Phillip Dampier

Today is Stop the Cap!‘s first anniversary.  One year ago today, this website was launched with the news that Frontier Communications, the local telephone company in Rochester, New York and in dozens of mostly rural communities nationwide, had quietly changed its Acceptable Use Policy to define appropriate maximum usage of their DSL service at a measly 5GB per month.

The  boneheaded, out of touch decision was called out for what it was: a profiteering provider pilfering wallets of their broadband customers.

All the signs of a Money Party among cable and DSL providers at consumer expense were apparent last summer.  Time Warner Cable was experimenting with a consumption billing plan in Beaumont, Texas.  In Canada, rhetoric about “bit caps” was already being circulated, trying to convince Canadians that broadband service was somehow as difficult to provide there as it is in Australia and New Zealand, where such caps were already in place.

To bring limits, rationing quotas, and consumption based billing to the United States would require consumers to ignore massive profits broadband providers were harvesting quarter after quarter at existing prices.  But demands for big profits from Wall Street meant they had to come from somewhere, and for cable companies with eroding profits from their cable TV divisions, and telephone companies dealing with disconnect requests for wired telephone lines, broadband was their choice.

It seems that what was insanely profitable a decade ago, when cable modem and DSL service started to introduce Americans to broadband, would now simply be ‘piles of  cash stacked like cord wood’-profitable as traffic increased. As the broadband adoption rate increased, bandwidth costs plummeted, and several providers also proudly trumpeted their reduced investments in their networks as a hallmark of keeping “costs under control.”

Consumers began actually using their service for… broadband-specific services, at the encouragement of providers’ marketing departments, touting their “always on” connection at “blazing fast speeds” to download music, movies, play games, and more.  Network utilization increased, and providers want someone to pay for a “bandwidth crisis” that isn’t a crisis at all.  Responsible investment in network infrastructure should be a given, in recognition that at least a small portion of those growing profits must be spent on maintaining and improving service.

One year ago, I laid out what was before us:

Cable operators have been discussing implementing usage caps in several markets to control what they refer to as a “broadband crisis.” The industry has embarked on a lobbying campaign to convince Americans, with scant evidence and absolutely no independent analysis of their numbers, that the country is headed to a massive shortage in bandwidth in just a few short years, and that a tiny percentage of customers are hogging your bandwidth.

Frontier, ever the rascally competitor, has decided to one-up Time Warner’s Road Runner product by slapping on a usage cap now for DSL customers before Road Runner considers doing the same. And in a spectacularly stupid move competitively, they have implemented a draconian cap that even the cable industry wouldn’t try to implement.

Time Warner Cable “took one for the team,” according to industry-friendly Multichannel News, when it introduced a ludicrous Internet Overcharging experiment of its own announced this past April, which would have “saved” customers money by getting them to “pay for what they use.”  In fact, their plan proved my point last summer, following the same roadmap of “bandwidth crisis” to “heavy downloaders” to trying to squeeze customers for more money for upgrades they could easily have done with the enormous profits they already earn.

Their proposal would have made a deliciously profitable $50 a month Internet service now cost consumers $150 a month with absolutely zero improvement in service, speed, or performance.  But Wall Street would have been happy with the higher returns.

Some 400+ articles later, we’ve educated consumers across North America about the reality of Internet Overcharging.  Despite industry propaganda “education” efforts, astroturfing groups we’ve exposed as having direct connections with the telecommunications providers paying them to produce worthless studies, fear-mongering about Internet brownouts by equipment vendors with solutions to sell, and a hack-a-thon of formerly respectable broadband pioneers and ex-government officials who sold their credentials for a paycheck to lobby and spout industry propaganda, most consumers continue to reject overcharging for their broadband service.  Consumers instinctively know a cable company with a rate change always means a rate increase, and plans to “save people money” actually means they will “protect industry profits.”

We have achieved victory after victory in 2008-2009:

• Fought back against Frontier’s boneheaded plan, and convinced them that DSL can compete best on price and flexibility — no usage cap has ever been enforced at Frontier, and today they are using Time Warner Cable’s blundering profiteering experiment against them in their marketing materials.  For rural Frontier customers with no other broadband provider, that’s a major relief from being stuck with one broadband option that rations their usage to ludicrously low levels.
• Stopped Time Warner Cable’s experiment before it got off the ground in several “test cities.”  The people of Austin, San Antonio, Rochester, and the Triad region of North Carolina did Time Warner Cable customers nationwide a tremendous service in halting this experiment before it spread.  Our efforts even brought a United States Senator, Charles Schumer, to the front lawn of Time Warner Cable in Rochester to announce the nightmare was, at least for now, over.  We managed to even see an end to the overcharging of customers in Beaumont, Texas who lived through a summer, winter, and spring, overpaying for their broadband service.
• We raised hell in the North Carolina state legislature, coming to the aid of Wilson and other communities in the state trying to get municipal broadband projects off the ground.  Communities across the state faced anti-consumer corporate protectionist legislation written by the telecommunications industry, introduced by willing elected officials who took big telecom money, and sold out their constituents.  We killed two bills, forced a sponsor of one such measure to repudiate his own bill, and gave major headaches to legislators that thought they could just cash those big checks, vote against your interests, and you’d never know.  Those days are over.
• We helped bring legislation up in Congress to draw attention to the issue of Internet Overcharging, and have called out providers who want to use their marketing departments to lie to customers about their broadband costs and profits, while being considerably more honest with their shareholders in their quarterly financial reports.  Congressman Eric Massa’s legislation would demand companies show proof of the need to implement consumption based billing.  Indeed, as consumers find out how profitable broadband service is at today’s prices, they’ll never tolerate the profit padding providers seek with tomorrow’s caps/limits, penalties and fees, and unjustified tiers.

