[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CNN Net Neutrality Primer 12-21-10.flv[/flv]

For those who may not fully grasp Net Neutrality, CNN’s Ali Velshi delivered a primer that helps explain how Internet traffic moves, how providers want to manage that traffic, and the implications of not enforcing robust Net Neutrality.  Velshi’s explanation delivers both sides of the argument with only a few minor errors.  We’d remind him consumers already paid for the big pipe depicted in the video.  Consumers should not have to pay twice for the same thing.  Less useful is CNNMoney Staff Writer David Goldman, who got several points wrong, especially about wireless. (8 minutes)

Verizon Wireless is willing to be aggressive to keep your business — if you are a good customer that pays your bill on time.

The company has been trying to deal with a growing number of its long-time customers who have gone “off-contract” and are still using phones they bought two, three, and even four years ago.  The issue?  Pricey data plans.

“A Verizon Wireless phone bill for a family of four can easily exceed $200 a month when smartphones come into play,” writes Stop the Cap! reader Jim in Honeoye Falls, N.Y. “Forget about $1.99 mystery data charge-inspired bill shock.  Just getting your regular monthly bill can cause your hair to fall out.”

Jim says his recent visit to Verizon left him numb when he ran the numbers about adding his teen children to his existing Verizon account.

“My daughter is fed up with AT&T and she wants out at the end of her contract, and she’s willing to sacrifice her iPhone to manage it,” Jim says. “Her brother shares the account and he’s offered choice words about AT&T’s dropped calls to all in earshot.”

“But I was stunned by the Verizon in-store representative who started throwing numbers at me about texting, data fees, and insurance — not to mention plan changes,” Jim said.  “I don’t remember cell phone service ever being this expensive.”

Jim is grandfathered into a plan sold by Verizon around five years ago, one that eats mobile web usage from the plan’s monthly minute allowance.

Those days are long gone.  A Verizon representative told Stop the Cap! the company did away with that arrangement “for the benefit of customers.”

“Customers would sometimes forget and leave their phone running a data application overnight and consume most of their plan’s minutes for the month,” was the story told to us.  “Customers would be angry and upset when they realized their minutes were gone.”

We countered it’s far worse to get a bill reflecting data use charged at $1.99 per megabyte, per instance — Verizon’s current policy for customers not on data plans.  That has led to some unfortunate bill shock incidents where customers have ended up with bills in the tens of thousands of dollars.

Verizon “helped” its customers there as well — mandating expensive data plans for customers owning today’s higher-end phones.  Verizon argues a $30 a month flat rate data plan is better than being socked with a huge bill at Verizon’s extraordinary pay-per-use price.

“That’s like telling a mugging victim to be thankful they weren’t also raped,” Jim retorts.

What burns Jim about all of this is that unlimited data service plans do not include unlimited texting.

“It’s offensive that Verizon asks you to pay $30 a month to push mobile data around, but that doesn’t include a single text message,” Jim writes. “If you forget to add a text plans, it’s 20 cents a message.”

Verizon offers a budget package of 250 text messages for $5 per month.

Jim’s journey is a familiar one we’ve heard repeatedly from Verizon Wireless customers who are interested in exploring today’s advanced feature phones, but are turned off by the corresponding fees levied by the wireless carrier — fees that can dramatically increase customer bills.

“We pay around $100 a month for two lines with Verizon when all of the taxes are added up,” Jim says. “To bring my kids on board, we’d have to upgrade away from our current cell phone plan to one with at least two mandatory data plans, which would add $60 a month to our bill just for that.”

Verizon’s back-of-the-envelope calculations suggest Jim’s new Verizon bill would easily exceed $200 a month based on their usage and plan features.

“That’s crazy,” Jim feels.

Those prices cause customers like Jim to head for the door, telling Verizon to leave their account the way it was when they walked in the door.

Verizon seems to be getting that, because the company is increasingly targeting upgrade offers to contract-renewal-resistant customers, especially with family members eager to jump into smartphones.

The most welcome news — rumors the company may explore offering a FamilyShare Data Plan that carries a usage allowance, but is charged per account, not per phone.  For casual users and those more than happy to switch to Wi-Fi where available, that could represent serious savings.

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In the meantime, two promotions that are available offer some help for customers looking to upgrade:

FamilyShare – Smartphones Talk Free a/k/a $10 off data plan

Marketed in two ways, this promotion targets multi-line customers with one or more members seeking a smartphone upgrade, but do not want to have a stroke when they open the bill.

