Shaw's flyer distributed to Novus customers (click to enlarge)

Letting Shaw get away with this will let them buy up competitors like Novus for a pocket full of Toonies.

[Update 10:16am EDT 7/29] — Brion, one of our loyal readers, had a chance to visit Novus’ website and discovered that Novus has usage allowances on its own broadband service.  That’s naughty.  They are far more generous than Shaw’s, which start at 10GB and are more commonly in the 60GB range for average customers, but that’s besides the point.  The Comments section is where the discussion about the usage allowances are taking place.  We call on Novus to explain their limit policy, and more importantly, consider dropping it altogether and using that as a competitive tool against Shaw, which has far lower limits.  If the vast majority of customers are unlikely to hit them, why have them at all?  Write an Acceptable Use Policy that allows for informal communication with the extreme users consuming terabytes of bandwidth a month and offers them a commercial plan for them to consider.  Don’t be a part of the Internet Overcharging crowd.  We celebrate the kind of competition Novus can provide residents of Vancouver and Burnaby, but we’d like to make sure the competition is worth fighting for.

[Update 6:12pm EDT] — Welcome to Novus customers who discovered this site through Novus’ campaign website. Stop the Cap! is an all-consumer website designed to promote and defend the competitive broadband marketplace in both the United States and Canada.  Paul-Andre Dechêne is our Canadian editor. We are unalterably opposed to Internet Overcharging schemes, which include bit/usage caps, consumption-based pricing, and fees or penalties imposed by providers for exceeding them.  We are pro-competition, pro-Net Neutrality, and opposed to throttles.  Companies like Novus which provide needed competition in the cable television, telephone, and broadband marketplace are essential for a healthy marketplace with rational pricing.  Shaw’s obvious predatory pricing tactics are designed to drive away Novus’ customers, making the company ripe for takeover, by Shaw of course, for a pocketful of Toonies.  While those Shaw prices sound good today, driving away competition guarantees much, much higher pricing tomorrow in a monopoly environment.  Novus is installing fiber optic-based service, which means they are already kilometers ahead of Bell and the usual assortment of the Shaw/Rogers/Vidéotron old school cable companies.

We welcome your views.  Just leave your public comments in the editor box at the bottom of the page (or click the comments link just below the headline).  You can explore more than 400 articles on our issues from the menu bar at the top.  Drop down menus will let you read about the issues that are most relevant to you.  Thanks for joining us.  The fight for affordable broadband continues across Canada, and we welcome your participation.  Bookmark us and drop by regularly. — Phillip M. Dampier, Editor]

Imagine paying $9.95 a month for a digital cable package with two free high-definition set-top boxes with personal video recorders, more than 200 digital channels, more than 25 high-definition channels, and a movie channel package.  Not convinced?  How about also getting two free months thrown in.

Need telephone service?  How about free nationwide/U.S. calling, free installation, and a whole mess of phone features for $9.95 a month?  Don’t forget broadband.  That’s just $9.95 a month as well for 15Mbps service with free Powerboost.  To sweeten the deal to diabetic coma proportions, Shaw will throw in two free months of service for each of those packages, too.

What’s the catch?  You have to live in an area currently served by Novus Entertainment, Inc., an upstart independent fiber-based competitor wiring metro Vancouver, British Columbia.  Novus has aggressively wired high rise condominiums and other densely populated neighborhoods and buildings in Vancouver.  Novus is a tiny company compared to Canada’s national cable companies.  Shaw provides cable television service to 2.1 million customers in several Canadian provinces.  Novus has 9,000 subscribers in 220 buildings in Downtown Vancouver and Burnaby and is planning an expansion into Richmond. Those buildings are being peppered with marketing from Shaw, including this special pricing offer.

Existing Shaw customers, and those who live outside of Novus’ service area, cannot obtain the special pricing.  That is the heart of a complaint lodged by Novus against Shaw at the Competition Bureau of Canada and in the British Columbia Supreme Court, charging Shaw is engaged in predatory pricing designed to put Novus out of business.

“Shaw is abusing its dominant position in the market by offering services – which it normally makes nearly 50 per cent margins on – at a sizeable loss as a means to destroy a local competitor,” said Donna Robertson, Co-President and Chief Legal Officer of Novus Entertainment Inc. “The millions of existing Shaw customers paying full price should be outraged because they’re unwittingly subsidizing the costs that customers with a competitive alternate pay, which is unethical and unfair. If they don’t make the offer available to everyone, current customers should call Shaw and demand the same deal.”

Novus points out Shaw has been “on a buying spree” picking up smaller cable operators and independent providers, but has “been unsuccessful in getting traction with Novus,” company officials suggest.

