope told listeners in a financial conference call last autumn.

That is a far cry from the story Mirko Bibic, Bell’s government affairs representative tells to anyone who will listen. Michael Geist, a Canadian syndicated columnist on technology law issues notes Bibic has told a different tale while appearing before Parliament’s Standing Committee on Industry to answer questions on usage based billing held in February.

For Bibic, usage-based billing is about “fairness” and solving alleged congestion issues.

“As for small businesses, which are generally on the same network as residential users, what you have is really a case where the congestion during peak periods is largely a residential phenomenon. It’s in that area that we’ve addressed the usage-based billing issue, and all we’re asking the CRTC for is to follow a fundamental principle of fairness,” Bibic told MPs. “If we asked 97% or 98% of Canadians if they would be prepared to pay more so that the 2% of heaviest users pay less, I’m pretty sure of what the answer would be.”

Bibic

Bibic’s argument has been repeatedly undercut by his own bosses, Geist notes.

In August, Cope told shareholders “our data revenue growth was 3.8% for our Residential Services business, particularly driven through an increase in Internet ARPU of 3.3%. And interesting, almost all that increase now coming from usage based billing as the demand for Internet use explodes through the use of video services, and we’re continuing to see an increase in the revenue per customer.”

By November, Cope was turning Bibic’s bandwidth “fairness and congestion” lemons into lemonade, celebrating data revenue growth of 5 percent, “driven principally by the bandwidth usage revenue being up 83% year-over-year.”

Cope not only decapitates his company’s arguments for usage-based billing, he also shines the light on who they will impact: if providers are to be believed that usage caps will only affect a tiny percentage of customers, how can data revenue be up a whopping 83 percent year-over-year. Are a handful of Canada’s “heavy” broadband users responsible for this growth, or are an increasing number of Canadian consumers finding themselves over the “generous” limits Bell has established because they used their broadband connections to stream movies and television shows.

As Geist notes, “no one should be under the illusion that UBB is anything other than a revenue maximization strategy in a market with limited competition, not one premised on fairness or network congestion.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/UBB is Nonsense.flv[/flv]

François Caron produced this video succinctly smashing the myth that “usage-based billing” and “usage caps” are about fairness or fight congestion.  In this case, Caron refers to Canadian providers, but the story is much the same south of the border.  These Internet Overcharging schemes are nothing more than an effort to control what you can do with your broadband connection.  AT&T wants a 150-250GB usage cap on broadband, but has limitless capacity for television and telephone service.  They also have $39 billion to buy T-Mobile, but need to overcharge you for broadband service.  Bell in Canada wants -every- broadband user in Canada to pay this ripoff pricing.  Share with anyone who thinks paying for usage is anything like paying for water, gas, or electricity.  It’s not!  (6 minutes)