Verizon Wireless is contemplating the end of flat rate, unlimited data plans as it introduces fourth generation data networks this year.

“We will probably need to change the design of our pricing where it will not be totally unlimited, flat rate,” John Killian, chief financial officer of Verizon Communications Inc., the wireless unit’s parent, said in an interview at Bloomberg’s headquarters in New York.

Verizon expects “explosions in data traffic” as the company introduces customers to its 4G network, potentially ten times faster than older mobile broadband technology.  Verizon Wireless, already capturing enormous sums of revenue from consumers forced into mandatory, expensive data plans when they upgrade to smartphones, will soon discover some serious limits on those plans.

The irony is, Verizon’s 4G upgrade will bring wireless broadband speeds to consumers they realistically cannot use for much more than web browsing, e-mail, and low-bandwidth apps.  Video downloads will burn through data limits imposed at the level AT&T introduced for its customers earlier this month.

Killian

Wall Street wants consumers re-educated to believe broadband can never be unlimited and must be treated as a precious, limited resource.

“The more bandwidth that you make available, the faster it will be consumed,” said Craig Moffett, analyst at Sanford C. Bernstein & Co. in New York. “From Verizon’s perspective, the last thing you want is for another generation of consumers to be conditioned to the idea that data is always going to be uncapped.”

Moffett’s clients hope that is true because usage limits will control costs and make customers think twice about using their data features on their phones.  Reduced demand equals increased revenue, just what Wall Street ordered.

Verizon Wireless has already set the stage for that increased revenue with mandatory add-on plans that boost customer bills, especially for those buying smartphones.  Although just 17 percent of Americans own smartphones today, Verizon predicts 70-80 percent of customers will upgrade to smartphones in the next few years.  That guarantees an “upgraded” bill as well.

Estimates about current average data usage from smartphone customers ranges from 200-600 megabytes per month, but that was before the arrival of video-friendly 4G network technology and the newest generation of phones optimized for video, which can easily consume ten times as much.

Verizon recognizes the “video threat,” and press reports suggest the limits will only be imposed on the 4G network.  Current generation 3G networks make viewing video tedious, a natural barrier for customers planning to “use too much.”

Verizon’s widely anticipated limits, almost certainly to be equivalent to AT&T’s with respect to allowances and pricing, may dampen enthusiasm for the iPhone on Verizon’s network.  Any existing AT&T customer is grandfathered into unlimited data plans for their smartphones.  If those customers leave AT&T, they will be forced to take a usage-capped data plan from Verizon with no looking back.  AT&T won’t provide unlimited plans for customers returning to their fold.

Dick Cheney's ghost is haunting the halls at the FCC these days as the agency conducts secret, closed-door meetings with just four companies to achieve "common ground" on broadband regulation. Consumers are not invited to attend.

In 2001, Vice President Dick Cheney convened the first meeting of the always-off-the-record National Energy Policy Development Group.  Secretly inviting executives of the nation’s largest oil companies and lobbyists for natural gas and mining, Cheney hoped to find “common ground” on energy issues that he could translate into legislation on Capitol Hill.  The final report kept the names of the self-interested corporate executives off the member roster, and predictably called for legislative actions that would directly benefit those in attendance.

In June 2010, a series of meetings with FCC Chairman Julius Genachowski’s chief of staff and executives from AT&T, Verizon, Google and Skype got underway to find “common ground” on the issues of broadband regulation and Net Neutrality.  With irony, the same FCC that promised it would be “the most open and transparent ever” has barred the press and the public from participation.  No consumers were invited.  No minutes from the meetings will be disclosed.  In short, these are “closed-door” meetings.

Even more surprising, apparently the FCC forgot to invite Comcast, the cable conglomerate most directly responsible for the agency having its authority cut from beneath it in the first place.

When the Washington Post asked Eddie Lazarus, Genachowski’s chief of staff, what was on the agenda, only vague notions about “seizing the opportunity” to find common agreement on issues like Net Neutrality were disclosed.  Lazarus added the big four were also there to give input on Congress’ interest in revising the Communications Act.

