After intense lobbying, wireless phone companies won a significant reprieve from the watered-down 2010 Net Neutrality policies introduced by Federal Communications Commission chairman Julius Genachowski.

Now some of America’s largest cell phone companies are considering plans that would offer special “toll-free” access to favored partners’ content, while leaving everyone else subject to the companies’ usage capped data plans.

Much of the discussion about exempting certain content from data allowances is taking place at this week’s CTIA Wireless trade show in New Orleans.

Some highlights:

• T-Mobile USA is planning to expand video streaming services offered to subscribers, but with a twist. Content creators could pay to have their shows streamed to customers, and in turn, T-Mobile would not charge that traffic against the customer’s monthly usage allowance. Whether T-Mobile would maintain an ownership interest in the content is unknown, but “preferred partners” would receive exceptional visibility through aggressive promotional campaigns T-Mobile would launch.  So would T-Mobile, which plans advertising and promotional messages inside that content;
• Verizon Wireless said it was looking to create “toll-free” data services that would be subsidized by content providers. Video, games, and even apps could be promoted to consumers as “data usage”-free, meaning it won’t count against your monthly usage allowance. But Verizon recognizes the concept would be controversial and run afoul of Net Neutrality concerns.
• AT&T has already signaled its interest in creating a “content-provider-pays” model where users get free access to content if content providers pay AT&T’s traffic charges.

All three carriers earlier abandoned all-you-can-eat flat rate data plans, and Net Neutrality proponents claim these latest moves are attempts by wireless phone companies to further monetize data traffic.

The Wall Street Journal reports the plans, in some cases, fly in the face of rhetoric about spectrum shortages and a wireless data traffic crisis (underlining ours):

T-Mobile’s Mr. Duea said the goal of new video offerings that don’t count against data plans would be to get customers interested in consuming more data, and set T-Mobile’s plans apart from those of other carriers.

"Data floods" and "spectrum shortages" don't stop T-Mobile.

Current FCC Net Neutrality rules require wireless carriers to not block competing services from companies like Skype and Google, nor censor content. Both Verizon and MetroPCS are challenging those rules in federal court. But wireless carriers are already exempt from giving preferential treatment to certain types of data or traffic, which opens the door to “toll-free” data services.

Net Neutrality supporters believe these practices will uneven the playing field for content creators and innovative new online start-ups, who may not be able to afford the prices carriers charge for first class treatment. It also influences consumer decision-making by encouraging customers to use the “toll-free” services to preserve their monthly data allowance.

Companies like Ericsson and Cisco have plans to market technology that will allow carriers to divide up data traffic into different traffic lanes, some fast and free to use, others subject to a customer’s monthly data allowance, and certain undesirable traffic shunted to low priority slow lanes.

A Verizon Wireless executive ironically blamed the need for “toll-free” pricing partly on the wireless industry itself, which has almost universally abandoned unlimited data plans.

“As we move away from flat rate pricing, there is room for an 1-800-type of service where certain destinations could offset the cost of the network to get customers to those destinations,” said Verizon’s chief technology officer Tony Melone. “There are Net Neutrality issues that have to be addressed, too.”

Melone added the company wasn’t quite ready to launch the “toll-free” traffic lanes just yet, but claimed certain content providers were discussing deals with the company to participate if and when the new toll booths are opened for traffic.

Canadian cable, phone, and satellite providers have done a better job stymieing would-be “cord-cutters” than their counterparts further south in the United States.

The Canadian Radio-television and Telecommunications Commission’s (CRTC) annual report on the country’s telecom companies shows all of them remain exceptionally profitable, keeping pay TV customers far more effectively than American providers. Total revenues climbed from $12.5 billion to $13.5 billion in just one year, as price hikes, Internet Overcharging schemes like usage-based billing, and lack of competition continue to takes its toll on Canadian wallets.

The biggest winners were the biggest telecom companies in Canada — Rogers Communications, Bell Canada (BCE), and Shaw Communications, which all saw profits soar 8.2% to $11 billion.  Costs increased about 10.7% in 2011, fueled by network upgrades and rampant hikes in programming costs — an interesting state of affairs considering Rogers and Bell own or control a substantial number of the programmers demanding higher payments.  Most of those increases were passed on to customers in the form of rate hikes.

Although Canadians are increasingly interested in streaming online video, virtually every major Internet Service Provider in the country has effectively prevented customers from dropping cable television service in favor of broadband-only access.  They manage it with usage caps and usage billing on their broadband products.  With streamed video accounting for a substantial drain on customers’ monthly usage allowances, Canadians are unlikely to cancel cable TV in favor of watching all of their favorite shows online.

In fact, the number of Canadian households that subscribed to a cable company’s basic television service actually increased by 2.8% in 2011 to reach 8.5 million.  Experts say the country’s transition to digital over the air television may account for some of that increase, but a few high broadband bills with overlimit fees for “excessive Internet use” can effectively drive online video fans back to traditional cable TV as well.

Satellite television in Canada remained flat,  with a virtually unchanged 2.9 million Canadians relying on Bell and Shaw satellite service for television entertainment.