Stop the Cap! has discovered Shaw’s discount offer is a remarkable one, compared with the regular pricing Shaw customers pay elsewhere:

Shaw Deal for Novus Cable TV Customers

$9.95 digital cable with two personal video recorders, movie channel package, digital channel package
Two free months service

Shaw Deal for Other Canadians

$67.85 HD package
$16.00 Movie Central/HBO or Super Channel premium movie network
$26.95 digital cable “specialty channel” package
$ 3.95 time shifting option
$30.00 Shaw HD personal video recorder set-top box

The grand total: $144.75 per month, with no free months.

“Shaw enjoys increasing cable margins of nearly 50 per cent, which it boasts to investors is ‘best-in-class’ compared to other North American cable companies,” said Robertson. “We believe that Shaw’s targeted campaign is an attempt to eliminate Novus from the competition, which would allow Shaw to maintain its near monopoly status and raise prices for all customers whenever it sees fit”

“Based on Shaw’s actions, we can only assume that they are trying to buy our customers by gouging their own prices,” said Robertson. “They’re offering these services at an enormous loss, while forcing the rest of their customers to make up the difference. We aren’t big enough to compete with Shaw’s predatory pricing, but we are faster and more reliable, and our service is actually less expensive over the long term.”

Novus has launched a website and is busy on Twitter asking Shaw customers across Canada to demand the same special offer they are making available in Novus’ service area.

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Do you want the 10 Bucks Offer too? Sign our Petition and call Shaw to request this special rate.

Greater Vancouver – 604-629-8888
Kelowna – 250-762-4433
Prince George – 250-562-1345
Fort St John – 250-785-3039
Victoria – 250-475-5655
Edmonton – 780-490-3555
Calgary – 403-716-6000

Rottenchester, a Stop the Cap! regular reader, discovered an impenetrable recipe for comprehension disaster in an online essay entitled, The Government, Road Runner, and David Letterman: A Farce in Three Acts.  Written by Susan Edelman, who has a Ph.D. in Economics from Stanford University and was an economist at the Federal Communications Commission (FCC) and the Department of Defense, the essay remarkably tries to present a broader point about government involvement in broadband, Road Runner Internet Overcharging, outrage at David Letterman for his comments about Sarah Palin, and government intrusion in our lives.

It’s a taffy pull thesis I don’t have the courage to attempt, and I was left completely mystified about what the takeaway message was.

WHAT IT ALL COMES DOWN TO, AND ARE YOU SURE YOU WANT THIS?
The assertion that Americans having a right to reasonably priced Broadband service.  This might be a good idea, and is in accord with the treatment of other types of transmission lines.  But do not kid yourself:  this would be the creation of another government-enforced right.  Only government can create and enforce rights.  But isn’t government incompetent?  And doesn’t private business do everything right without government meddling?. (And while you are thinking about this, keep in mind that all Americans do not have the right to reasonably priced health care. )

Edelman rapidly risks losing her argument by default, because most readers are likely not to understand it.  Having been involved in the Road Runner Affair since it began in April, she has lost me, and I have lived and breathed this issue for months.  One potential interpretation of her argument might be is the apparent irony of many conservative Rochester residents calling out the Obama Administration in the pages of the local newspaper with reflexive government=bad and free market=good arguments.  Perhaps in her eyes, many of these same people called out in those same pages for regulatory government relief from abusive broadband pricing.

If so, two points:

1)  I honestly believe most people will not ponder her piece long enough to ferret out a takeaway message.

2) There is no evidence the “free marketeers” were the ones reacting with outrage over Time Warner Cable’s experiment gone wild (and then shelved for now.)  In fact, as soon as Senator Charles Schumer (D-NY) got involved, the editorial feedback pages in the local media from conservatives, along with some local conservative talk radio, rapidly turned the issue of Internet Overcharging into a Senator Schumer Bashing Party.  I have no doubt some of those not closely following the issue automatically adopted the opposite position Schumer had just because of their passionate dislike of him.

Most consumers, in my experience, rightly treated this issue as above the usual right-left tug of war.  That’s because overcharging for broadband isn’t a right or left issue.  It’s a consumer issue.  The conservative thinkers appreciate the strong push towards forcing additional competition in the marketplace.  Those with a politically liberal philosophy aren’t opposed to competition, but want the extra security of government oversight and/or regulation where competition does not exist.

It’s my personal view that telecommunications policy is complex enough without dragging David Letterman and Sarah Palin into it.

Phillip Dampier

While western New York was dealing with a rare bout of tornadoes, another storm began brewing online when AT&T customers discovered their access to a website devoted to the posting of images, 4chan, had been blocked.

