They're in your neighborhood, just waiting to break into your home network, according to WXYZ-TV in Detroit

The biggest security threat most broadband users will encounter doesn’t come from identity thieves or kiddie porn rings roving neighborhoods looking for unsecured computers to exploit — it’s from your neighbors looking for free access to your broadband service.

Local newscasts have recently been running sensationalist stories of mysterious cars parked on neighborhood streets driven by ne’er-do-wells barging onto unsecured home wireless networks.

In fact, the most common threat isn’t from drive-by crime rings, but right next door.  With most broadband accounts providing flat rate service, the occasional uninvited guest ‘borrowing access’ probably goes unnoticed.  But should Internet Overchargers have their way, the consequences of account sharing in a world with paltry usage limits and usage-based-billing could show up on your monthly bill.

In countries where these overcharging schemes already have taken firm root, reports of customers receiving enormous broadband service bills are common.  In Australia, rarely a week goes by without someone reporting a hacked wireless network incident.  Consumers have been forced to become watchdogs, constantly checking usage statistics to ensure someone in the neighborhood hasn’t been “borrowing” their Internet account and blowing through their monthly usage allowance.

One customer, who lives in an apartment complex, shares a too-common story:

Over the past 24 hours someone (or something?) has been sucking the life out of my internet connection and chewed up 10Gb of my quota. How do I troubleshoot the cause of this? I have a Buffalo WHR-G54S Wireless Router and my network is secured.  I live by myself in a small block of apartments; I have had no visitors either.

Another customer discovered when it’s your word against your provider’s, the provider wins:

Yesterday, I was checking my broadband bill and was surprised to find out that they had charged me for downloading an extra 4 GB of data. I checked my usage online for the current month and it was already 8GB! This is despite the fact that I have been on holiday for ten days, and my normal usage involves casual browsing and downloading e-mails.

Furthermore, I never exceeded my download limit since I started with my ISP. My ISP also confirms that this is quite unusual and against my normal usage pattern. I have asked them to provide me some usage statistics but they can only give me the data that I already see on my account online.

The cost of exceeding the limit can be enormous.  BigPond in Australia, for example, has a few Internet plans that charge a $0.15 per megabyte overlimit penalty.  That’s $150AUD per gigabyte.

[flv]http://www.phillipdampier.com/video/WXYZ Detroit Open Wi-Fi Risks 1-26-10.flv[/flv]

WXYZ-TV in Detroit ran this sensationalist report on drive-by hackers breaking into wireless networks. (3 minutes)

The solution suggested by most Internet Service Providers is to enable built-in wireless security.  How much protection that provides and whether customers will be able to understand how to configure security remain open questions.

Some phone companies providing DSL service have plenty of older equipment still in customer homes that only supports the older WEP security standard.  That’s insufficient to protect consumers from intrusion because WEP security has been seriously compromised.

“WEP as a security measure is so broken that your (and everyone else’s) kid sister can easily circumvent it,” computer security researcher Ralf-Philipp Weinmann told the BBC.  Weinmann is co-author of the aircrack-ptw tool that can crack WEP in minutes.

Anyone caring about their privacy, said Weinmann, should not use WEP to stop others using their wi-fi hotspot.

Current generation wireless routers typically provide both WEP and the more secure WPA standard. But now there is evidence WPA can also be compromised, with a little help from “cloud computing,” which puts several high powered computers together to quickly work on cracking your password. A service has even been launched to let would-be crackers rent time on the “cloud” to “test” network security passwords, starting at just $17. In as little as 20 minutes, those with relatively simple passwords will find their network security compromised.

You can protect yourself by at least making sure your router is “secured” with a password.  Most every router comes with instructions or software that make this process as simple as possible.  When you have a choice of security standards, aim for WPA2, if available.

Thus far, most reported WPA network break-ins occur because the user is relying on a simple password — often a common word, name, series of numbers, or something similar that is much easier to break. Try to use a password that is not a word in a dictionary, doesn’t correspond to information anyone could mine off your Facebook page (city/town, school, birthday, parents or siblings names, etc.), and would be impossible to guess off-hand.

