Phillip Dampier: The Blizzard of BS from Canadian ISPs is getting salted and plowed by Canadian media and outraged citizens.

A major ongoing Internet Overcharging campaign by Canadian Internet Service Providers to extract more revenue from consumers has sailed under the radar for more than two years now in most of the Canadian press.  Although some newspapers have occasionally covered various telecommunications atrocities related to cell phone pricing, lagging broadband speeds, and an overall lack of competition in the country, specifics about efforts to curtail broadband usage (or monetize its claimed “overuse”) has been a topic mostly discussed on online forums.

No more.

As Stop the Cap! turns more attention to Canadian Internet Overcharging schemes, let this be an object lesson to our American readers about how the game is being played.  What starts in Canada could finish American flat rate broadband as well.

CRTC Ruling Lights the Flame

This week, the Canadian Radio-television and Telecommunications Commission (CRTC) finalized rules that will effectively end unlimited broadband service in the country.  Remarkably, the Commission’s ruling completely ignores the one group such “usage-based billing (UBB)” impacts the most: individual customers.

The game-changing rules, found in the obliquely-named “Telecom Decision CRTC 2011-44,” effectively establish false usage-based pricing on both the wholesale and retail levels.  No provider will actually sell broadband packages that charge only for what a consumer actually uses.  Instead, each provider will set arbitrary usage allowances — usage limits — on their broadband accounts.  Any remaining unused allowance is forfeit at the end of the month, but “overuse,” at the discretion of the provider, will be penalized with overlimit penalty fees running several dollars per gigabyte.

The CRTC acknowledges, and big providers admit, these Internet Overcharging schemes are all about getting consumers to change their online activities.

[Providers] submitted that UBB rates shape end-user behaviour and that different UBB rates would lead to different behaviours by carriers’ and competitors’ end-customers.

Perish the thought.  Without such pricing, Canadian broadband could ultimately offer an alternative to overpriced cable-TV and telephone packages sold by the very providers that advocate limited use plans.  Providers insist on predictable, uniform usage.  The Commission apparently agrees.

The Commission even acknowledges today’s unlimited use plans in Canada almost always recover the actual costs incurred to provide them, and then some:

The Commission also notes that the flat-rate component of the carriers’ retail Internet service rates recovers most, if not all, of the associated retail UBB costs. In the Commission’s view, this situation provides carriers with the flexibility to adjust or waive retail UBB rates on a promotional basis.

With this in mind, why the CRTC felt radical changes were warranted is only a mystery until you realize most of the commissioners were former employees of the various telecommunications companies themselves.

Birds of a feather….

The only audience the CRTC listens to.

All of the falderal about the merits of UBB aside, in the end the CRTC threw a small bone to independent service providers not affiliated with super-sized players like Bell, Rogers, Shaw, and Videotron — the Commission ordered they be given a “whopping” 15 percent price break off wholesale rates.

Major carriers were outraged even by this token amount, arguing that providers forced to charge correspondingly higher prices (higher than major carriers charge) could still eke out a place in the market by offering other services or better support.  They didn’t need, or deserve a discount.

But independent competitors warned without discounts approaching 50 percent, many will be gone within five years.  Many providers argued the major companies, some who received taxpayer subsidies to construct national telecommunications networks, would be able to set wholesale prices artificially high to drive them out of business.

Canada’s Media Reacts

The effective end of flat rate service across Canada finally sparked significant national media coverage of the imminent death of Canada’s broadband revolution, soon to be relegated to a nickle-and-dime metered pricing scheme that will give providers the monetary power to control usage, limit innovation, and have their hands into picking marketplace winners and losers.  Don’t like Netflix?  Slash usage allowances.  Want to protect your cable-TV revenue?  Exempt your own online content from the meter as long as you keep your subscription.  Want to drive down Canada’s broadband standing in the world?  Turn the marketplace over to a handful of companies dreaming of revenue opportunities afforded by monetizing broadband usage.