That’s great news for thousands of Washington’s lobbyists who helped fashion the disastrous 1996 Communications Act that represented Christmas morning for corporate interests — more deregulation in the broadcast business which lead to massive consolidation, giveaways to the cable and telephone industry, and more handouts to wireless companies.

What was supposed to be a law to govern the public interest of the airwaves and telecommunications turned into a lobbyist feeding frenzy.  Consumers couldn’t afford the price of admission. Reopening the Communications Act means telecom companies from coast to coast can get busy working on their Christmas wish lists for the 500+ Secret Santas that live and work in the legislative branch of government these days, especially on the Republican side of the aisle.

Of course, the real outrage here is the FCC’s hope that the four companies can reach some agreement on contentious broadband issues and then the agency can do away with the entire matter of broadband regulatory reform.  Why fight the battle if you can compromise the issue away?  No matter what the four agree on, there are still many outstanding issues relating to consumer protection which cannot be negotiated by four corporate entities.

Those on both sides of the broadband regulatory issue are appalled at the secrecy.  Brett Glass, who opposes Net Neutrality and runs a WISP in Wyoming asked, “What happened to Chairman Genachowski’s promises of “the most open and transparent FCC ever?”

Indeed.

Lazarus tried his best to paper over the serious implications of holding secretive meetings in a blog post:

Senior Commission staff are making themselves available to meet with all interested parties on these issues. To the extent stakeholders discuss proposals with Commission staff regarding other approaches outside of the open proceedings at the Commission, the agency’s ex parte disclosure requirements are not applicable. But to promote transparency and keep the public informed, we will post notices of these meetings here at blog.broadband.gov. As always, our door is open to all ideas and all stakeholders.

In part, here was our response to Mr. Lazarus:

There is no transparency or openness in closed-door meetings that bar the public from participation. It’s just more of the same inside-the-beltway deal-making that will undercut consumers. Believe it or not, there is more at stake here than whatever issues Verizon, AT&T, Google, and eBay have to discuss.

And what if the four agreed on anything (improbable)? Does that mean the rest of us are expected to go along to get along?

The FCC’s door is -not- open to all ideas and stakeholders when the chairman’s chief of staff only invites four voices to his table.

There is nothing open and transparent about secret meetings peppered with excuses about why disclosure rules do not apply.

[Update 10:30am ET Wednesday — The DailyFinance quotes a government source: “We fu*ked up,” a government source familiar with the meetings told DailyFinance. “We deserve the bad press. It was a process foul at a minimum.”]

Time Warner Cable is back again with another offer to existing Frontier Communications customers trapped in multi-year service agreements.  If you dump your Frontier landline overboard for Time Warner Cable’s Digital Phone service, the cable company will send you a gift card worth $200 good towards defraying your early termination fee, if any.  If you don’t have such a fee, you pocket the $200.  A year ago on this date the company ran a similar promotion heavily promoted in local cable television ad spots.

Time Warner will provide free installation of the phone line including unlimited nationwide long distance for $24.95 a month for 12 months.  With the $200 gift card, that’s above and beyond their usual promotion.  The company is also extending a bundled discount if a customer also takes Road Runner broadband service with their “digital phone” service.

For Frontier customers looking for an early exit, this offers one opportunity.

Existing cable subscribers can take advantage of the offer.  There are terms and conditions to consider, starting with where the offer is available.  The following Time Warner Cable service areas qualify:

• TWC Western New York
• TWC Central New York
• TWC Albany, NY
• TWC New England
• TWC Dothan, AL
• TWC Enterprise, AL
• TWC Yuma, AZ
• TWC El Centro, CA
• TWC Gunnison, CO
• TWC Telluride, CO
• TWC Coeur d’Alene, ID
• TWC Moscow, ID
• TWC Madison, IN
• TWC Newburgh, IN
• TWC Terre Haute, IN
• TWC Ashland, KY
• TWC Owensboro, KY
• TWC Richmond, KY
• TWC Kansas City, MO
• TWC Lincoln, NE
• TWC Ironton, OH
• TWC Richlands, VA
• TWC Pullman, WA
• TWC Clarksburg, WV

Next, the offer is only good for residential customers switching from Frontier’s landline service.  Limit one gift card per customer.  Your final Frontier phone bill showing a disconnect request must be furnished to Time Warner Cable within 30 days to qualify.  Your name and address must match on both bills.  Offer is not available to customers with past due balances with Time Warner Cable, defined as any money owed in the past 30-60 days or customers who have been disconnected for non-payment in the twelve (12) month period preceding this offer.  Service must be ordered by Dec. 31, 2010, and installation must occur within thirty (30) days of order date.