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How to secure your wireless network (6 minutes)

Your Bill from MTN - Internet Overcharging Gift Wrapped

South Africans using the wireless services of MTN may be in for quite a shock in the coming weeks as the company attempts to collect for customer data usage charges it forgot to bill last fall.  Some customers have discovered the company automatically debited their checking accounts for thousands of dollars of “back usage” customers deny using.  Once again, when choosing whether to believe a faulty usage meter and billing system or the customer, Internet Overchargers believe the meter that fills their pockets with customer cash.

Benzi Kornizer is one customer impacted by the data discrepancy.  Despite using MTN’s data service for several months without incident, the company is trying to withdraw R10000 ($1,321 US Dollars) from Benzi’s checking account.  Kornizer pays R600 ($79) per month for 3GB of wireless data usage.  MTN’s usage meter, after the installation of a new billing system, claims he used more – more than $1,000 more.

“I received a letter from MTN, with no reference number, no date, no details of the problem and now I am having trouble getting my problem resolved,” Kornizer told ITWeb.

MTN believes in their usage meter, which it is using as justification to back-bill customers, despite admissions of ongoing billing problems.  Affected customers are receiving letters signed by customer relations executive Eddie Moyce admitting prior under-billing.

“MTN is in the process of re-processing the used data and customer call data records and will debit the affected customers’ accounts accordingly,” the letter states.

MTN’s billing practices, now a story in the South African media, resulted in a statement released by the company.

“We are extremely sensitive to the fact that billing errors have had an impact on the pockets of our subscribers. We will not suspend any voice or data contracts as a result of this error, and MTN will credit the accounts where double-billing errors occurred. MTN subscribers will also retain their loyalty points accrued over this period. MTN will investigate and evaluate every query on a case-by-case basis,” says Moyce.

He explains that the trouble stems from an upgrade of the billing system the company is using. “We have invested millions in a new billing system, which went live at the end of 2009 and is proving to be successful. However, we are still working hard to rectify the fallout from the previous system.”

The company admits the complete transition to the new billing system may take years to complete.  That leaves customers like Kornizer playing broadband usage roulette, never certain what the company’s meter will finally read, even months after the billing cycle ends.  Although MTN claims their meter is “proving to be successful,” customer complaints are pouring into consumer protection agencies and websites.

Kornizer is threatening to sue MTN in court.

Eddie Moyce, customer relations executive, spoke with MoneyWeb about the billing problems experienced by MTN. (5 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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A sampling of the complaints from just the last 48 hours about MTN’s Usage Meter on consumer site HelloPeter, which has logged more than 9,000 customer complaints thus far against MTN:

“My December bill for my MTN Data Contract suddenly hits R3000 despite an normal usage of +-R320. I call the Autopage Accounts only to be told that there is a billing problem. However, any reply from MTN that this is a backbilling issue can be refuted. On my itemised billing, it shows that on Christmas day I used 1.2GB of data in 2 sessions a few minutes apart! Now, my modem is a 1.8Mbps but downloading 600MB in seconds is absolutely incredible!”

“Last month I received a data usage bill for R1901 which I thought was insane as it has always been R249 per month.  I queried it and a itemised bill was sent though, which showed the ‘usage’, so I could not argue, then on the 23rd I received an SMS saying MTN incorrectly billed customers for that period and we would get a full credit for the incorrect amount. Then I check my account and another R2693 was debited from my account.”

“My average monthly MTN bill for internet access via a modem is R271.27 which was boosted by a November bill for R521.20. I paid this amount even though it looked very high. I was astounded by my December bill for R 5395.48! I spoke to [customer service] who tells me that I must wait 25 working days for my query to be assessed! In the meantime I must pay the R5394.48 or else my [service] will be suspended! MTN insists I must pay before they audit my account.”

“I migrated my internet from a 500 meg to a 3 gig package, completed the paperwork and was assured that everything is in place and will be faxed through for the migration. After receiving an account for over R11000,  I was informed that the migration was never made. I do not have the forms, but the personnel remembered the transaction and called the accounts department. Answer, ‘Sorry, we made a mistake and did not do the migration for you, but you did use the data so you must pay the account’.”

“Since October 2009 I’ve been billed R 16000 mostly for data use. My account was suspended three times without notice….  [The company won’t send me] proof of the amount used.”

