An Associated Press report gave credit to Stop the Cap! for getting first official word that AT&T ended its Internet Overcharging experiment in Beaumont, Texas and Reno, Nevada.

Stop the Cap! reader Scott Eslinger managed to get an AT&T customer service representative to read aloud a confidential memo distributed by the company terminating the experiment effective April 1st.  Because AT&T never disclosed the end of the experiment to impacted customers, the coverage by the wire service should help spread the word to residents that the rationing is over:

The phone company confirmed Tuesday that it is no longer holding DSL subscribers in Reno, Nev., and Beaumont, Texas, to data consumption limits and charging them extra if they go over.

With AT&T’s retreat, no major Internet service provider is championing the idea of charging subscribers for their data usage. Time Warner Cable Inc. was a major proponent of the idea and also conducted a trial in Beaumont, but backed away last summer after its plan to expand metered billing to other cities met fierce resistance from consumers and legislators.

AT&T’s trial started in November 2008 in Reno, and was later extended to Beaumont. It ended on April 1 this year, said AT&T spokeswoman Dawn Benton.

“We’re reviewing data from the trial, and this feedback will guide us as we evaluate our next steps,” Benton said.

AT&T should carefully review feedback from customers who despise usage limits and overlimit fees.  Studies show the overwhelming majority of customers do not like their broadband usage artificially limited with arbitrary allowances and overlimit fees, and customers will dump providers who ignore their wishes.

AT&T’s experiment never saved consumers a penny — the company simply slapped allowances as low as 20 GB per month on existing speed-based tiers.  Customers already face practical usage limits from Internet providers.  Those purchasing slower speed tiers are usage limited by those speeds.  Those who pay for higher priced, faster tiers benefit from naturally greater allowances those speeds provide.  Adding a new layer of limits only discourages customers from using the service they already pay good money to receive.  Besides, as profits explode in the broadband sector, the costs (and investment) to provide the service have declined, wiping out the justification for these schemes.

Stop the Cap! opposes all of these Internet Overcharging schemes.  While many providers seek to demagogue some broadband users as “data hogs” or “pirates,” the fact is today’s “heavy user” is tomorrow’s average consumer.  High speed broadband has the potential to revolutionize education, health care, private business, and entertainment, but not if a handful of major providers decide to end innovation by rationing the service to its customers.

Sprint will not limit use or throttle speeds for users of its 3G or mobile WiMax networks, despite a report from Engadget claiming the company was on the verge of applying speed throttles on its users exceeding 5 GB per month of usage.

A Sprint spokesman told Dow Jones Newswires any limits would apply only for Sprint mobile broadband data users roaming on other companies’ data networks using modems attached to laptops or personal computers.  Smartphone users are not affected.

“Sprint does not, nor plan to limit speeds, nor change a customer’s ability to use any particular application or Internet site,” said Sprint spokesman Mark Elliott.

However, the company has made it clear it can temporarily suspend a customer’s ability to roam on Sprint’s data network if “excessive usage” is detected.  Current plans provide up to 300 megabytes of service while roaming.  Higher allowances are available for purchase.  Customers will receive text messages notifying them when they reach 75 percent and 90 percent of their allowance.  After that, Sprint can cut off service until the next bill cycle begins.

Sprint has to pay higher fees when customers roam on non-Sprint networks, hence the usage limit.

Sprint, America’s third largest wireless carrier behind Verizon Wireless and AT&T, is trying to position itself as the competitive choice for customers who do not want to worry about usage allowances and overlimit fees.  The company hopes customers who are tired of escalating wireless bills will once again look beyond the two largest providers.

Goldman Sachs has reviewed the implications of Frontier Communications assuming control of millions of Verizon landline customers, and promptly downgraded their stock to a Neutral rating, telling investors the upcoming consolidation will hasten eroding revenues at Frontier.

“Consolidation of the underperforming acquired assets causes an immediate step-up in revenue erosion for FTR (-6.3% in 2010). In addition, the combined company’s initial EBITDA margins will be significantly below those of legacy FTR (pro forma of 48.0% in 2010, 470 bp below legacy FTR).”

Analysts added, “We expect longer term EBITDA margins of 50%-plus, driven by synergy realization (we forecast $450 mn/year by 2013), and moderating revenue declines, as FTR is able to bring a more localized focus to assets that were not a primary focus inside of a much larger Verizon entity. We forecast 2011/2012 FCF of $950 mn/$921 mn, as synergies and margin expansion only partially offset continued (but moderating) revenue erosion.”

In English, that means Frontier will benefit from its larger customer base in reducing expenses on a per-customer basis, and could become a big enough player to realize some benefits from rolling out services to a larger number of customers nationwide, but those benefits will be tempered by the ongoing loss of revenue as customers dump Frontier landlines for wireless and, where available, switch to a cable modem product to get better speeds and consistent service that Frontier DSL does not provide.  Losing that 5 GB monthly usage allowance won’t hurt either.