If you’ve contemplated a change in providers but didn’t want to be subjected to a steep early cancellation fee, this isn’t a bad offer.  Although I don’t use Time Warner Cable Digital Phone myself, others in my family do and they are satisfied with the service, although there have been at least two serious outages so far this year that ran several hours.  Since most people also carry a cell phone, any cable outage or power interruption that also takes out your phone line isn’t as serious as it might have been in earlier years.

And, ahem, unlike Time Warner Cable’s attitude towards broadband, they really do provide unlimited calling with their “digital phone” service.

Time Warner Cable is mailing this letter to Frontier Communications customers in the Rochester, N.Y. market. (Click to enlarge)

Telstra is Australia's largest telecommunications company. (Photo: Telstra)

It’s not as if the Australian government didn’t warn private broadband providers, notably Telstra.  For the past several years, Australians have endured expensive, slow, heavily usage-limited broadband service that has put the country well behind many other Commonwealth nations.  Australian Communications Minister Stephen Conroy finally warned the nation’s largest telecommunications provider if it didn’t move forward on upgrades and improved service, the government would be forced to step in to protect the national interest.

Instead of improving service, Telstra spent years stonewalling the government and the Australian public, while banking high profits for broadband service.  That’s a familiar story for North Americans, stuck with companies like Bell, Rogers, AT&T, Comcast and Verizon — all of whom seek ultimate control over what kind of service you receive, what you pay for it, and what websites you can and, perhaps down the road, cannot visit without paying a surcharge.

Australia is closing the chapter on this story with a happier outcome for its 22 million citizens.  Perhaps the United States and Canada could learn a thing or two from the folks down under.

Bringing U.S. Oligopoly-Style Management to Australian Broadband: The Sol Trujillo Years — 2005 to 2009

Telstra, a former government monopoly comparable to the American Bell System, was privatized in the late 1990s.  Telstra looked to the United States for a chief executive that had experience navigating that transition.  They found Sol Trujillo working his way up the management ladder at AT&T, finally culminating in chairmanship of former Baby Bell Qwest Communications.  Would Trujillo like to take on the challenge of managing Australia’s largest phone company? Trujillo signed on with as Telstra’s CEO in 2005 promising to modernize the business and to bring American-style innovation to the South Pacific.

Instead, Trujillo established an American-style rapacious oligopoly.

[flv width=”424″ height=”260″]http://www.phillipdampier.com/video/Nine Australia Trujillo War on Unions.flv[/flv]

Channel Nine in Australia reported on Telstra’s sudden interest in union-busting after Sol Trujillo arrived in 2005.  (1 minute)

Sol Trujillo

In his first year at the company, Trujillo started an all-out war to get rid of Telstra’s organized labor, slashing 10,000 jobs to “save the company money” all while boosting his own salary.  What started as $3 million in compensation in 2005 would rise to more than $11 million dollars just four years later, even as the value of Telstra declined by more than $25 billion on his watch.

Trujillo alienated his employees and officials in the Australian government.  Then-Prime Minister John Howard attacked Trujillo’s salary boost as abusive.

“I’m not complaining about the salary I get but I do think the average Australian, who gets paid a lot less than I do … regards that sort of salary as being absolutely unreasonable,” Mr Howard said on Southern Cross radio. “And it doesn’t help the capitalist system, which I believe in very passionately, that some people appear to abuse it.”

Trujillo’s salary was 38 times greater than the highest official in Australia’s government.

The average Australian retiree gets by on $219AUS a week.