But everyone is paying more to watch.

In 2011, cable companies paid $2.1 billion in wholesale fees to the pay and specialty services they distribute, an increase of 10.2% over the $1.9 billion paid the previous year. The fees paid by satellite companies rose by 2.8% in one year, going from $894.4 million to $919 million.

That leaves vertically and horizontally-integrated conglomerates like Bell in the perfect position to extract higher programming payments.  Those costs are passed down to Canadian consumers and blamed on “greedy programmers,” despite the fact those programmers are owned in part or outright by Bell.

A Rogers retail rental store

Rogers is also well-suited to remain a part of the Canadian entertainment experience.  The company owns cable systems, wireless phone networks, programmers, and even home video stores. However Stop the Cap! reader Alex notes Rogers has been closing a number of those video stores over the past few months.

“This gives customers one less choice for renting movies, basically forcing them to use Rogers On Demand instead,” writes Alex.

Rogers On Demand comes with a higher price, too.  In-store rentals from Rogers are priced at 2 for $9 or 3 for $15.  A recent look at Rogers’ video on demand website, Rogers Anyplace TV, shows most movie titles priced at $4.99 each.  With Rogers closing 40 percent of their retail rental outlets, movie fans have had fewer competitive choices for movie rentals.

One potential new contender coming to Canada – kiosk video rentals.  Although services like Redbox are now commonplace in the States, they are virtually unknown in the north.  Jim Gormley, former owner of Jumbo Video is back with Planet DVD.  With just 2% of Canadians renting movies from kiosks, Gormley believes there is plenty of room to grow, especially as Rogers scales back its video rental business.

Planet DVD has a pilot project running with supermarket chain Sobeys to place kiosks in front of nine store locations.  The first kiosk was erected in early March in front of a Sobeys store in Mississauga, Ont.

A new release at a Planet DVD kiosk is priced at $3 for a one-day rental.  That’s less than what most video stores charge, but more than double what Americans pay at a Redbox kiosk.

Time Warner Cable's usage meter.

Time Warner Cable today relaunched usage-based billing, offering customers a $5 monthly discount off Internet access when they confine their usage to a maximum of 5GB per month.

Stop the Cap! was at the forefront of protesting Time Warner’s last Internet Overcharging experiment in 2009, which would have allowed unlimited access for $150 a month — a major rate increase to be sure.  Other customers had usage allowances that originally would have ranged from 40-60GB per month, with overlimit fees of $1/GB or more.

Time Warner Cable’s Jeff Simmermon, director of digital communications, admitted the 2009 experiment attempted in Beaumont, San Antonio, and Austin, Texas, Greensboro/Triad, N.C., and Rochester, N.Y. was unsuccessful.

“Yes, we did try this before, a few years ago,” Simmermon said. “And yes, pretty much everyone agrees that it didn’t go so well. So we listened to customer complaints. A lot.”

The cable company is trying again in southern Texas, including the cities of San Antonio, Laredo, Corpus Christi, the Rio Grande Valley and the Border Corridor.

This time Simmermon says the usage-based pricing program for Time Warner Cable customers will be optional. He also promised Time Warner Cable customers will always have access to unlimited broadband at a flat monthly rate.

This is a major change for the cable company, because earlier statements from both CEO Glenn Britt and the chief financial officer Irene Esteves called usage based billing inevitable.

Simmermon admitted Time Warner Cable is making plenty of money selling unlimited access to customers today.

Simmermon

“We profit from unlimited consumption, and a free, open Internet is the sort of Internet that has gotten us this far,” Simmermon wrote on the company’s blog.

“All participation in the Essentials plan is opt-in, with the opportunity to save a few dollars each month,” Simmermon said. “It’s not going to be for everybody, and that’s fine — all Time Warner Cable customers will still have the option of selection an unlimited broadband plan.”

The details:

1) Up to 5GB/month of data transmission for a $5/month discount from one’s current monthly bill. All Standard, Basic and Lite broadband customers will be eligible. Turbo, Extreme and Wideband customers will continue as always, with access to unlimited broadband and no optional tiered plan or discounts.

2) The ability to opt-in and opt-out of a tiered package at any time.

3) A “meter” that tracks usage on a daily, monthly, weekly or even hourly basis, enabling customers to accurately gauge usage.

3) A 60 day/2 billing-cycle grace period to allow customers to adjust usage patterns. During this time the company will notify customers of overages but won’t charge for them.

4) Overages will cost $1 per GB, not to exceed a maximum of $25/month.

This presents the opportunity to save $5/month from a monthly broadband bill.

Time Warner already has the TV Essentials plan for $39.99/month that offers low-income households to have access to cable, in a stripped down package. Simmermon says this is meant to be the broadband equivalent.

[Stop the Cap! will publish our own views on this development in a separate editorial.]

