[Updated 1:00pm ET: Stop the Cap! reader Michael Chaney found a video interview done last fall with some Australian providers falling all over themselves to praise themselves for Internet Overcharging schemes, and suggest American providers learn from them how to get away with trying the same thing.]

The group managing director of Telstra (Australia), Justin Milne, wants you to know that the era of free love is over.  They are sick and tired of letting content producers like Ninemsn (a partnership between Australia’s Nine Network ((think ABC or CBS)) and Microsoft’s MSN) use their pipes for free to send those video clips to their customers.  It’s time to break out the checkbooks and start paying them for freeloading on their network.

In a commentary for ZDNet Australia, Milne equates Net Neutrality with greed and “economic self-interest dressed up as moral virtue.”  Pot to kettle, especially when he quotes Franklin Roosevelt:

Franklin Roosevelt said during the Great Depression that heedless self-interest reflected not only bad morals but bad economics too.  Seventy years on, his advice still rings true.

Yes it does, and Telstra is a perfect example of that in practice, offering dreadful broadband service with paltry limits on usage and heavy throttles on speed when one exceeds them, all for a substantial price.  Telstra’s own self-interest leaves a lot of Australians despising the provider and begging for alternatives.  The morality of a company that now wants content providers, with whom it has no business relationship, to pay them money to reach their customers, can be left to the reader’s determination.

This is a tune we’ve heard before.  AT&T’s former CEO Edward Whitacre was the guy who first lit the flame to the gas line of abusive provider tactics using generally the same language:

How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?  (11/07/05)

Justin Milne

After Whitacre was educated that providers already pay hosting fees, infrastructure and licensing costs, and provide the very stuff that drives consumers to sign up for AT&T’s broadband services (and pay them for it) in the first place, Whitacre did a full reversal three months later:

“Any provider that blocks access to content is inviting customers to find another provider. And that’s just bad business.” (3/21/06)

Milne follows in Whitacre’s earlier footsteps, except he wants to be paid by everyone.  His customers are already subjected to limits on usage, which have limited Australia’s multimedia online experience years behind most others, and now he wants to have the money he earns from Internet Overcharging -and- the right to limit content that reaches his customers to only those who pay Telstra for the right to deliver it:

“Some content providers such as ninemsn argue that Telstra should subsidise the cost of the ninemsn customers visiting their internet sites. We might also assume [they] would prefer petrol to be free for their cars, and Hayman Island would like air travel to the resort free,” Milne wrote.

“But Shell, Qantas and Woolworths do not give their services away for free. Just like BigPond and the rest of Australia’s ISPs, they need to charge their customers a fee so that over time their investment is recouped,” he said.

Of course, Shell, Qantas and Woolworths only charge once for their products and services.  They don’t install a toll booth on a road and claim that because a full petrol tank weighs more than a near-empty tank, there needs to be a surcharge toll.  Qantas doesn’t send people down the aisle on a flight with a collection plate demanding more money for your ticket because the plane was packed.  All of Australia’s ISPs charge their customers for providing broadband connectivity.  Telstra does as well.  The difference is that Telstra wants to charge its customers a fee and also charge the websites you choose to visit a “transport fee” on top of that.  Your bill as a customer doesn’t go down because of “cost sharing.”  Telstra’s profits simply go up.

Milne’s problem with Net Neutrality is its core principle that all legal data traveling across the net must be treated equally.  That means Telstra has no way to enforce their HissyFit.  In the absence of Net Neutrality, they can block, limit, or throttle those that refuse to pay them.

The cost of the infrastructure to support this traffic has been borne almost entirely by internet service providers, and not by the publishers. In Telstra’s case alone, the company has invested billions of dollars in the Next G mobile broadband network covering 99 per cent of Australian consumers, the HFC cable network in major cities and the extensive ADSL network.

Unfortunately there is no magic pudding, so this investment must be repaid by the beneficiaries of the internet — the users on the one hand, and the publishers who seek to make money from those users through advertising and subscriptions.

Milne almost suggests they did this out of the goodness of their heart, and their investment was not going to be paid back.  The fundamental reality is that subscribers to those services are Telstra’s customers and they pay for that service, such as it is.  That is where that investment will be recouped.  Demanding a company that has no business relationship with your company to pay up or else face the potential of being cut off is akin to extortion.