Trujillo had to make due with more than $211,000 a week.

[flv width=”424″ height=”260″]http://www.phillipdampier.com/video/Nine Australia Telstra Salary Hike.flv[/flv]

Channel Nine ran this report on the controversy over Sol Trujillo’s compensation package.  That old meme about having to pay high salaries to attract quality talent would have been more convincing had Trujillo’s policies not caused a $25 billion reduction in Telstra’s value.   (2 minutes)

Customers weren’t exactly endeared to spending more of their money on Telstra products and services.  Telstra had already embarked on cost controls for network upgrades, leveraged its monopoly power in many parts of the country with high rates for usage-restricted service, and bungled a critical application to participate in Australia’s National Broadband Network.

Australia’s National Broadband Plan, a roadmap for broadband improvements, set pre-conditions to involve small and medium-sized businesses in network construction.  Trujillo balked, demanding that Telstra — and only Telstra — should have the right to determine what kind of network should be built in the country.  More importantly, unless they exclusively ran it, the company would do everything in its power to block or destroy it.

Internet Overcharging schemes limit enjoyment of broadband usage across Australia. Telstra provides a usage meter estimator that includes all of the useless measurements for e-mail, images, and web browsing. But throw in some movie watching and the gas gauge really starts to spike.

The Sydney Morning Herald business reporter Ian Verrender was stunned:

Telstra has employed a three-step strategy to muscle out any competition.

It can be neatly condensed into three words: Bluster, Belligerence and Obfuscation.  We [just] saw it again in spades.

Telstra has been excluded from one of the most ambitious infrastructure projects announced by a Federal Government in decades: the construction of a national broadband network.

Could it really be that Telstra’s board and management were so incompetent that they could not get past stage one in a tender process of this magnitude?

After all, there were only four main criteria that had to be met. The first was the proposal had to be lodged in English. The second and third had equally low hurdles. Metric measurements – not the old inches, feet and miles – were required and the bid had to be signed. Nothing too difficult there.

But the fourth criterion appeared to stump Telstra. It didn’t include any plan for the inclusion of small business. And so the Communications Minister, Stephen Conroy, was obliged to exclude Telstra, an announcement that shook 12 per cent from the value of the country’s biggest telecommunications company.

This was no accident on Telstra’s part. It knew it was lodging a non-conforming proposal. Why, you ask?

The answer is simple. Telstra does not want a national broadband network, particularly one that involves anyone else. That includes taxpayers.

And if one has to be built, Telstra will do everything in its power to delay or kill the process. Yesterday marked stage one in a protracted war, ultimately designed to defeat one of Prime Minister Kevin Rudd’s key election promises.

Trujillo claimed yesterday that Telstra had been unfairly excluded from the process on a technicality. That’s just rubbish.

In recent months, the company, its chairman, Don McGauchie, and Trujillo repeatedly threatened to walk away from the tender process, and lodged the proposal only a few hours before the deadline.

Trujillo’s rhetoric yesterday was laced with the usual mixture of bravado and threats. He compared Australia to North Korea or Cuba. He declared only Telstra was capable of building the type of network required by the Government.

But two lines stand out. First this: “Customers make the choice of who they do business with; regulators and governments and others do not.” And then: “We reserve our rights regarding future action.”

The message is clear. Telstra will launch legal action at every opportunity – and even when there aren’t opportunities.

That time-honored American practice of simply suing your way through any legislative or regulatory roadblocks threatened to come to Australia.

The exclusion of Telstra from such a revolutionary broadband project didn’t sit well with the board or shareholders, and directly led to Trujillo’s ouster in 2009.  By then, he had alienated customers, the government, and just about everyone else.  Perhaps the government would allow a second look at a Telstra broadband application if it was submitted by someone other than Sol Trujillo?  It couldn’t hurt to find out.

[flv width=”424″ height=”260″]http://www.phillipdampier.com/video/Nine Australia Telstra Trujillo Quits 2-26-09.flv[/flv]

Channel Nine covers the ousting of Sol Trujillo, wondering what sort of golden parachute he’d receive on the way out the door.  (3 minutes)

Just weeks after leaving, Trujillo decided to settle scores with Australia, telling reporters that he thought the country was backwards and racist.