The Globe and Mail — A metered Internet is a regulatory failure: The CRTC has decided to allow Bell and other big telecom companies to change the way Canadians are billed for Internet access. Metering, or usage-based billing (UBB), will mean that service providers can charge per byte in addition to their basic access charges. The move is sure to stifle digital creativity in Canada while the rest of the world looks on and snickers.  […] So there you have it. Just as the world is ready to feast on what Canadians might cook up in the way of multimedia 3.0, Canada decides to meter the Internet, tilting the table sharply towards old-school TV networks and big corporations that can absorb the higher cost of doing business.

Canadian newspapers have covered the story in the greatest detail, but now — finally — Canada’s television news has discovered the story, which for many media critics mean the story is actually “real.”

“If you don’t see it on television, it didn’t really happen,” writes Jim from Halifax, Nova Scotia.  “A lot of Canadians don’t read newspapers, and the magazines certainly are not covering this story, so it has been an online-only event  until CBC, CTV, and Global put it on their newscasts.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CBC News Extra Billing for Internet 1-18-11.flv[/flv]

CBC Television reports on the Internet Overcharging controversy.  (2 minutes)

Some critics say much of Canada’s commercial media is already in the hands of a tightly controlled, vertically integrated empire.  Most of the cable and phone companies have ownership in many major commercial broadcasters, cable networks, and even newspapers and magazines.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Vertical Integration.mp4[/flv]

30 Rock’s Liz Lemon and Jack Donaghy explore the concept of “vertical integration.”  Then see how it relates to Canada’s media.  (3 minutes)

But even a controlled media environment cannot stop outrage over UBB going viral, as ordinary Canadians realize they are about to pay much higher prices for a service they depend on more and more.

Outrage Commences

Charlie Angus (NDP) -- "This pricing is a ripoff."

While these pricing schemes have been around awhile, now that they are getting well-publicized exposure, consumers have realized the implications of counting how many YouTube videos they watch.

Tens of thousands have signed Openmedia.ca’s online petition, others are complaining to the media and writing their members of Parliament, demanding action.

That will only get louder when consumers start receiving bills for double, triple, or even higher for the exact same quality of service they used to pay less to receive.

“There will be a huge wake-up call for many customers,” said Jared Miller, president of Youmano, a provider based in the Town of Mount Royal.

Charlie Angus, the NDP member of Parliament who speaks about digital issues, said he he thinks the entire pricing scheme is a ripoff that will lead to huge increases in customers’ bills.

“What we need to have is clear and transparent rules so it’s being used in a measured capacity, and it’s not just instituting the principle that every time you turn on the Internet, they can ding you for fees like they do with cell-phones,” Angus said. “We’ve seen this before; when we were told that deregulating cable rates would give customers a big benefit. We were paying 60-to 100-per-cent more in no time.”

“Canada is already falling behind other countries in terms of choice, accessibility and pricing for the Internet,” Angus added.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/CTV British Columbia – Canadians rank among most enthusiastic web users 12-28-10.flv[/flv]

CTV British Columbia explores Canada’s love affair with technology and how its integration has dramatically changed the social lives of many families.  That’s no surprise, considering Canadians are North America’s most enthusiastic net users.  (2 minutes)

Commissioners of the National Telecommunications Commission (NTC), led by its chair Gamaliel Cordoba (middle, in blue shirt) preside in a public hearing Tuesday on the proposed circular requiring broadband data limit for consumers and minimum broadband speed for service providers. The event, which was held at the NTC main office in Quezon City, was attended by various industry stakeholders, including telcos, bloggers, and consumer advocacy groups. Photo by Melvin Calimag; Courtesy: GMANews.tv

Philippine consumers won a major victory this morning, successfully stripping language permitting Internet usage limits from a broadband reform measure before the country’s telecommunications regulator.