Ever wonder why cell phone companies are upset about new regulations that would warn customers when they are about to face mobile usage overlimit or roaming fees?  Rogers Communications explains why in their latest quarterly results:

Nadir Mohamed, CEO:

There was, however, a sequential slowing in the wireless data revenue growth rate, and that’s primarily attributable to new outbound data roaming plans that we put in place. With these new plans, we put in place automated customer notification mechanisms that had a net effect of slowing usage versus stimulating it to the degree that we expected it to. We’re in the process of modifying how these plans and notifications work, which I expect will have a more stimulative effect and help restore the trajectory we had for wireless data growth.

In simpler terms, Rogers began notifying their customers through text messaging when they were about to start data roaming — the most expensive data usage around, incurred when you leave Rogers’ service area and roam on another provider’s network.  With Canadians visiting the United States and elsewhere, using a cell phone while traveling can get expensive fast.  Rogers created new roaming data plans for customers likely to need the service while abroad.  But their roaming data plans come at steep prices:

Unintended consequences: When subscribers know they are about to pay more, they stop using.

U.S. Data Passes

Day Pass: $5 for 2MB
Day Pass: $10 for 10MB
Day Pass: $20 for 40MB
Week Pass: $25 for 15MB
Week Pass: $50 for 60MB
Week Pass: $100 for 250MB

The warnings that customers were about to incur even higher a-la-carte roaming fees or start to consume their day or weekly data pass had the unintended, but highly predictable effect of getting people to think carefully about using data while roaming.

Bruce

While good for consumers, that is bad for Rogers’ bottom line, so the company’s formerly frank warnings to customers are “being modified” to help the company “stimulate” revenue and restore the predicted revenue growth from the high-priced roaming plans.

“We tried to create real transparency about when people and how people could get on data packages as they went overseas,” admits Robert Bruce, president of Rogers Communications Division. “We put in a fair number of reminders to let people know that they were on à la carte pricing, and we think that these dissuaded significantly customers from using it and possibly created some confusion along the way.”

Rogers Cable customers are also finding some of the company’s newest innovations a challenge to their monthly broadband usage allowances, among the lowest in Canada:

• Rogers Remote TV Manager: Enables cable subscribers to search programming and manage PVR recordings anytime on any device;
• Rogers Live TV. This service lets cable customers stream live TV channels on their tablets and watch shows anywhere they are in the home;
• Rogers On Demand TV app on Microsoft’s Xbox 360 LIVE platform, bringing Rogers On Demand TV to the gaming console;
• A refresh of the digital cable user interface, improving ease of use for the Whole Home PVR and a better program guide and search function.

In the long term, Rogers is moving towards an IP-based delivery system for its video programming, allowing the company to deliver video across different platforms more efficiently.  As Rogers converts the rest of its cable systems to digital cable, it is opening up new broadband capacity — a critical part of the company’s revenues.

Rogers admits it uses data caps to drive revenue.  By moving customers into higher usage, more expensive tiers, Rogers is able to drive revenue upwards as well.

“As customers continue every quarter, in and out, to consume more and more and spend more and more time on the Internet, we think it’s both a great opportunity for us and a welcome addition to the product offering from a customer perspective,” Bruce said.

Just a few weeks after announcing $2 rate increases on most tiers of the company’s broadband service, Rogers Communications has announced speed upgrades and tiny increases in usage allowances for certain customers:

• Express: download speeds will increase from up to 12Mbps to up to 18Mbps and data allowance will increase from 60GB to 70GB.
• Extreme: download speeds will increase from up to 24Mbps to up to 28Mbps and data allowance will increase from 100GB to 120GB.

These enhancements apply to customers utilizing Rogers DOCSIS 3.0 capabilities. Rogers will start rolling out the faster speeds to existing Express tier customers currently receiving download speeds of up to 12 Mbps starting January 26^th and will continue over the following weeks. New customers will experience faster speeds beginning February 21^st. All new and existing customers will benefit from higher data allowances starting March 8^th.

Rogers has played repeatedly with their usage allowances, particularly for its Extreme tier, which has seen increases and decreases over the past few years:

Rogers Extreme Tier Usage Cap History

• 2009: 95GB per month
• 2010: Reduced to 80GB per month (-15GB)
• 2011: Increased to 100GB per month (+20GB)
• 2012: Increased to 120GB per month (+20GB)

Rogers’ Express service gets just a 10GB monthly bump, making the speed upgrade less valuable because customers are restrained from using the service.

Rogers says the incremental upgrades are a result of Canadians using the Internet more than ever.

“Rogers customers are increasingly watching movies on Rogers on Demand Online, working from home and using multiple devices like tablets and laptops connected by Wi-Fi to the internet,” said John Boynton, executive vice-president and chief marketing officer at Rogers Communications. “The ways Canadians are using the internet are changing dramatically and we are constantly reviewing our plans and policies to ensure they deliver the best possible customer experience that lines up with evolving needs and usage patterns.”

Apparently those living in western Canada use the Internet even more, because Shaw Communications’ comparable broadband tiers are much more generous:

Shaw Communications Usage Allowances

• High Speed 10Mbps: 125GB per month
• High Speed 20Mbps: 200GB per month
• Broadband 50Mbps: 400GB per month