[flv width=”424″ height=”260″]http://www.phillipdampier.com/video/Nine Australia Trujillo Calls Australia Racist 3-09.flv[/flv]

Payback time.  Trujillo threw a hissyfit in a BBC interview calling Australia’s lack of laissez-faire regulatory policies backwards, and treatment towards him racist.  (Channel Nine – 1 minute)

The Post-Trujillo Era: More Arrogance and Ruthlessness, But a Communications Minister Outmaneuvers the Telecom Giant — 2009 to Present Day

Telstra spent the summer of 2009 attempting to heal the Trujillo-caused wounds with conciliatory statements in the Australian media.  Telstra’s new chief executive, David Thodey, admitted the company’s customer service record needed improvement.  He distanced himself from some of the more caustic comments from the former CEO, and claimed the company was on-track to be a major participant in improving Australia’s broadband experience.

Conroy

But as the months progressed, Australia’s Communications Minister, Stephen Conroy ultimately concluded he was getting the lip service treatment that Telstra had delivered Australians for years.  Conroy, already suspicious of the company’s control-minded tendencies, quietly began bending the ear of Prime Minister Kevin Rudd.  Conroy had watched Telstra’s steadfast refusal to work constructively towards a National Broadband Network (NBN).  By last summer, the company was making proposals for underwhelming broadband expansion.  Fiber optic broadband was unnecessary and expensive, they said.  Besides, the service Telstra was providing was already good enough.

Australians didn’t agree.  Part of the platform that brought the Rudd government to power was the promise of better broadband service in Australia.  Waiting for Telstra to provide it was a futile exercise.

Conroy told Rudd the government should not be setting its broadband policy agenda based on what worked most conveniently for private providers.  If they won’t move, then let’s get them out of the way, Conroy suggested.  Rudd, working for the interests of the Australian people — not just a handful of telecom companies seeking riches with substandard service at monopoly prices, agreed.

After reviewing the proposals submitted to design and construct 21st century broadband service for Australia, Rudd dismissed them all, calling them inadequate.  The government, he announced, would go it alone and build the network itself — delivering a fiber to the home network for 90 percent of Australians on an open network available to any provider that wanted to rent access at wholesale rates.

More importantly, Conroy was not going to allow Telstra to continually block progress on the NBN.  Conroy was not some supine minister willing to compromise away the goal of super-fast affordable broadband.  His critics called him Machiavellian, slashing and burning anything that stood in his way.  But Conroy was steadfast — corporations would never be allowed to dictate broadband terms to the government.  He warned Telstra to cooperate or face the consequences.

Telstra continued to stall and stonewall, and last September, the Rudd government delivered what it promised — a forced break-up of Telstra.  The company was given a choice — either sell back its copper wire landline network to the government or divest itself of satellite TV service Foxtel and lose access to any additional wireless mobile frequencies for Telstra’s cellular service.

The equivalent in the United States would be to declare fiber to the home to be in the national interest, and if AT&T and Verizon didn’t deliver it to nearly every home in their service areas, the government would move in and do it themselves, taking back ownership of the AT&T and Verizon’s infrastructure along the way.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Network 10 Aus Telstra Break-Up 9-15-09.flv[/flv]

Network Ten covered the announced break up of Telstra by the federal government.  (2 minutes)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Nine Network Telstra Breakup 9-15-09.flv[/flv]

Channel Nine ran several reports on the announced breakup of Telstra, including an interview with the opposition.  (6 minutes)

Australia Declares Broadband a Utility Service that Private Providers Cannot Control

Monday marked a day in history for Telstra, agreeing to sell back its copper wire landline business (for which it will receive $11 billion in compensation).  In return, Telstra is assured wholesale access to the new fiber broadband network, and can market products and services on it.  It cannot, however, serve as a gatekeeper to keep competitors out nor maintain virtual monopoly service, especially for less suburban and rural customers.