In a newly revised draft, this language written by and for some of the nation’s largest telecom providers was removed after a major consumer push-back:

“WHEREAS, it has been observed that few subscribers/users connect to the internet for unreasonably long period [sic] of time depriving other users from connecting to the internet; NOW, THEREFORE… Service providers may set the maximum volume of data allowed per subscriber/user per day.”

Consumer rights group TXTPower was instrumental in exposing the provider-written language and generating a groundswell of opposition to broadband usage limits.  The group’s leader Tonyo Cruz said Internet Overcharging schemes like usage caps deliver all of the benefits to providers while limiting consumer access and increasing bills.

“The adoption of [usage caps] will destroy social media in the Philippines and affect businesses,” Cruz told commissioners at a National Telecommunications Commission public meeting attended by consumers.

Cruz compared broadband in the Philippines with a turtle race.

“Imposing caps would be like putting speed limits on slow-moving turtles,” he said.  “It is one thing for telcos to say that a small percentage of consumers abuse their networks, but is another and more important thing to know whether they actually deliver the promised services and whether they have at the moment or in the future the capacity to deliver them.”

Cruz says his group doesn’t oppose providers dealing individually with consumers who use their accounts to the point of creating problems for other users on the network, but a blanket usage limit punishing every Filipino was unacceptable.

The issue rapidly became a political hot potato when ordinary Filipinos contacted their elected representatives to protest the measure.

Kabataan Partylist representative Mong Palatino put the Commission on notice: “NTC’s draft memo [including usage caps] is clearly anti-consumer and regressive. It tramples on the rights of the consumers to get what they pay for in terms of a reliable Internet service,” Palatino wrote in a widely distributed statement. “By allowing telcos and Internet Service Providers (ISPs) to limit Internet speed and connection, NTC seemingly wants the whole nation to regress to an Internet era that is much slower and highly unstable,” Palatino explained.

For Cruz, the entire argument for usage caps and the complaints about consumers using too much Internet service “ring weird.”

“The telcos who complain about over-use are the same companies actively encouraging consumers to use the Internet and become avid Internet users, to watch and upload videos and photos,” Cruz noted.

Cruz and other consumer activists want the Commission to hold additional public hearings, and stream them live over the Internet.

Ontario residents enjoy less than half a serving of broadband their neighbors in Quebec enjoy from Bell, for less money

Residents of Quebec enjoy more than double the broadband usage allowance Bell provides its Ontario customers, showing once again h0w arbitrary Internet Overcharging schemes are for consumers in North America.

Broadband Reports reader Ironsight200 ponders why customers in Quebec enjoy substantially less abuse from the skimpy usage allowances Bell imposes on its customers.

The prices charged differ as well, with Quebec residents also getting an out-the-door lower monthly price because Bell does not impose charges on the modem Ontario customers rent for $3.95/month — $6.95 a month with the Fibe 25 service.

Let’s take a look (and don’t worry Ontario readers, Bell promises you can still look at least 624,999 additional web pages this month without incurring overlimit fees):

Quebec users get more than double the usage allowance of...

...their neighbors in Ontario.

Pricing for Bell broadband service at the bundled price:

*- includes $3.95 modem rental fee. ^- includes $6.95 modem rental fee.

Sezmi set top DVR box, antenna, and remote control

While most of the pay television industry forces huge basic cable packages on subscribers containing dozens of channels never watched, an innovative California company thinks it has the perfect solution for those who want to cut cable’s cord but still keep some of their favorite cable channels.

Sezmi combines a super-sized 1 terabyte DVR set-top box ($149.99) with a digital broadcast receiver to deliver every local television signals, 23 popular cable channels, on-demand movies, video podcasts, and YouTube content for $19.99 per month.  Don’t care about the cable channels or live outside of Los Angeles?  The price drops to $4.99 per month.

Sezmi’s inventors believe the marketplace is ripe for a compromise between paying enormous cable bills or simply going without popular cable series and 24/7 news.