The promotion works with existing Verizon Nationwide Family SharePlans starting at $69.99 monthly access for 700 Anytime Minutes.  Add a $29.99 data plan for each additional smartphone and get $9.99 off your bill for each smartphone, per month, for the next two years. Sometimes this is pitched as “$10 off our unlimited $29.99 data plan” — because it is the price of the data plan that usually scares would-be smartphone customers back to their old phones.  Charging $20 instead of $30 is soothing enough to ease some customers on board the smartphone revolution.

“This is an ideal option for customers with a spouse or child wanting to move to a smartphone,” said Marni Walden, vice president and chief marketing officer for Verizon Wireless.

The caveats.  Your new smartphone will probably come with a two year contract extension and the primary line on the account is not qualified for the discount.  But there is an easy way around this.  If one or more lines on your account are not going to upgrade, simply have Verizon reassign one of those lines to be the primary line.  Legacy service plans no longer offered will have to be abandoned, and there is no way back to them.  This promotion expires January 7, 2011.

Talk (450 Minutes) With Unlimited Text and Data for $69.99 per month

Price conscious consumers have started giving carriers like Sprint a second look.  Rated the most improved carrier by Consumer Reports, Sprint’s aggressive pricing has begun to attract some Verizon customers.  In response, Verizon has been testing a new promotional plan that makes data and texting unlimited for one flat price.  The plan was initially open only to those who received an invitation in e-mail, but a quick call to Verizon Wireless customer service finds at least one call center that can add this plan for anyone — no invite required.

The plan’s price for single line accounts is $69.99 per month and a one year contract renewal is required for those with less than one year remaining on existing contracts (or those off-contract altogether.)  If you still have more than a year remaining on your contract, no further extension is required.

A companion FamilyShare plan delivers 1,400 minutes per month.  The monthly $139.99 price delivers service for two lines.  Each additional line is $19.99 per month, which includes unlimited texting and data.  For heavy users with several smartphones on an account, this plan can represent significant savings, and does not expire.

Caveats: Getting either plan might take a few calls to customer service.  Not every call center can add this promotion for customers.  Voice minutes might be too limited for some customers, but Verizon also offers the Friends & Family option, allowing unlimited calling to a select group of numbers.

Phone Promotions

This holiday season, selecting your new phone is probably going to be the cheapest part of your relationship with Verizon over the next two years.  The carrier is literally giving away several smartphones, offering buy one, get one deals on others.

Promotions like these from Verizon should not be the final word on pricing. Compare offers from online phone retailers and then call customer service and negotiate prices down.

Consumer advocates acquainted with the wireless market traditionally suggest the biggest savings come from online merchants like Wirefly, Dell Mobile, or Amazon.

At first glance, that advice seems sound.

Jim’s daughter and son both want the Droid X which sells for $199.99 on Verizon’s website. Verizon offers a Buy One, Get One special on the Droid X currently so the effective cost for two phones is $199.99.

But hang on a moment.  Dell Mobile (powered by Wirefly’s parent company) has the same phones for much less — $19.99 each, based on how the phones would be added to Jim’s account.  Until last evening, Dell even threw in a $25 gift card to sweeten the deal.  Excluding that, the difference in price between Verizon and Dell was a whopping $160 for the exact same phone.

Trying to narrow the difference used to be an exercise in futility for many Verizon customers.  With a market leadership position, Verizon doesn’t have to viciously compete on price.  As a result, hard fought negotiations often yielded little more than an accessory like a car charger thrown in to sweeten the deal.

But those days are starting to change, especially when Verizon considers you an excellent customer prepared to change carriers.

Lesson one for Jim was to avoid Verizon stores if he wanted the best possible deal.  As he discovered, Verizon store employees are recalcitrant about giving away the store as they try and protect their commissions and sales numbers.  Besides, many of the employees Jim dealt with seemed to know less about Verizon’s plans than he did.

Jim decided he could handle Verizon’s Smartphones Talk Free promotion, but he wasn’t about to leave $160 on Verizon’s table for the phones.  He visited a Verizon store in nearby Rochester to see what could be done about the price of the phones.

“Basically nothing was the answer,” Jim says.

“These guys will say anything to make a sale,” says Jim.  “But when you try and negotiate with them, they have little authority and less to offer.”

He reports a sales representative finally offered him free cell phone cases and a spare charger (a $100 value according to the Verizon rep — a value Jim disputes) instead of a price discount.