Frontier is betting a good deal of the company on expanding broadband service in its largely rural service areas, where many Americans are still stuck relying on dial-up or satellite fraudband, the service that promises a broadband experience but doesn’t come close to actually delivering one.

As long as Frontier doesn’t face competition in its markets, it can deliver 1-3 Mbps DSL service for up to $50 a month and bank those profits as a firewall against ongoing loss of landline revenue.  But if new players arrive, such as LTE wireless, WiMax, cable, or municipal fiber, Frontier’s business plan could go awry in a hurry.

Frontier also continues to pin its hopes on its enormous payout of dividends — sometimes exceeding 12 percent.  The stock is currently the best dividend payer in the S&P 500.  With dependable dividends and the ability to throw back free cash to investors, shareholders can’t ask for anything more.  In the first quarter alone, free cash flow amounted to $152 million and the company paid a dividend to shareholders representing 52 percent of that amount.  That’s $152 million Frontier won’t be spending to upgrade their service or have on hand to pay down debt.

For independent legacy landline providers like Frontier, reducing that dividend could spell disaster for the company’s stock price. Even investors understand this, which is why these kinds of cautionary notes are often attached to coverage about the company:

A cautionary note: telecoms companies with large fixed line exposure generally yield high dividends presently because investors do not believe their revenues and income levels are sustainable as people continue to substitute mobile phones for fixed lines.

LUS Fiber is a municipally-owned provider competing in Lafayette, Louisiana

Lafayette Utility Systems’ LUS Fiber has filed a formal complaint with the Federal Communications Commission accusing the cable industry co-op of blocking the company from getting the favorable discounts and access to cable networks its competitor Cox Cable receives.

LUS Fiber Director Terry Huval said the blockade against LUS Fiber could ultimately cost the city millions and deny subscribers access to popular cable networks.  Huval accused its rival, Cox Cable, of being behind the repeated denials of membership for the Louisiana municipal cable system.

The municipal provider issued a news release stating that its complaint to the FCC originally was joined by municipal providers in Wilson, N.C., and Chattanooga, Tenn., but the National Cable Television Cooperative has since admitted those systems, while keeping LUS Fiber out.

“The NCTC opened membership to two other municipally-owned telecommunications companies that are very similar to our own Lafayette operation and in the same week refused to admit us on the same terms and conditions,” Huval said. “The only difference among the three systems is that our major cable competitor is NCTC’s largest member as well as a member of NCTC’s board of directors.”

LUS Fiber's primary competitor is Cox Cable

The NCTC is critically important to many medium and small sized cable companies who together collectively bargain access and the best possible volume discounts for hundreds of cable networks and broadcasters.  Those discounts are substantial, considering only Comcast gets larger discounts than the NCTC’s group membership.  NCTC membership also frees members from the tedious one on one negotiations cable systems would otherwise be required to conduct to obtain and maintain agreements with cable programmers.

Keeping LUS Fiber out means the municipal provider could be left charging higher prices than Cox charges for cable-TV in Lafayette.

Federal law appears to be on the side of LUS Fiber as part of the 1992 Cable Act that consumer groups fought for:

It shall be unlawful for a cable operator, a satellite cable programming vendor in which a cable operator has an attributable interest, or a satellite broadcast programming vendor to engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers.

The NCTC operates a spartan website at nctconline.org

As someone who personally was involved in the passage of that legislation, the ironic part is we were fighting -for- the NCTC back then.  Of course, those days the cooperative was made up of wireless cable providers, utility co-ops, municipal co-ops, and other independent cable systems that were constantly facing outright refusals for access to cable programming or discriminatory pricing.  Satellite dish-owners were also regularly targeted.  NCTC was a friendly group in the early 1990s but has since become dominated with larger corporate cable operators, especially Cox Cable and Charter Communications.

LUS builds a compelling case:

NCTC and its dominant members have not only grown significantly in size and power, but they have become increasingly anti-competitive themselves. They are now undermining Congress’s pro-competitive intent by using denial of membership in NCTC as an anticompetitive device to insulate NCTC’s existing members from competition by new entrants.

Specifically, in 2007 and 2008, NCTC imposed a “moratorium” on new members, claiming that it needed time to review its membership policies. In late 2008, NCTC supposedly lifted the moratorium, posting new application procedures on its website. These procedures, NCTC stated, would ordinarily result in admissions within 60-120 days. LUS promptly applied for membership, furnishing all of the information that NCTC required. In reality, NCTC only lifted the moratorium for private-sector cable operators, including Cox and Charter. For LUS and other municipal cable operators, NCTC’s claim to be open to new memberships turned out to be little more than a deceptive sham.

In short, as of April 2010, despite publishing procedures suggesting that new members would be admitted within 120 days, NCTC had not admitted a single new public communications provider during the year and a half since it supposedly lifted its moratorium.

Without access to programming at competitive prices, no one would consider switching to a municipal provider that charged higher prices than the incumbent.  The NCTC’s increasingly secretive and erratic admission of new municipal members provides ample ammunition for those on the outside looking in to accuse the group of unfair practices.