Besides, Sezmi’s founders argue, with free digital television stations increasing the amount of programming they offer and Americans wanting to watch more of their favorite shows on-demand, Sezmi’s super-sized DVR may provide enough live and recorded programs to more than satisfy average viewers.  If not, a budget-priced package of two dozen popular cable channels could give people enough courage to cut cable’s cord forever.

At its core, Sezmi’s set top box offers an enormous capacity hard drive that can store up to 1400 hours of SD (standard definition) and 340 hours of HD (high definition) programming.  It can also record one channel while watching another, and its software gives each member of a viewing family their own personal menu to access, record, and view the programming they want.

[flv width=”446″ height=”270″]http://www.phillipdampier.com/video/Sezmi All-In-One Personal TV Service.mp4[/flv]

A promotional reel introducing shoppers to Sezmi and its services.  (3 minutes)

Sezmi’s founders future-proofed their technology to be immune from broadband providers with Internet Overcharging schemes in mind.  Unlike other cord-cutting alternative set top technology that relies on broadband to access programming, Sezmi receives its live TV and cable network programming entirely over the air.  That keeps your local cable or phone company from stopping all the fun by imposing broadband usage limitations or charging steep penalties for watching too much of a competitor’s service.

Sezmi’s unique way of bypassing the local broadband provider is both innovative and challenging at the same time.  In the Los Angeles market, currently the only city where Sezmi provides cable networks, it leases leftover capacity from local stations to transmit the encrypted cable networks over the air to Sezmi receivers.  As long as you get a signal from a local station, the cable signals come along for the ride.

While that can work in Los Angeles, which has at least 26 full powered broadcast stations in the market from whom it can potentially lease capacity, most American cities have fewer than eight full power local channels.  If those stations can’t or won’t lease out their extra bandwidth, the cable programming service simply won’t work.

Part of the original business plan for Sezmi was to provide the set top box as a solution for phone companies like Frontier and other independents who want to deliver a video package without improving their current copper-based networks to deliver it.  Because the box will work reasonably well with a broadband connection of 3.1Mbps or higher, companies selling DSL broadband packages to customers could use Sezmi to deliver video content to subscribers.  In rural areas, relying on broadband delivery may prove more effective than over-the-air reception, and since the provider offers the service themselves, there is little chance they’d limit their own customers’ use of Sezmi.

Now Sezmi is directly being sold to consumers on Amazon.com and in Best Buy stores in the 35 U.S. cities Sezmi serves.

Sezmi's cable channel lineup is currently only available in Los Angeles.

Buyers are pre-qualified before purchase to determine if they’ll be able to receive a suitable broadcast TV signal required for Sezmi to operate.

A lengthy beta test in Los Angeles revealed many consumers loved the concept of Sezmi, but definitely discovered some flaws:

• There is no wireless connection supported for broadband.  You must use a supplied Ethernet cable to connect to a router;
• The remote control and its functionality was frequently reviewed as unintuitive and slow to respond to commands;
• Cable networks arrived only in standard definition video;
• Reception varied considerably depending on where one lives in relation to local broadcast transmitters.  Where TV stations use different transmitting locations, reception problems for one or more stations can be an issue unless you regularly reposition the antenna;
• Sezmi’s antenna module looks like a small bookshelf speaker and was more obtrusive than many thought necessary;
• Sezmi’s online viewing options are limited to YouTube and Sezmi-partnered content.  No Hulu or Netflix access is supported.
• Some reviewers felt charging $5 a month for a Sezmi package that only included free, over the air broadcast stations was unjustified when they also had to purchase the required set top box.  Many of these comments came when the box was priced at $299, however.  Sezmi has reduced the price of the set top box by half, so it’s likely the monthly fee includes some hardware cost recovery;
• The cable networks chosen do not include a lot of sports, although the company is currently negotiating with ESPN;
• Love it or hate it, one of America’s favorite cable channels – Fox News, is not included in the lineup although CNN and MSNBC are.  Their asking price may have been too high.