“I walked out,” said Jim.

While inquiring about how to place his order with Amazon, the online retailer instructed him to call Verizon directly to reconfigure something on his account before placing the order.

That was a fatal mistake… for Amazon.

“I was very surprised that the Verizon Wireless representative immediately started to fight for my business in ways the in-store reps never did,” Jim reports.

When Jim made it clear he was not about to give Verizon $160 more than he had to, the Verizon Wireless representative reviewed his account and placed Jim on hold.  Moments later, Jim learned Verizon would match Amazon’s offer.

“That was actually a relief for me because those third party online retailers have their own contracts you have to sign yourself committing to no account changes for six months, and you are never really sure whether they’ll configure the account properly,” Jim said.

Jim also scored free overnight FedEx shipping in time for Christmas and the representative promised to call him back after the phones arrived to finish setting up the account.

The only downside is that Verizon is still sticking Jim with mail-in rebates that will be fulfilled with debit cards.  His charges for the new phones will get added to his regular Verizon bill, however.  No credit card required.

Verizon’s willingness to extend offers can depend on your business relationship with the company.  Making late payments or arriving credit challenged can dramatically reduce how far Verizon will extend its hand.

Our advice to others in Jim’s position:

1. Call Verizon customer service and deal with them, not store employees when trying to negotiate the best deal.  A good phone rep will deliver discounts in-store salespeople know nothing about and won’t be willing to offer even if they did;
2. Make it about the price.  If you have a competing offer, share it with them.  Verizon can easily adjust prices downwards with their New Every Two $50 credit and do better with additional credits such as a free month of service to effectively knock your price down;
3. If they offer accessories, hold out for actual billing credits.  Buy your own accessories later;
4. Be prepared to hang up and call back if you get a difficult representative.  Some call centers are better than others;
5. Consider the competition.  Customers on individual plans might find far better deals with prepaid carriers like Page Plus that use Verizon’s network.  Or it may be time to consider a different carrier.
   

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Franken FCC Net Neutrality Plan Flawed 12-20-10.flv[/flv]

Sen. Al Franken (D-Minn.) took to the Senate floor this weekend to explain his strong opposition to the proposed Comcast-NBC/Universal merger, how some of the nation’s largest telecom companies use limited competition to maintain confiscatory pricing for service, and why feeding the Big Telecom beast with favors requested in multi-million dollar lobbying campaigns will cost ordinary Americans more money for less service in the future.  Franken’s remarks are a refreshing change of pace from the usual Congressional rhetoric, reduced to “Obama’s takeover of the Internet,” “socialist broadband,” and “Maoist net policies” we usually hear about.  It’s well worth the time to educate yourself about Big Telecom’s agenda.  (25 minutes)

FCC Chairman Julius Genachowski sold President Obama's campaign pledge, his credibility, and you down the river in a sweetheart deal with Big Telecom.

The Federal Communications Commission voted today to pass what Chairman Julius Genachowski called “Net Neutrality” — reforms that will guarantee a free and open Internet.  But critics charge any similarity to actual Net Neutrality is purely coincidental.

In a 3-2 vote along party lines, the Democratic Commissioners approved Genachowski’s framework to keep providers from blocking access to websites.

Genachowski claims the rules will protect consumers from providers controlling the free flow of online content and will provide regulatory certainty for the broadband marketplace.  Providers, who have either lined up behind the chairman or have muted their criticism of the proposal in recent days, suggest they weren’t about to censor Internet content in the first place and that Net Neutrality is a cause in search of a problem.

Public interest groups were less than satisfied, dismissing today’s proceedings as “Net Neutrality-lite,” or “Net Neutrality with more (loop)holes than Swiss cheese.”  In particular, Genachowski’s willingness to exempt wireless broadband from the rules was a very sore spot among Net Neutrality proponents and some in Congress.

“Maybe you like Google Maps. Well, tough,” said Sen. Al Franken (D-Minn.) “If the FCC passes this weak rule, Verizon will be able to cut off access to the Google Maps app on your phone and force you to use their own mapping program, Verizon Navigator, even if it is not as good. And even if they charge money, when Google Maps is free.”

Franken is convinced excluding wireless networks from open Internet rules is the first step towards a free speech calamity.

“If corporations are allowed to prioritize content on the Internet, or they are allowed to block applications you access on your iPhone, there is nothing to prevent those same corporations from censoring political speech.”