I offered Milne two alternative suggestions:

• Expand your network to create infrastructure suitable to meet the needs of your subscribers, who will sign on in greater numbers to your service.
• Create hosting platforms and services at attractive prices to content providers who will use your service to host their content (and pay you for actually doing something for them).

Barring that, this is nothing but a HissyFit from another provider looking for a payday.

Michael Chaney, one of our readers, discovered this video interview compilation done last fall by ZDNet.  Enjoy the Internet Overcharging excuse making, where the customer becomes the enemy, and the creativity to find new ways to charge more in without bounds.

“The attempt is being made certainly in the UK but also in the US to push that cost onto the content owner by saying, you pay, and we’ll prioritise your traffic,” he said. “[And] if you don’t pay, your traffic will be really crap.”

[flv width=”480″ height=”360″]http://www.phillipdampier.com/video/ZDNet Australia Providers 2008.flv[/flv]

Beaumont, Texas

Stop the Cap! reader Mark who went to war with Time Warner Cable in the Beaumont area when they tried to impose Internet Overcharges on his account (and got his money back), found himself back with AT&T after dropping Time Warner Cable.  Mark is among many who made it clear that imposing these kinds of billing schemes is not up for discussion — he will cancel service immediately.

Before Mark returned to AT&T, he called the company’s customer service sales center and asked about usage limits and other pricing tricks and traps, and they responded, “there are no cap limits.”  That’s because for most of AT&T’s coverage area, that’s true… for now.  The company has been testing Internet Overcharging with usage allowances and overlimit fees in two cities – Beaumont, Texas and Reno, Nevada.  Unfortunately, not every AT&T sales representative seems aware of this fact, even when you provide them with an address and telephone number within the test area.

“We received the modem and before I had opened the package a certified letter arrived from AT&T,” Mark says.

“It was a letter stating that AT&T had introduced usage limits, and I called them immediately to  cancel,” he said.

When you live in a city with two broadband providers, both engaged in Internet Overcharging, you discover you run out of options very quickly.  Or do you?

“I called AT&T and talked to an upper level retention agent named Jennifer, and told her if I could not get a flat rate Internet plan from AT&T, I wanted to also cancel my two phone lines and my business Yellow Pages ads,” Mark said.

Even when providers claim to “listen to their customers” on issues like this, the one word they always truly understand is: CANCEL.

“Jennifer immediately agreed to note my account that there would be no usage overlimit charges, which effectively gave me flat rate service,” Mark said.

The AT&T representative also sent him a $75 gift card and promised to investigate getting him faster DSL service on the Elite tier he tried before, and failed to receive.  To date, Mark hasn’t been billed one cent more than his standard monthly rate, despite AT&T’s ongoing “tests” in Beaumont.  As long as that remains true, and AT&T works on getting him more reasonable speeds, Time Warner Cable has lost a customer, potentially for good.

Mark feels he’s living on the front line of a battle between consumers and providers over what is rapidly becoming a utility as important as telephone service.

“I feel the Internet is going to pass Americans by if something is not done,” Mark adds.  “I personally will not pay the kind of fees the ISP’s want to charge.”

Mark is also curious why these “tests” are being imposed on residential customers, and not business customers who are charged prices providers claim are justified considering their “higher usage.”

“Starbucks and Books a Million all have Internet service from these companies and provide it to their customers,” Mark notes.  “Were they exempt?”

Time Warner Cable’s testing, now suspended, never involved commercial accounts.  AT&T doesn’t appear to have included their business accounts in any tests either.

If you are an AT&T customer in Beaumont or Reno, you may have a shot at exiting a test you never wanted to be a part of in the first place.  Simply insist on either being exempted from Internet Overcharging schemes, or take your business elsewhere (Time Warner Cable in Beaumont, for now, may be your best option.)  Retention specialists may be the only representatives empowered to exempt you, so you may have to indicate your intent to cancel service before reaching one.

If you are under a contract with an early termination fee, ask the competitor if they’d be willing to cover your exit fee.  Time Warner Cable is doing that in some markets.  If not in full, negotiate and see how far they’ll go.