Sezmi’s co-founder probably expects that detailed level of critique considering the company’s business plan targets technology-minded “early adopters” who are well versed on technology and very opinionated about how it works.  They also feature prominently in the group of consumers that are now spending less time watching live television and less-willing to pay the asking price for it.

“The Sezmi offering is geared toward the next wave of consumers who want a very high-quality experience and the latest technology features, but are not willing to overpay for that,” said Phil Wiser, co-founder and president. “We’ve limited ourselves to really focus on that segment who are value-oriented and tech-oriented.”

Those who are value-oriented have responded positively to Sezmi.  Stop the Cap! reader John in Sherman Oaks, Calif., who notified us about Sezmi’s local media blitz says it’s exactly what he was looking for, and he’s enjoying some shows he missed from USA, TNT and Discovery.  But his wife misses her favorite HGTV and Food Network shows, which Sezmi doesn’t carry.

“I told cable to take a hike,” he writes. “I only watch perhaps a dozen channels and Sezmi has most of them covered for about 1/3rd of the cost the cable company charges, not including the fees, taxes, and renting cable’s set top boxes.”

John adds 24/7 access to live news programming was the one thing that held him back from dropping cable before Sezmi arrived.

Sezmi's Los Angeles Coverage Map (click to enlarge)

“I wasn’t going to give up CNN and MSNBC for breaking news,” he said.

Wiser’s comments to the San Francisco Chronicle seem to match John’s perceptions about the service.

“The key thing we realized with Sezmi is that consumers would not be ready to drop a paid TV experience purely for Internet offerings,” he said. “You need a bridge that includes a traditional cable experience with a more on-demand interactivity.”

Although John says he has few problems getting good broadcast signals from Mt. Wilson, where most Los Angeles-area broadcasters maintain their transmitters, some  residents further east in Riverside say their experiences were considerably worse.

“If you walked in front of the antenna, reception would drop out,” wrote one reviewer.  “A rooftop antenna is really a smart idea if you need reliable reception to make sure your shows get recorded,” wrote another.

The potential impact Sezmi could have on cable and phone company pay television packages varies depending on which analyst you choose.

Mike Jude, with Frost & Sullivan, told the Chronicle devices like Sezmi will probably remain niche products that will have trouble attracting interest from traditional cable subscribers.

But Gerry Kaufhold, an analyst at In-Stat, said Sezmi’s innovative approach could find a significant audience especially with more casual TV viewers. He said 15 percent of viewers don’t pay for TV while 35 to 40 percent of cable users pay about $40 for basic cable. Both could find a lot of utility in a product like Sezmi, he said.

“Anyone that gets a big digital cable (package) is unlikely to leave, but people who get basic cable may be willing to make that jump and cut some 20 bucks off their bill,” Kaufhold said. “They can also get people who don’t pay for TV to try it.”

With a Yankee Group study looming that estimates one in eight Americans will disconnect or downgrade their paid TV services by April, devices like Sezmi could threaten industry profits even sooner than some analysts think.

Service Coverage – Click links for respective channel lineups

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Sezmi Services Described.flv[/flv]

Sezmi Explained: This series of videos walks you through all of Sezmi’s features and services.  (12 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Sezmi Setup.flv[/flv]

Sezmi’s setup is explained in this video, guiding you through the process of hooking up the equipment.  (10 minutes)

Pacific Fibre's planned undersea fiber optic cable set to begin service in 2013. (click to enlarge)

Australia and New Zealand remain the two countries most notorious for Internet Overcharging schemes like usage caps and speed throttles.  The lack of international broadband capacity is routinely blamed for limiting broadband usage for consumers in both southern Pacific countries, and now a major undersea fiber optic cable project seeks to end those Internet Overcharging schemes once and for all.