Craig Aaron, managing director at Free Press bemoaned today’s vote over rules he suggests were written by the industry itself.

“These rules don’t do enough to stop the phone and cable companies from dividing the Internet into fast and slow lanes, and they fail to protect wireless users from discrimination. No longer can you get to the same Internet via your mobile device as you can via your laptop,” Aaron said. “The rules pave the way for AT&T to block your access to third-party applications and to require you to use its own preferred applications.”

The Obama Administration is likely to claim credit for the new rules and declare Net Neutrality a campaign promise fulfilled, a claim that makes several net activists’ blood boil.

“Chairman Genachowski ignored President Obama’s promise to the American people to take a ‘back seat to no one’ on Net Neutrality,” says Aaron. “He ignored the 2 million voices who petitioned for real Net Neutrality and the hundreds who came to public hearings across the country to ask him to protect the open Internet. And he ignored policymakers who urged him to protect consumers and maintain the Internet as a platform for innovation. It’s unfortunate that the only voices he chose to listen to were those coming from the very industry he’s charged with overseeing.”

Aneesh Chopra, Obama’s chief technology officer said on Dec. 1 that the FCC proposal was an “important step in preventing abuses and continuing to advance the Internet as an engine of productivity growth and innovation.”

Genachowski’s two fellow Democratic commissioners agreed, noting the policies probably don’t go far enough, but it’s a start and they wouldn’t oppose them.  But Commissioner Michael Copps made it clear he remains unhappy with how the entire debate was managed.  He fears corporate control of broadband content will bring the same mediocrity large corporations have managed to deliver Americans over radio and television.

“I don’t want the Internet to travel down the same road of special interest consolidation and gate-keeper control that other media and telecommunications industries — radio, television, film and cable — have traveled,” Copps said. “What an historic tragedy it would be,” he said, “to let that fate befall the dynamism of the Internet.”

If today’s mild net reforms are a step forward, it’s a small one say critics like the Center for Media Justice.  They suggest the FCC’s idea of Net Neutrality offers “minimal protections” for consumers.

“Our greatest fears have been realized,” said Malkia Cyril, Executive Director of the Center for Media Justice. “The Internet can only work if it’s a truly level playing field. Telecommunications companies have used their considerable wealth and lobbying might to exclude some of the most vulnerable communities from the only protection there is from their corporate abuses. These rules aren’t fair, and they don’t provide a path to equity or opportunity. We’re deeply concerned that today’s vote sends a clear message to our communities that if you access the Internet through your cell phone, you don’t count. The FCC has sadly shirked its responsibility to protect all Internet users equally.”

All of the debate may ultimately mean nothing should one of the providers decide to challenge the new rules in court.  The Commission failed to address an earlier court decision that ruled the Commission’s regulatory framework was based on nothing more than good intentions.  The agency was toying with the idea of reasserting authority over broadband using a different framework, but providers furiously lobbied against that, claiming it would “regulate the Internet” under rules designed for landlines.  The Commission’s decision to proceed under a foundation condemned by an earlier federal court ruling exposes an obvious weak spot providers could attack in additional lawsuits.

“We know these rules will be hotly contested,” said Betty Yu, MAG-Net Coordinator. “As they roll out, grassroots communities will continue to monitor the process, ensuring that the rights of wireless users are protected from the over reach and abuses of AT&T, Verizon, Comcast and other telecommunications companies. These rules are a compromise- unfortunately, what was lost in the deal are the rights of wireless users.”

Verizon may make things easier for Yu and other consumer groups to clear the playing field and start over again.  The company released a statement today that foreshadows a willingness to challenge the agency’s Net Neutrality rulemaking in court (underlining ours):

“While it will take some time for us to analyze the F.C.C.’s rules and the order once they are released, the F.C.C.’s decision apparently reaches far beyond the net neutrality rules it announced today,” the company said in a statement. “Based on today’s announcement, the FCC appears to assert broad authority for sweeping new regulation of broadband wireline and wireless networks and the Internet itself. This assertion of authority without solid statutory underpinnings will yield continued uncertainty for industry, innovators, and investors. In the long run, that is harmful to consumers and the nation.”

Net Neutrality Order Snippets

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The Federal Communications Commission’s Open Meeting introducing Net Neutrality and includes a vote on the rulemaking.  (2 hours, 42 minutes)

This slide, produced to sell "network management" equipment, is the best argument for Net Neutrality around.