“My bill from MTN ranges between R1200 and R1400 a month – In October, November and December 2009, I received bills between R11 000 and R14 000 a month! When I queried these bills the answer was always the same: These are amounts that were not billed ‘forgot’ to bill me this amount and ‘there was an error’ on their system and this usage was not billed for. When asked for proof of some kind – seeing as I have not been using the account in December 2009, they told us they could not provide this. Nor would the call centre agent put me through to a Manager to discuss or sort it out. The last time we spoke to someone, they told us to ‘just pay it’ or make a payment plan to pay it off. I have no intention on paying any amounts due to their system faults and without proof of how I could use between R11 000 to R14 000 a month. Inconsistent billing, no service, no response to messages left, no responses to emails and faxes. I had no choice but to change service providers.”

“I am presently on the 500MB package for internet service, cost; R239/Mth. Yet my bill arrives stating just over R1400. I know I have not exceeded my allowance as I check it before and after each session and I only use it to Skype family back home, plus some VERY minor surfing on the odd occasion. This has been raised twice now with MTN, both times I have been greeted by a ‘it happens often’ mentality, told they can not find a reason why the bill is so high and the billing dept will get back to me in 21 days. This is going to be AFTER the money is taken out of my account. Evidence on this website indicates that grossly overcharging their clients is hardly an isolated occurrence here and there, but a standard procedure. This they seem to find an acceptable way to treat their customers. I wonder how they would feel if their clients all decided to settle bills in 21 days or at their leisure, through no fault of their own. To the present time this problem remains unresolved and not taken seriously by MTN.  TOTALLY UNACCEPTABLE.”

Comcast's new usage gauge

Broadband Reports noticed Comcast’s usage meter has broken out of its limited trial in Portland, Oregon and customers are receiving notices across the Pacific Northwest noting the company’s usage meter is now available for their ‘convenience.’  But remarkably, Comcast has told 99 percent of their customers they “do not need to check the usage meter” because they won’t be close to the company’s 250GB limit:

We are pleased to announce the pilot launch of the Comcast Usage Meter in your area. This new feature is available to Comcast High-Speed Internet customers and provides an easy way to check total monthly household high-speed Internet data usage at any time. Monthly data usage is the amount of data, such as images, movies, photos, videos, and other files that customers send, receive, download or upload each month.

Comcast measures total data usage and does not monitor specific customer activities to determine data usage. The current data usage allowance for the Comcast High-Speed Internet service is 250GB per month. This means that the vast majority of our customers – around 99% currently – will not come close to using 250GB of data in a month, and do not need to check the usage meter.

That leads to two questions: Why would a company make an effort to produce a meter that is irrelevant to the vast majority of customers, and why institute a usage cap at all if only one percent of customers come close to exceeding it?

The answer, of course, is that most customers won’t need to worry about the limit today, but tomorrow is another matter.

As more broadband users begin watching video over Comcast’s broadband service, they will come perilously closer to the fixed limit Comcast offers — a limit that protects Comcast’s cable television package from customers switching to broadband-based viewing.

Bandwidth Hog? One customer consumed 897GB last November... using a backup method Comcast itself recommends to customers

Once Internet Overcharging schemes get their foot in your door, it’s usually only a matter of time before they force their way in and start looking for your checkbook.

Would Comcast seek to eventually lower today’s 250GB limit?  Perhaps, but there is no evidence of anything imminent.  It has been done before in Canada and sold as a “money-saver,” offered with an “insurance policy” Bell had the chutzpah to suggest “protected” customers from overlimit fees.  Monetizing broadband use is a hot topic for providers seeking enhanced revenue from their broadband divisions.  Time Warner Cable tried to convince customers it would tie revenue earned from its own Internet Overcharging experiment into expansion of their local broadband networks.  That was proven blatantly false when upgrades commenced in areas never part of “the experiment,” while those that were have been bypassed for DOCSIS 3 upgrades.

Some might believe such limits protect providers from dreaded hordes of malicious “bandwidth abusers,” a broadband urban legend comparable to the Cadillac-driving welfare queens we heard about in the 1980s.  In truth, the handful of so-called “abusers” have quietly been dealt with under the terms of existing Acceptable Use Policies for years without inconveniencing the vast majority of customers with arbitrary usage limits.  But the industry-sponsored narrative persists, usually in the form of some neighborhood hacking teenager sucking your bandwidth dry and costing you money.