The 4chan site has become notorious over the past year for its “anything goes” policies about content, particularly in its “random board” /b/. The site has generated a number of controversies, including staged pranks, swarming other websites, and unfortunately, occasional malicious activity by a minority of its users. Since the site permits anonymous posting, and has traditionally been more “self-regulating” than moderated, it’s a polar opposite of most corporate-run online communities.

When 4chan enthusiasts discovered their site was being blocked by AT&T, it represented the online equivalent of of course, you know this means war. AT&T was blasted in the blogosphere, called out by some tech-minded online culture websites, and made a virtual pawn in the Net Neutrality debate. A few angry 4chan enthusiasts even set up a “rioting/’war’/protest” site to launch counteraction against AT&T.

AT&T eventually admitted it was blocking the site for “security reasons” and issued two early statements:

CentralGadget:

AT&T has confirmed that they are “currently blocking portions of the internet site 4chan.org”, but states that they are “following the practices of their policy department.”

AT&T went on to say that they did contact (or, at least, attempted to contact, they wouldn’t clarify) the owners of 4chan. They say that they have specific reasons why they blocked these parts of the site, but they would not disclose them to CentralGadget.com. AT&T states that they have requested specific things and changes from 4chan’s owners, and that 4chan has not complied.

Regardless, without a clear explanation of specific rationale for blocking 4chan… both 4chan and CentralGadget.com encourage you to continue calling AT&T technical support, and filing your complaints there (escalate as high as possible, we have heard reports that Tier 1 support agents are being told to incorrectly state that AT&T doesn’t block any web site).

Broadband Reports:

Beginning Friday, an AT&T customer was impacted by a denial-of-service attack stemming from IP addresses connected to img.4chan.org. To prevent this attack from disrupting service for the impacted AT&T customer, and to prevent the attack from spreading to impact our other customers, AT&T temporarily blocked access to the IP addresses in question for our customers. This action was in no way related to the content at img.4chan.org; our focus was on protecting our customers from malicious traffic.

Overnight Sunday, after we determined the denial-of-service threat no longer existed, AT&T removed the block on the IP addresses in question. We will continue to monitor for denial-of-service activity and any malicious traffic to protect our customers.

Since the end of the weekend, access to 4chan has been restored by AT&T, but the site is performing slowly as it presumably gets attention from a large number of visitors who learned of the site from the controversy, but never heard of it before Sunday.

AT&T’s clumsy explanation fired up a new chapter in the Net Neutrality debate, with various groups and 4chan enthusiasts, and even the DailyKos website, calling this an example of a violation of Net Neutrality — providers denying equal access to all website traffic regardless of its source.

Unfortunately, this is much more an instance of jumping the gun.  Indeed, there is credible evidence 4chan, in addition to its free-wheeling atmosphere, also attracts quite a few malicious attacks, presumably from disgruntled members of the site.  “Denial of service attacks” which throw limitless requests at a web server to slow it down until it essentially crashes under the jamming traffic load, are not uncommon on 4chan.

AT&T’s technical team claims it placed blocks on the impacted IP address(es) to keep the traffic from impacting their own network, and the issue blew up only when AT&T’s non technical customer support staff did a poor job of explaining what was going on to customers.  There are also an open question whether AT&T needed to block -all- traffic on its network to 4chan, or whether blocking just the offending portion would have been sufficient.

Assuming the facts are in AT&T’s favor, and other ISPs have confirmed the attack as being authentic, this is less a case of Net Neutrality abuse, but rather standard procedure at most web hosting companies and service providers to contend with denial of service attacks and other malicious activity.  The hosting providers that provide service to Stop the Cap! engage in the same practices.  One of the hosting companies we use once shut off access to a group of websites it hosted to deal with an attack on just one website.  Once the targeted site was isolated and traffic blocks placed, service resumed for everyone else.  When the attacks were stopped or blocked by other providers down the line, service for the targeted site resumed as well.

But AT&T is not blameless.  A major national ISP like AT&T should have had a rapid and clear response ready for inquiring customers about the 4chan matter.  It was the absence of information initially, and the poorly phrased statements later that created the feeding frenzy of online speculation.

There is a thin line between “network management” policies that deal with malicious traffic and its impact on customers on one side and disingenuously labeling high bandwidth uses of its network (peer to peer, etc.) as requiring “network management” of its own (throttles, etc.).  Historically network technicians have always been given latitude to protect their employer’s network from purposely malicious traffic like “botnets,” “spam servers,” and “denial of service attacks.” They should continue to have that latitude until such time they are shown to be abusing it.

4chan’s own internal policies, and their unwillingness to control some user excesses, also make it very difficult to rush to their defense, particularly when the site owner acknowledges many of those excesses.

There are many legitimate battles to be fought for Net Neutrality.  An ISP dealing with a denial of service attack, barring any new evidence that credibly challenges AT&T’s response, should not be one of them.