Want to visit Facebook?  That will be two cents per megabyte, please.  Skype?  You can get a real bargain this month — your ISP is only charging you $5 for an unlimited monthly permission pass.  YouTube?  All customers with a deluxe bundled broadband plan get a special discount — just 50 cents for up to 60 videos, this month only!

All of these charges, levied by your Internet Service Provider, are real world scenarios being sold by two equipment vendors — Allot Communications and Openet, for immediate use on Net Neutrality-free wireless broadband networks.  Thanks to Stop the Cap! readers Lance and Damian for sending us the story.

Both companies are excited by the potential harvest of bountiful revenue — for themselves in selling the equipment that will carefully monitor what you do with your Internet connection and then control what kind of experience you get, and for providers who can finally bend the usage curve down while “finally” getting average revenue per customer shooting sky high once again.

In the webinar, run last Tuesday and moderated by Fierce Wireless, the two companies carefully divided their one hour presentation between the technological and financial benefits of “network management” technology.  For every statement about how their bandwidth management system would improve the predictable responsiveness of the provider’s network, another comment followed, touting the enormous new revenue potential this technology will bring providers, all without costly network upgrades.

Poor provider. His stuffed pockets of profit are leaking your money paid to access websites you want to visit. But with Allot and Openet's products, the pot 'o gold is just a few steps away.

On Tuesday, the Federal Communications Commission will vote on a watered-down Net Neutrality proposal that would do nothing to prevent this nightmare scenario from becoming reality.  The webinar and its accompanying slides couldn’t illustrate Net Neutrality-proponents’ arguments better:

1. Such technology requires providers to carefully track and monitor everything you do with your web connection, obliterating privacy and creating a potential data trail that could be exploited for just about anything.  Indeed, Allot and Openet treat the data tracking feature as a benefit, opening the door to marketing campaigns to upsell your broadband connection or target upgrade offers based on your web history;

2. It’s all about the money.  Allot and Openet see their products as a cost-saver for providers to control expenses by cutting speeds/access for heavy users to provide a more consistent service for others, reducing the urgency to upgrade networks.  The companies also heavily focus on the revenue opportunities available from Internet Overcharging schemes;

3. The webinar includes a slide showing that providers can charge individual fees just to visit and utilize third party websites and applications, while letting providers deliver their own content, services and applications for free.  Got a bothersome competitor?  Just make a quick change with Allot’s product and your customers will face a withering admission fee in the amount you choose before they can even use the application;

4. The technology allows providers to wreak special havoc on peer-to-peer traffic, always the bane of traffic-conscious ISPs;

5. Want to extract more cash from an individual subscriber?  Providers can custom-design packages based on web site habits, usage, speed, and even the time of day the person is most likely to use the web.  Providers can then develop so many different usage packages, comparison shopping becomes meaningless.  The price you pay may be different than what others on your street pay, and you may never know by how much or why.

These Big Telecom workmen are not hard at work upgrading networks to meet demand. They are wrangling an Internet Overcharging scheme to reduce your usage while charging you more. (All of these slides were produced by the vendors themselves.)

Public Knowledge legal director Harold Feld saw right through the slide show: “If you want the slide deck to show why we need the same rules for wireless and wireline, this is it.”

Listen to the audio portion of “Managing the Unmanageable: Monetizing and Controlling OTT Applications,” which does not include the slide show. (60 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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Broadband advocates have been warning providers have been dreaming of this kind of pricing for a few years now.

“I have been saying that this is where they want to go for a while,” Barbara van Schewick wrote to Wired. “The IP Multimedia Subsystem (IMS), a technology that is being deployed in many wireline and wireless networks throughout the country, explicitly envisages this sort of pricing as one of the pricing schemes supported by IMS.”

Although the system described by the webinar is currently being sold for use on wireless networks, nothing prevents providers from adopting similar schemes on their wired networks, arguing their use is about “intelligent network management,” not content or pricing discrimination.

It’s a scenario likely to be tested soon, especially with FCC Chairman Julius Genachowski’s watered down Net Neutrality proposals.  More than one observer believes the chairman has made a deal with the Big Telecom Devil: observe our watered down rules, don’t sue to have them thrown out, and the Commission will not invoke Title II and reinstate regulatory authority over broadband.

But as anyone who watches the broadband industry must realize by now, providers always break these deals.  They will sue the moment a controversy erupts that is not in their favor, and they are very likely to win.