What constitutes “excessive” or “fair” use ludicrously ranges from Frontier’s infamous 5GB usage allowance to Comcast’s 250GB limit.  Every company insists their limit is the fairest and that 99 percent of customers won’t exceed it, no matter what it is.

Are there consumers moving a lot of data across Comcast’s network?  Yes.  One Broadband Reports reader in Spokane posted a usage report showing a whopping 897GB of consumption in November.  Was he running a torrent client swapping an illicit copy of Avatar with people all over the world?  Was he downloading lots of illegally obtained music and movies?  Was he running a commercial business on a residential connection?  No.  It turns out he was retrieving a backup to restore data from a failed hard drive.  In fact, Comcast recommends customers use online backup services, and even provides customers with a free, limited version of Mozy, which includes an easy path to upgrade to much larger storage plans.

Even Comcast doesn’t believe in the usage-limits-solve-congestion meme. In response to a query from IP Democracy back in February, 2008:

“Most [ISPs] recognize that a metered approach doesn’t solve peak-hour usage pressures.”

But it will do wonders for a provider’s bottom line.

Lawrence, Kansas is a unique place to live.  Its local newspaper, the Lawrence Journal-World, was one of the first in America to begin an online edition in 1995.  Its owner, The World Company, just so happens to also own the independent cable system serving the community, which also provides broadband and phone service to the city’s 90,000 residents.  Its biggest competitor is AT&T, which has been upgrading parts of Lawrence with its U-verse system to stay competitive.

Sunflower Broadband, which provides a “triple play” package of Internet, cable TV and telephone service, has remained controversial among service providers because it instituted an Internet Overcharging scheme with usage caps and overlimit fees.  The company has been used by the American Cable Association, a trade and lobbying group serving independent cable operators, as a poster child for effective rationed broadband schemes that reduce demand and increase broadband profits.

Lawrence, Kansas

Customers generally have loathed usage caps, particularly when they were stuck choosing between Sunflower’s faster, usage capped broadband service or a low speed DSL product from AT&T.  Stop the Cap! receives more complaints about Sunflower Broadband than any other provider, except Time Warner Cable during its own Internet Overcharging experiment in April 2009.  Lawrence residents appreciate the relatively fast speeds Sunflower can provide, but complain they can’t get much use from a service that limits customers to a set allowance and then bills them up to $2 per gigabyte in overlimit penalties when they exceed them.

Last fall, things started to change in Lawrence as AT&T began offering it’s U-verse service in parts of the community.  We began receiving e-mail from Lawrence residents pondering a new service plan Sunflower Broadband introduced — Palladium, an unmetered broadband option priced at $49.95 per month.  It sounded like a good deal, perhaps introduced to protect them from U-verse customer poaching, until they noticed Sunflower was  selling the plan without a fixed downstream or upstream speed.  In fact, no speed was mentioned at all.  Indeed, Sunflower’s Palladium is nothing new to those living abroad under various cap ‘n tier broadband regimes.  It’s comparable to New Zealand Telecom’s Big Time plan, where customers need not fear overlimit fees and penalties, but have to live with a “traffic management” scheme that gives priority to customers on other plans living under a usage cap.

In other words, Palladium customers get last priority on Sunflower’s network.  If the network is not congested, these customers should enjoy relatively fast connections.  But during primetime, expect speeds to drop… and dramatically so according to customers writing us.

Sunflower Broadband's Internet pricing - add $10 if you want standalone service

That customers debate just how slow those speeds can get testify to the nature of cable’s “shared infrastructure.”  Groups of subscribers are pooled together in geographic areas and share a set amount of bandwidth.  As usage increases, so does congestion.  Responsible operators measure that congestion and can split particularly busy neighborhoods into two or more distinct “pools,” each sharing their own bandwidth.  Based on the variable reports we’ve read, it’s apparent Palladium works better in some parts of Lawrence, namely those with fewer broadband enthusiasts, than others.

Network management is a major concern of Net Neutrality proponents.  It allows an operator to artificially impede traffic based on its type, who generates it, and potentially how much a customer has paid to prevent that throttling of their speed.  In the case of Palladium, network management is used to give usage-capped customers first priority for available bandwidth, and push Palladium customers further back in line.

Judging the quality of such a service is a classic case of “your results may vary,” because it is entirely dependent on when one uses the Internet, how many others are logged in and trying to use it at the same time, how many customers are saturating their connections with high traffic downloading and uploading, and how many people are sharing your “pool” of bandwidth.  Oh, and the quality of your cable line can create a major impact as well.