Some telecom analysts believe the deal is actually good news for Telstra, if they’d see beyond their control tendencies.  After all, they say, Telstra gets to rid itself of a legacy copper-wire landline network that is expensive to maintain and serves a dwindling number of consumers, many who have switched to wireless.  They also get to develop and market new high bandwidth applications on a network they are no longer responsible for financing.

It’s a win for the government as well who gets a single, national fiber network built in the public interest, which makes it far easier to recoup the billions in costs to build it.  They’ll even likely make a profit suitable to defray the costs of subsidizing wireless broadband service for Australia’s rural residents, to be served with at least 12Mbps connections.  No cost-recovery fees on customer bills, no usage limitations that restrict innovation, and broadband that serves everyone, not just a handful of corporations that seek to monetize every aspect of it.

Conroy wouldn’t think much of America’s National Broadband Plan, which relies near-exclusively on private providers voluntarily doing the right thing. Conroy stopped putting blind faith in Australia’s large telecommunications companies.  The Obama Administration hasn’t.

We’ve seen millions spent lobbying to permit a handful of providers to control broadband service on their terms.  Few will provide fiber to the home service and many are content leaving rural Americans with dial-up service.  With dreams of Internet Overcharging schemes to manipulate usage to maximize profits even higher, things could get much worse.  What’s right for AT&T isn’t right for us.

For Australia, who has lived under such monopolistic broadband regimes for over a decade, a National Broadband Network without arbitrary usage limits and available to all — rural and urban — is the promised land.  It will leapfrog Australia well ahead of the United States and Canada, with far faster speeds and better prices, all because a government stood up to a corporate provider that preferred to overpay its executives instead of getting the job done right.

Australia had a reality check — broadband is a utility service necessary for every citizen who wants it.  Just as electrification and universal phone service became ubiquitous in the last century, broadband will also join those services in the years ahead as commonplace in nearly every home.

If only the strength and conviction that is fueling Australia’s broadband future could also be found in the United States, where too often what is urgently needed today gets frittered away into “maybe we can have it someday” compromises with big telecom and their lobbyists.  That isn’t good enough.

ABC National Radio interviewed telecom analysts about the implications of today’s deal with Telstra to retire Australia’s copper wire phone network (June 21, 2010) (4 minutes, 17 seconds)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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Australia’s current Labor government has refused to compromise on its goal of delivering super-fast broadband service to nearly every Australian, declaring they will get the job done no matter what it takes.

“This government is determined to build a national broadband network and will not let anything get in its way,” declared Prime Minister Kevin Rudd.

Rudd was responding to critics from opposition political parties and some private providers who had been trying to throw up roadblocks to stop the government effort, which many private providers felt ceded too much control to the government.

Rudd’s plans to construct the network were bolstered with the release of a new study showing the construction and operating costs to be lower than previously thought.

Stephen Conroy

Lindsay Tanner, Australia’s Finance Minister, told colleagues, “The government would get its investment back and also, over the course of the investment, earn a modest return.”

Stephen Conroy, Communications Minister, promised wholesale pricing for the unlimited fiber-based service would range between $17.50-26.30US per month.  Retail pricing for entry-level ADSL broadband service from Telstra currently runs $35US per month, with a 2 GB monthly usage allowance.

Conroy previously threatened Telstra that if it didn’t want to help build the national network at a reasonable price, the government would do it themselves.

Tony Smith, opposition Shadow Communications Minister called Rudd’s insistence on a national fiber network reckless, irresponsible, and risky.

But for Australian consumers long subjected to expensive monthly prices for heavily usage limited service, 100Mbps service — or even slower, unlimited service — represents a major improvement.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Network 10 Aus Cheap Broadband 6-21-10.flv[/flv]

The Ten Network in Australia ran this report on the current Australian government’s unwillingness to compromise away its goal for a national fiber network.  (2 minutes)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Nine Australia National Broadband Plan Study 5-6-10.flv[/flv]

Channel Nine reports on the release of the broadband study showing Australia would save money building their own national broadband network instead of letting Telstra build it.  (1 minute)