Richard Greenfield, Pali Research

Wall Street media analyst Richard Greenfield of Pali Research is telling investors that the era of quick cash from “digital phone” service customer additions is probably coming to an end.

Greenfield penned a research note last week pointing out that despite the blizzard of postcards, mailers, and wall-to-wall advertising cable operators do to promote their “digital phone” services, it’s getting tougher to sign up new customers.  Mike Farrell in Multichannel News condensed the marketspeak down:

In a research note, Greenfield noted that industry-penetration leader Cablevision Systems, which has telephony in 40% of its homes passed and more than 60% of its basic-video base in a triple-play bundle, took six years to reach those milestones. Time Warner Cable after five years has about 15% penetration (27% of subs in a bundle); Comcast, four years into telephony, has 13% phone penetration and 24% of its subs in a triple-play bundle.

The year 2008, the analyst noted, was the first that net telephony additions fell for both Comcast and Time Warner Cable.

“While Cablevision is way ahead of its peers in telephony, the question is now becoming, will its peers be able to get to even 25% penetration, let alone the 40%-plus levels Cablevision has achieved or is the opportunity to further cement the bundle simply dwindling by the day?” Greenfield asked.

For the uninitiated:

• “Homes passed” refers to homes where cable service is available;
• “Triple play bundle” refers to customers who take three services – cable TV, Internet, and telephone service in a bundled package from a provider;
• “Penetration” refers to market share.  In the case of Time Warner Cable, only 15% of their subscribers sign up for “digital phone” service, but the number is higher for those with a bundled package.

Greenfield, who often annoys cable companies and instigates angry press releases from some cable trade associations, represents the Wall Street investor types, who are not pro-company or pro-consumer.  They are simply pro-money for investors.

Investors are very concerned this year about cable company stock value.  They worry customers are starting to cancel cable television packages (or at least downgrade their service to get fewer channels), and are now also concerned telephone revenue will not grow at the traditional rate it has since “digital phone” service was introduced.

Broadband service is the exception.  It remains highly profitable and is continuing to grow even during hard economic times.

Stop the Cap! believes that cable operators will look more and more to broadband profits to help prop up their stock price, making it imperative that broadband service deliver as much profit as possible, while operators crack down on costs.  Internet overcharging schemes, such as limiting and discouraging access, raising prices, or a combination of both can reduce costs even further while maximizing profits, particularly in markets where limited or no competition exists.

Flagler Beach, Florida

Another public-private Wi-Fi initiative has been launched, this one in Flagler Beach, Florida, between the city government and Bright House Networks, the area’s dominant cable operator.

The Wi-Fi network will provide consistent wireless access to the Internet in the downtown business and beach areas, running approximately from Highway 100 (Moody Blvd.) south to 2nd Street and from Highway A1A (Oceanshore Blvd.) west to Flagler Avenue.

City and local tourism officials celebrated the launch of the Metro Wireless Network in Flagler Beach by suggesting it will be a convenience for tourists looking for broadband access.

“It’s also a boost for tourism because promotions that are targeted to bring visitors to the area can tell them that they can connect during their stay in town and don’t have to fish around for access,” said Doug Baxter, president of the Flagler County Chamber of Commerce & Affiliates. “Everybody is stuck to a computer these days. (The free wireless service) is a lure.”

The service is creating some mild controversy in Flagler Beach, where residents have learned “free access” is provided on an unlimited basis only to existing customers of Bright House Networks’ Road Runner broadband service.

Non-subscribers will be granted two hours access per day, but that access is contiguous, not cumulative, meaning the moment one logs into the system, the two hour allowance starts running.  Checking your e-mail first thing in the morning assures when you log on later in the day, your free time will have expired and you will be told to purchase additional time.

The price?

1 hour – $1.95
1 day – $4.95
1 week – $14.95

All pay services are also sold in contiguous blocks of time.  For example, the one hour access fee expires one hour after paying for the service, even if you did not use the service for an entire hour.

JJ32, commenting on The Daytona Beach News-Journal website:

How exactly is this a boon for the tourism industry when tourists can only use it for two hours, or have to pay for the service? This also isn’t unique. Other money-hungry cable companies (looking at you AT&T) have this in other cities, and it looks like Bright House Networks has now joined this notorious lot. I agree that wireless access in public areas is important, but I am tired of pro-cable company press releases saying how much they’re doing for the community, when in reality they’ve just discovered a new way to rake in revenues.

Some area businesses are also unimpressed.

Carol Fisher, owner of the BeachHouse Beanery, said she isn’t likely to promote the city’s service. That because the coffeehouse’s customers can access the wireless network she’s provided for some time, Fisher said, and there are no hoops and hurdles or fees.

City officials are widely distributing a flier explaining the service in greater detail to residents and visitors.