Sunflower Broadband representatives claim Palladium is “optimized for video” and should provide at least 2Mbps service during peak usage and up to 21Mbps service at non-peak times.  That’s a tremendous gap, and we wanted to find out whether most customers were getting closer to the low end or the high end of that range.

Back in October, we wrote a request in the comments section of the Journal-World asking customers to e-mail us with answers to several questions about their experiences with Sunflower Broadband:

• 1) whether you ever exceed the cap.
• 2) do you think there should be one.
• 3) would you prefer faster speed with a cap or slightly slower speed with no cap.
• 4) your experience with the new unlimited option.
• 5) whether you would contemplate switching to AT&T U-verse if it meant escaping a usage cap, even if it had slower speeds.
• 6) Would you pay more for faster speed and no cap?
• 7) your overall feelings about Sunflower Broadband.

We heard from just over two dozen readers sharing their thoughts about the company and its service.  The response was mixed.

Generally speaking, customers hate the usage caps Sunflower Broadband maintains on most of their broadband tiers.  All thought it was unfair and unreasonable to limit broadband service under Sunflower’s Bronze tier to just 2GB per month and their Silver tier to just 25GB per month.  Most customers who wrote subscribed to the Silver tier of service with 7Mbps/256kbps speeds at $29.95 per month.  They also paid a $5 monthly modem rental charge.  Those who wrote who fit the “broadband enthusiast” category were internally debating whether the Gold plan, with its assured 50Mbps/1Mbps speeds for $59.95 per month was a better option, even with a 120GB allowance, or whether they should opt for Palladium’s $49.95 option to escape the usage cap.

Among enthusiasts, some felt Sunflower responded to customer demands by offering an unlimited plan in the first place, and thought it was an acceptable trade-off to obtain lower speeds at peak usage times for a correspondingly lower price, and no cap, as long as speeds were reasonable at all times.  Others were offended they had to make the choice in the first place.

“If I lived anywhere else, I wouldn’t have to choose between a throttled service or one that asks for $60 a month for 120GB of service,” writes Steve from Lawrence.  “AT&T DSL for me is 1.5Mbps service because I live close to the edge of the distance limit from AT&T’s exchange.”

But Justin, also from Lawrence, has a more favorable view. “I hate their usage cap with a passion, but when you look at what small cable companies usually offer their customers, it’s slow speed service at terribly high prices,” he writes. “At least Sunflower did DOCSIS 3 upgrades and can offer big city speeds here.  How long will that take other small independent providers?”

Troy adds, “at least they gave us one choice for unlimited service.  Time Warner Cable and Comcast sure didn’t.”

About half of those who wrote did exceed their usage cap by underestimating the amount of usage in their respective households.  Most of those who did were on the Silver plan.

Dave writes, “I knew right off the bat the Bronze tier was ridiculous for anyone to choose, and our family has three teenagers so we knew that was not an option.  We tried the Silver plan when we switched from AT&T DSL service and blew the lid off that 25GB cap probably within two weeks and got a crazy bill.  At least Sunflower forgave the overlimit fees for the first month, but they could afford to because we upgraded to Palladium, paying them $20 more per month.”

One customer's dismal Palladium speed test result from last October, likely the result of a signal problem

Angela, who shares an apartment with two other roommates had their share of fights over who used up all the broadband allowance.

“We have a wireless network and everyone splits the bill, but when we ran up almost 200GB of usage, we freaked.  Nobody would admit to using that much Internet.  Thanks to my boyfriend, we discovered our wireless router was wide open and one of our lovely neighbors probably hopped on to enjoy,” Angela writes.

Sunflower also forgave their overlimit bill for the first month, but they decided to take advantage of an introductory offer from AT&T and switched to U-verse and are much happier.

“At least with AT&T, we know what our broadband bill is going to be and we don’t have fights or worries about getting a huge bill from Sunflower,” she adds.

Among those answering our question about reduced speed in return for no cap, the consensus view was “we would need to know what speed they are providing.”  Broadband speed was important to most who wrote.  While many may not be able to discern a difference between 10 and 20Mbps service for most online activities, obtaining 2Mbps service when expecting closer to 20Mbps is readily apparent, and that was the biggest problem with Palladium users unimpressed with its performance.