Report any results of your efforts to us.  We’ll pass the word on to others.

One of the arguments used by those who want to engage in Internet Overcharging is that people already “pay for what they use” for gas and electric service, so why shouldn’t they adopt the same attitude towards Internet service.

Historically, people did used to pay for their usage of online services, before there was a World Wide Web.  CompuServe, QuantumLink, PeopleLink, Delphi, GEnie, AOL, among many others used to provide access to dial-up users for a fee which varied depending on the amount of time spent accessing the service.  Rates during business hours were outrageous (CompuServe charged upwards of $12-16 per hour in the 1980s), but more reasonable during the evenings.

But as costs to provide the service declined, providers rapidly abandoned that type of pricing for flat rate, unlimited access for one monthly price.  Internet Service Providers worked the same way, with customers first using dial-up modems to connect for one monthly price.  Nobody worried about watching the clock or meters.  It has worked that way ever since, with highly profitable results for broadband providers.

MetroPCS Coverage Map (click to enlarge)

Now, some of these companies hunger for more of your dollars, and they are attempting to convince you their pricing should be similar to utilities like gas, electricity, and water (while conveniently not allowing themselves to be regulated like those providers).  They scrupulously avoid comparing their service with telephone companies, which are really the closest cousins to broadband service.

Now we know why.  While some broadband providers want to move away from flat rate pricing, telephone companies are moving toward flat rate pricing.

In addition to unlimited local, statewide, and nationwide flat rate long distance plans, MetroPCS, a regional prepaid mobile telephone provider, has announced a new unlimited international flat rate calling plan for just $5 per month.

To be eligible for $5 Unlimited International Calling,  customers must choose an unlimited calling plan starting at $40 per month.  For an additional $5, customers get unlimited calling to 100 countries.

MetroPCS sees this new international flat rate plan as a “game changer” in the industry, drawing large numbers of new subscribers who love to call overseas.  The company may even attract tourists who sign up with a “throwaway” basic mobile phone just for the duration of their visit.  The costs for the service are dramatically lower than roaming rates, especially for international calls, even with the price of the phone.

The only downside?  MetroPCS operates in only a limited number of cities, although they maintain roaming agreements with Leap Wireless (Cricket) to extend their coverage.  Once one company offers flat rate international calling, others will certainly follow, potentially establishing a new paradigm for truly unlimited mobile phone calling, regardless of where you call.

"As you can see I'm only at 26.35% and (Cogeco's) notification says I'm at 85% (of my allowance)?" (click to enlarge)

“You can trust us, we’re the cable company!”

One major implication of Internet Overcharging schemes is putting your faith in an industry that already strains credulity when it comes to justifying rationing and price gouging your Internet access.

Back in April, we raised the issue of  “meters” and “gas gauges” being used to measure customer usage having absolutely no oversight or verification that the “readings” they were providing actually represented your usage.

Our concerns were justified.

Broadband Reports has been tracking Cogeco customers finding their own measurements completely at odds with the Canadian cable operator that often reports far different numbers.

In the end, whose “meter” will Cogeco trust?  Theirs of course.

Here are some Cogeco customers sharing their frustrations:

“Well today is Friday the 19th of June and the Monitor is still down and with this being the month that we have to pay you would think the system would be up and working properly. I have a strange feeling that come some time next month people are going to open there bills and see extra charges that shouldn’t be there and Cogeco is going to end up losing a bunch of customers.”

“I don’t understand how they can charge for overages if they can’t properly meter their services.”

“Mine is showing 0 for both upload and download for the past 4 days. Then again I am not going to complain about it not reporting my usage. I kinda hope it stays this way.”

“Here’s a direct quote from my overage email received on Friday: “You have reached 100% of your Internet usage monthly limit. You have reached the MAXIMUM of your Internet usage monthly limit. Additional usage charges will be credited this month. Charges for additional usage will not take effect until June 2009.  I also show 40GB of usage on June 1st while each day after shows normal daily habits. Good job Cogeco. Combined with the increased rate for the Pro package, your overage charges are already forcing me to consider other tv and internet providers.”

“I think what this might do is force users to suck down every byte of their Cap to use their connection to the fullest. Before you never cared, because you could always just get what you wanted, when you wanted. But now since its monitored I know I am going to make sure that take full advantage every month.”