Pacific Fibre hates usage caps.  The company, which is one of the partners in a planned 5.12 terabits per second undersea cable connecting the United States with New Zealand and Australia, believes limiting broadband consumption is bad for business — theirs and the digital economies of both nations.  Now the company is reportedly willing to put its money where its mouth is, charging broadband providers a flat rate per customer for unlimited access to its backbone network.

The company believes such pricing will force providers into selling more generous, often unlimited broadband service packages for businesses and consumers.  Providers have routinely blamed insufficient international capacity for restrictive data caps.  But increasing capacity, including Pacific Fibre’s new cable set to begin service in 2013, removes that excuse once and for all.

Co-founder Rod Drury believes there will be so much capacity, if providers continue to engage in Internet Overcharging schemes, most of the newly available bandwidth could actually go unsold.

“Why don’t we flip the model around and go to a per-person charging model and then try to give internet providers as much bandwidth as we possibly can for that?,” Drury told BusinessDay.  “The charges could be segmented by customer type; you could do it for mobile connections, home connections, schools, hospitals and businesses, and set a reasonable price.”

[flv]http://www.phillipdampier.com/video/CNBC Interview With Pacnet CEO June-July 2010.flv[/flv]

CNBC talked with Pacnet CEO Bill Barney, one of the partners in the Pacific Fibre project, about bandwidth needs in Asia and how new undersea fiber cables will meet the growing demands.  (Segment one of the interview was done in June, segment two in July.)  (10 minutes)

Telecommunications Users Association chief executive Ernie Newman said Drury’s idea was long overdue. “The way the world is moving is towards all-you-can-eat-type plans and any move like that has got to be the way of the future.”

But one of Pacific Fibre’s competitors, Southern Cross, which currently provides undersea fiber connections for South Pacific Internet Service Providers, said he wasn’t sure Drury’s idea would work.

Southern Cross marketing director Ross Pfeffer said broadband providers haven’t been justified limiting broadband usage for some time, as newly available capacity has already helped ease the bandwidth crunch.  Instead, critics contend existing providers don’t want to give up the massive profits they are earning limiting usage, maximizing revenue from users who think twice before using high bandwidth services, thus reducing required investments in network upgrades.

“New Zealand internet providers [are] using data caps to segment the retail market and maximize their own revenues,” Pfeffer noted.

Both Australia and New Zealand are embarked on National Broadband Plans to take back some control of their broadband futures from private providers many accuse of monopolizing an increasingly important part of both countries’ digital economies.

Drury’s project, and others like it, may become important components of newly constructed national fiber-to-the-home projects proposed in Australia, and dramatically improved service in New Zealand.

[flv width=”480″ height=”292″]http://www.phillipdampier.com/video/Underwater cable laying 1936.flv[/flv]

The history of deploying underseas cables is a fascinating one.  Check out this 1936 documentary showing how AT&T made undersea phone cables to connect the San Francisco Bay area.  Back then, companies didn’t use rubber or plastic cable jackets to keep the water out.  They used jute fiber and paper!  Some other companies used gutta percha, which is today best known for root canal fillings, or tar mixtures.  (5 minutes)

[flv width=”484″ height=”292″]http://www.phillipdampier.com/video/BBC Cable Under the Sea.flv[/flv]

Before there was telephone service, the challenges of connecting the far flung components of the British Empire were met by underseas telegraph cables beginning in the 1870s.  A fascinating BBC documentary visited Porthcurno, located at the tip of Cornwall, England, where 14 undersea telegraph cables stretched from a single beach to points all around the globe. Then something called “wireless” arrived and threatened to ruin everything.  (8 minutes)

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/Fiber Optic Cable.flv[/flv]

But what exactly is “fiber optic cable” and how is it made?  More importantly, how do they store thousands of miles of fiber optic cable on a single ship, ready to drop to the bottom of the ocean?  The answers to both are here.  (12 minutes)