“Palladium is god awful, and close to unusable on the weekends and during the early evening when everyone is online,” writes Kelly, also in Lawrence.  “We have college students all over the neighborhood and these people can’t be unconnected for a minute, so I’m not surprised Palladium crawls when everyone is online.”

Kyle, a regular Stop the Cap! reader writes the whole concept of Palladium leaves a bad taste in his mouth.

“Palladium is the equivalent of going into a restaurant and eating leftovers — whatever speed is leftover, it’s yours.  Sometimes it might be a whole meal, other times scraps!  It’s an example of crappy customer service coming from a provider which doesn’t have much competition (although maybe that will change with U-verse),” he says.

Kyle is on the Gold plan, but remains unimpressed with Sunflower:

“Is there another DOCSIS 3 system in the country that limits upload speed to 1Mbps or has a bandwidth cap this low (120 GB) with DOCSIS 3?”

Stop the Cap! also obtained access to the company’s subscriber-only forums and discovered considerable discontent with Sunflower’s broadband service.

“I recently switched over to Palladium to avoid the new Gold price gouging. I bought the new modem set it up and much to my surprise my speeds were HORRIFIC! Consistently 4.5Mbps service over the course of a week at various times. Upload speeds were so terrible it took 15 minutes to send emails with one minute movies,” writes one user.  “So, for $20 more a month Palladium offers much slower speeds BUT unlimited bandwidth (which according to Sunflower’s own statistics almost no one exceeds their limits anyway.)  What a rip-off. All I want is my old Gold back, same speed and price. I am absolutely disgusted with Sunflower. Calling Palladium “variable speed” is a lie. You are throttling customers – period.”

“So I have Palladium and the speeds are decent, usually around 10Mbps down (we won’t talk about up speeds.) But every time I run a torrent my speeds go down to about 500kbps. The second I turn off my torrent client and run a speed test again its right back up to 10. Has anyone else been having similar issues? It seems like Sunflower throttles my entire connection when they detect a torrent,” writes another.

One Lawrence resident claims he was blacklisted by Sunflower Broadband after criticizing them.

“Their blacklisting of me served as a warning to others after I spoke out nationally.  They are quite pissed and I’m not allowed to go to any event sponsored by them.  I even got removed from the local Twitter festival,” a person who I have chosen to keep anonymous writes. “The nutshell is that the bandwidth from DOCSIS 3.0 is extremely throttled for Palladium users. If they have done heavy downloading the throttle drops speed to about 2Mbps.”

For Lawrence residents who have decided they don’t like the choices Sunflower provides for broadband service, the good news is that AT&T is upgrading their network in the city to provide U-verse service, and many who wrote us have switched just because AT&T does not engage in Internet Overcharging caps and limits in Lawrence.

There is even a blog devoted to comparing Sunflower Broadband service with AT&T U-verse.  The Lawrence Broadband Observer has been reporting on the dueling providers since August.  His verdict: AT&T U-verse wins for broadband for its more stable speeds, and no Internet Overcharging schemes, even if it costs more:

We decided to go with U-verse for our Internet service, canceling our Sunflower Broadband Internet, which we had used for over 13 years. U-verse’ top line internet costs $15 more per month then Sunflower’s; we decided that the advantages of U-Verse for Internet were enough to make this extra $15 per month a reasonable value.

Furthermore, the speed of U-verse has been remarkably consistent, always ranging between 16 and 17Mbps down and about 1.4Mbps up, no matter the time of day.

While Sunflower’s service is very fast at certain times of day, it frequently slows down during evenings or other times of heavy network use, sometimes to less then half of the speed we were paying for.

The other primary reason we went with U-verse was because U-verse does not have bandwidth overage fees or any kind of bandwidth limits. Although we have been careful with Sunflower and managed to avoid any bandwidth overage charges, having “the meter running” all the time was annoying, and we worried that we could always be surprised with an unexpected charge. With U-verse we do not have this worry.  One could almost think of the $15 extra for U-verse as an insurance policy…it buys peace of mind not having to worry about bandwidth overages.