“Not showing any bandwidth for the past 3 days – how can Cogeco prove the authenticity of the meter? Bull.”

“This is exactly what I was thinking. Three days without any change to the meter, and I am supposed to pay for this?”

“This morning, it is telling me am I at 92%… there’s no way I did almost 12 GB of transfer yesterday. What is up with this thing? At this rate, I’m going to probably have to fork over some $$ for extra bandwidth this month, but I’m really wondering how accurate this thing is.”

“I called in to see what I’m at for the month, the rep said 68GB – monitor showing 105GB with 4 blank days. Who the hell is right?”

“First time I pay an overage I’m canceling.”

“Even if these are not governed by Weights and Measurements Canada, there would be a lawsuit for billing on services not rendered.  I’m paying for 100GB, and being overbilled at 23GB. Breach of contract, fraud, take your pick.”

Cogeco, following in the footsteps of Rogers, Canada’s largest cable operator, has mailed letters home to residential subscribers informing them that their new Internet Overcharging scheme and fees are real and will apply to broadband accounts that exceed their arbitrary usage allowances.  Since the spring, Cogeco has been showing the Internet Overcharges on subscriber’s bills, but not actually billing them.  That is set to change, however, and many residents in Ontario and Quebec are quite upset.

“Cogeco can bite me. As soon as I manage to scrounge up a second DSL modem I’m gone.”

“I’m waiting for the Cogeco trolls to come out of the woodwork so they can claim how competitive and affordable that plan is.”

“I am starting to hate Cogeco very much, I am tempted to cancel my internet and my digital TV service for spite.”

“Vote with your wallets guys, I did. And now with the increase I’m going to cancel my HD access and return the receiver — enough is enough. I’ll be down to Basic Digital Cable and if they keep increasing prices, that will go too.”

“Ditto! Price increase is THE LAST STRAW for this 10 year + customer!”

Cogeco’s limits also come with overlimit fees that are particularly harsh on casual and power users.  In Canada, many overlimit fees are currently capped at a maximum amount, and do not continue to increase beyond that maximum.  Lite users face a $2.50/GB overlimit fee (maximum $30), despite representing almost no usage impact on Cogeco’s network, and “Pro” users face a $1/GB overlimit fee, but face a maximum of $50 in overlimit penalties, despite paying a much higher up-front monthly subscription fee.

In a nutshell,

• Lite – 10GB/mo bitcap – $2.50 per GB over to a maximum of $30
• Lite Plus – 20GB/mo bitcap – $2.00 per GB over to a maximum of $30
• Standard – 60GB/mo bitcap – $1.50 per GB over to a maximum of $30
• Pro – 100GB/mo bitcap – $1.00 per GB over to a maximum of $50

Broadband providers in the United States always promise that if they are permitted to introduce Internet Overcharging schemes, it will be “fairer” for all customers, because “heavy users should pay more for what lighter users don’t do.” Providers also typically allude to network improvements and no widespread price increases.

But as Canadians have already discovered, big telecommunications firms operating with virtual duopolies can have their cake and eat it too.

Cogeco customers now face the prospects of classic Internet Overcharging — usage allowances, overlimit fees and penalties, and “fair pricing,” but after the company implemented these schemes, consumers got a reminder of what cable operators like Cogeco are also capable of — widespread rate hiking.

New Rates: We’re improving our services so you’ll continue the best today and in the future (effective July 17, 2009):

Internet Pricing

Standard – With TV or Phone…..current rate: $44.95……new rate: $45.95

Standard – Standalone……..current rate: $52.95………..new rate: $54.95

Pro – With TV or Phone……..current rate: $69.95………..new rate: $76.95

Pro – Standalone……………..current rate: $74.95………..new rate: $81.95

Internet Overchargers like Cogeco consider “fair share” to mean giving an equal amount of dollars from yourself to them.  That’s fair, right?

It’s simply more evidence to this universal truth, a fact of life every North American should already know:

Cable bills never decrease, they only increase, unless you drop services.

When a cable company tells you they have a plan to guarantee “fairness,” be sure to remember what represents “fairness” to you may mean something entirely different to them.