As you can see, Internet Overcharging is not a dead concept.  An educated consumer will recognize a swindle when they see one, and providers continue to test overcharging schemes in focus groups in different parts of the country.  They’ll use any analogy, from a buffet lunch to a toll road traveled by big trucks and little cars.  They’re looking for anything they can find to sucker you into believing paying more for your broadband service is fair.

Broadband service must be fast, affordable, and competitive.  In too many communities in Canada and the United States, a monopoly or duopoly marketplace has guaranteed none of those things.  In our second year, we must remain vigilant in our core mission to fight Internet Overcharging, but we also need to fight for more competition, regulation where competition does not exist, oversight over providers, and support for projects that will enhance broadband and make it more affordable than ever.  With your help, we can stand toe to toe with any provider, because the facts are on our side, not theirs, when it comes to Internet Overcharging schemes.

Welcome to Year Two!

If cable operators intend to impose Internet Overcharging schemes to measure and cap residential broadband accounts, the Federal Communications Commission (FCC) must impose equal treatment on traditional video cable television packages to allow customers to subscribe to only the channels they want.

The Austin Broadband Interest Group, a not-for-profit broadband advocacy organization, calls out the cable television industry for advocating an end to flat rate broadband service at the same time they continue to resist a-la-carte pricing for cable television packages.

In a filing with the FCC as part of a nationwide broadband policy inquiry, the Texas group recites the history of Time Warner Cable’s recent proposed experiment curtailing current flat rate Internet service.  Time Warner Cable planned to expand its Internet Overcharging market test conducted in Beaumont, Texas into four additional cities: Austin and San Antonio in Texas, Rochester in western New York, and the Triad region of North Carolina.  Customers in the test would have faced the prospect of paying 300% more for an equivalent level of flat rate service, with bills increasing from $40-50 a month to a staggering $150 a month, with no increase in speed or immediate improvement in service.

The Austin group claims that such Internet Overcharging efforts are designed to protect Time Warner Cable’s video business model, which includes the packaging of flat rate video cable TV packages to customers across the country.  Time Warner Cable, among other cable providers, have grown increasingly concerned about free online video potentially discouraging customers from subscribing to a cable television package.  Industry executives fear that new generations of Internet users will dispense with traditional cable TV service, obtaining video entertainment online, instead.

The group advocates the FCC enforce a rule that any broadband provider that wants to implement limits or consumption-based service tiers must also offer the same pricing model for video programming.  Matthew A. Henry and Chip Rosenthal, authors of the filing, include other competing video providers in their comments.  Telephone companies, including AT&T and Verizon, have begun offering video services to customers in addition to broadband packages.  AT&T is testing an Internet Overcharging scheme to limit consumption in two cities — Beaumont, Texas and Reno, Nevada.

The cable industry has struggled with Congress and the Commission for years to prevent the imposition of a-la-carte video programming pricing, permitting customers to pay for only the channels they want to watch.  The industry claims it would destroy the business model of cable television, where cable programmers like CNN, The Weather Channel, A&E, and most others impose a subscription fee based on the number of “basic cable” subscribers that have access to those channels.  Most networks charge between 10-80 cents per subscriber, with some sports-related channels charging considerably more.  By dividing the costs among every subscriber, the industry argues, it can deliver a robust video package to everyone for the same price.

Unfortunately, cable programmers continually increase the rates they charge for their cable networks, often well above the rate of inflation, and many broadcast networks and stations also demand cable companies take on new networks they may not necessarily want, to obtain continued permission to carry local stations on the cable dial. The result: relentless annual rate increases for cable television packages.

The inequity of cable’s argument that it must be allowed to continue providing flat rate television programming packages (and disallow a-la-carte) while programming costs increase, while demanding an end to flat rate Internet pricing, despite a decrease in the costs to provide it, suggests “fairness” is not the motivation for proposing such Internet Overcharging schemes:

In May of 2009, Time Warner Chief Executive Officer Glenn Britt essentially admitted that the competitive threat of online video to traditional cable is the driving force behind the company’s capped and metered pricing model. Mr. Britt told investors, “If, at an extreme, you could get all of the programming you get over cable for free on the Internet, over time people will stop buying (TV).”  Unfortunately, Time Warner has chosen to protect its cable revenues through unfairly restricting usage of its broadband service. This clearly demonstrates the need regulatory ground rules aimed at dissuading such anti-consumer and anti-broadband business practices.

Rather than representing a “fair” method of billing, metered pricing plans and usage caps are a strategy intended to salvage diminishing cable revenues by forcing users to use less Internet. Users have been watching increasing amounts of video online, with some abandoning their cable service altogether in favor of broadband (an effect that has been sped by the struggling economy). This presents an obvious dilemma for broadband providers that also offer a cable product, like Time Warner: as online video watching goes up, the revenue-generating cable usage goes down. Online video is bad for business because a cable company directly profits from its cable content through advertising, pay-per-view and video-on-demand, but can’t profit off Internet content. The fact is that Time Warner is offering competing products and the company has a vested interest in cable video prevailing over Internet video. Time Warner introduced metered pricing and usage caps to make its customers turn off their computers and pick up the remote.