Phillip Dampier

Verizon Wireless’s next generation LTE wireless broadband network threatens to bring expensive “usage-based billing” to millions of Americans using technology products that depend on wireless networking to communicate  — from the handheld tablet you use to enjoy USA Today over morning coffee, the car that delivers news, weather and traffic reports to and from work, to the portable television you use to catch up with the game while running around town.

At the Consumer Electronics Show, Verizon chief technology officer Dick Lynch warned that Verizon is likely to abandon any notion of flat rate usage pricing, particularly when Verizon doesn’t get a piece of the action from the sale of the devices that connect to their network.

Instead, Verizon Wireless will adopt a wireless version of Internet Overcharging — usage-based billing that isn’t entirely “usage-based.”

A true consumption billing system charges consumers only for what they use — don’t use the service that month and customers would pay little or nothing for service that billing period.  Instead, providers maximize revenue with arbitrary “usage allowances” which are part of the steep monthly service fee.  The unused portion of the allowance typically does not roll over, in effect lost at the end of the month.  That means you pay for not using their network.  Imagine if your electric company charged you for leaving the lights on 24/7, but you were out of town that month.  If you exceed your allowance, the overlimit penalty kicks in, and most providers set those prices high enough to sting you while rewarding them.

“The problem we have today with flat-based usage is that you are trying to encourage customers to be efficient in use and applications but you are getting some people who are bandwidth hogs using gigabytes a month and they are paying something like megabytes a month,” Lynch said. “That isn’t long-term sustainable. Why should customers using an average amount of bandwidth be subsidizing bandwidth hogs?”

Lynch

The first step to broadband pricing enlightenment is to recognize the only true “hog” here is the broadband provider with an endless appetite for your money.  Usage-based pricing schemes carry the one-two punch for consumers, with no pain for providers:

1. They discourage usage, as consumers fear using up their monthly allowance and getting socked with an enormous bill filled with penalties and overlimit fees;
2. The corresponding reduction in usage lowers the providers’ capital spending requirements to meet consumer demand, and increase profits dramatically from those who find allowances too limiting and are willing to pay the exorbitant pricing providers charge those who exceed them.

Does Verizon actually believe that $60 a month for their wireless broadband service represents a fair price for someone using “something like megabytes a month?”  Can Verizon show it is losing money on its wireless broadband service?  I think not.

Predictably, Lynch provides a “between-the-lines” slap at government intervention to force open wireless networks to additional competition in the equipment marketplace:

“The whole paradigm of how we sell devices into the public is changing,” Lynch said. “At the same time that we announced LTE, we announced an open development initiative where we encouraged third-party developers to deploy devices on our network.”

That initiative was hardly the result of a sudden change of heart from Verizon.  It came from pressure Washington applied over the “closed network” practices the American wireless industry has followed for years.  Handsets and the applications that run on them have traditionally been closely controlled by providers.  Features built into smartphones and other handsets were disabled or limited by providers before the phones were sold to the public.  Usually, this forced customers to use the services either provided directly by their wireless company, or one of their “affiliated partners.”

Verizon Wireless is signaling the consequence of a more competitive, open market for wireless products and services: usage limits and a higher bill. That’s because you didn’t buy that device at a Verizon store at their asking price, and you’ve been using it too much.

Consumers would make a grave mistake in blaming a more activist watchdog role by the federal government to force open the wireless industry to competition and innovation by third parties.  Despite Verizon’s hints that those pesky regulators in Washington are to blame for your usage being limited and your bill being higher, the blame really belongs with the carriers pocketing those proceeds.

Since regulators will get the blame regardless, isn’t it time to go all out for American consumers by transforming the wireless provider marketplace?  Here are our suggestions:

1. An end to the ongoing consolidation of existing wireless players into a shrinking number of what will soon be two or three “too big to fail” national providers;
2. Insistence on additional competition coming from new, independent players, not simply those directly affiliated with the dominant four carriers (Verizon, AT&T, Sprint, and T-Mobile);
3. Justification for confiscatory data pricing made possible from the highly concentrated wireless marketplace, particularly in smaller cities and communities.

Verizon and AT&T have both engaged in a lot of scare talk about usage and their costs to manage it.  We’d believe them, except we read their financial reports and neither company is hurting.  We’d even be willing to meet them halfway and advocate additional allocations of spectrum to provide the bandwidth an increasingly wireless world will demand, but not at their asking price with those pesky terms and conditions that ration service to consumers at top dollar prices.