Cornell University students pay an average of $37,000 a year (before housing, student fees, and other expenses) to attend one of America’s most prestigious universities.  When they arrive on-campus, it doesn’t take long to learn the college has one of the nastiest Internet Overcharging schemes around for students deemed to be using “too much Internet.”

For years, Cornell limited students to less than 20 gigabytes of Internet usage per month, only recently increasing the monthly allowance to 50GB this summer.  Cornell’s overlimit fee starts at $1.50 per gigabyte, billed in megabyte increments.  Now some students are pushing back, launching a petition drive to banish the usage limits that curtail usage and punish the 10 percent of students who exceed their allowance.

Christina Lara, originally from Fair Lawn, N.J., started the petition which has attracted nearly 300 signatures over the past few weeks.

“Cornell students, along with students across the world, rely on the Internet to pursue their academics, independent research, and leisure activity,” Lara writes. “We should not be subjected to charges for our Internet usage, particularly because our curriculums mandate we use the Internet. Despite this, Cornell University continues to adopt NUBB (Network Usage-Based Billing), which charges students for exceeding the 50 gigabyte per month ‘allowance.'”

Lara incurred bills as high as $90 a month in overlimit fees last year, thanks to regular use of Netflix and Skype for online video chats with friends and family back home.

Internet fees for on-campus housing are included in the mandatory student services fee.  Although Time Warner Cable has a presence on campus, most residence halls don’t appear to be able to obtain service from the potential competitor, which sells unlimited Internet access in the southern tier region of New York where Cornell is located.  Instead, Cornell students on campus rely on the university’s wireless and Ethernet broadband network, and DirecTV or the university’s own cable TV system for television.

Lara

The apparent lack of competition makes charging excess-use fees for Internet usage easy, critics of the fees charge.

“It’s much easier if you live off-campus or in one of the apartment complexes students favor,” says Neal, one of our readers in the Ithaca area who used to attend Cornell.  “The only complication is getting access to the University’s Intranet, which is much easier if you are using their network.”

Neal says Verizon delivers landline DSL to off-campus housing, but not on-campus.  Because the service maxes out at 7Mbps, most who have other options sign up for Time Warner Cable’s broadband service instead.

“It’s cheaper on a promotion and much faster, and it’s still unlimited,” Neal says. “Hasbrouck, Maplewood and Thurston Court were the only residential buildings that offered the chance for Time Warner Cable on-campus, and only if the wiring was already in place.”

Neal notes many apartment complexes off campus have contracts with Time Warner Cable, which means cable TV and basic broadband are included in your monthly rent.  Some Cornell students who live on or near campus try to make do with a slower, but generally free option — the Red Rover Wi-Fi network administered by the University.  Others reserve the highest usage activities for computers inside university academic buildings, where the limits come off.

Lara complains Ithaca, and the southern tier in general, is hardly an entertainment hotbed, making the Internet more important than ever for leisure activities.

Time Warner Cable provides the rest of Ithaca with unlimited Internet.

“If Cornell was situated in a major metropolitan area with a vast nightlife that could accommodate the interests of most, if not all, our undergraduates, then many Cornellians wouldn’t be so inclined to stay in their rooms and get on the Internet,” Lara says. “But that’s not the case. Cornell’s Greek life dominates the social scene, making ‘nightlife’ a dividing factor in the community.”

Tracy Mitrano, Cornell’s director of information-technology policy, told The Chronicle the vast majority of students will never hit the cap, and those that do cannot be charged more than $1,000 a month in overlimit fees, regardless of use.  Those that do exceed the limit typically find a monthly bill for “overuse” amounting to $30.

“The approach that Cornell uses offers transparency and choice,” said Mitrano. She noted that Cornell provides students with clear information regarding their network usage by alerting them by e-mail when they are about to hit the limit and by setting specific rates for overuse fees.

“The choice seems to be using the university network or moving off-campus to buy Verizon or Time Warner Cable broadband to avoid the usage cap,” counters Neal. “I am not sure their ‘choice’ argument flies if students don’t have the option of signing up for Road Runner in their rooms on their own, bypassing the Internet Overcharging altogether.”

Both Neal and Gregory A. Jackson, vice president of Educause, seem to be reaching consensus on whether or not universities should be charging students for Internet separately from room and board.  Jackson notes it is a discussion being held at an increasing number of universities.  Neal thinks having a wide open access policy to deliver competition could solve this problem in short order, and students should make the decision where to spend their broadband funds themselves.

“If Cornell’s IT bureaucracy faced unlimited-access competition from Verizon and Time Warner Cable, do you think they’d still have a 50GB usage cap, considering only a small percentage of their captive customers exceeded it,” Neal asks.  “Of course not.”

[Thanks to PreventCAPS for the story idea.]

Mediacom, America’s eighth largest cable company, lost 20,000 video subscribers in the second quarter of 2011, joining a growing parade of cable companies reporting increased cord-cutting by customers who either cannot afford, or don’t need increasingly-costly cable TV service.

The cable operator, which largely serves small cities and suburban areas, has suffered from notoriously poor consumer ratings for several years, and some customers have apparently had enough.  Mediacom, which went private earlier this year, provided fewer details about its performance in its first quarter as a private company, but the information it did provide showed attempts to make up the losses with rate increases on remaining customers and increased revenue from phone and broadband sales, and Mediacom’s advertising business.

The company’s customers in its strongholds in the southeastern and midwestern United States have been impacted hard by declining property values and high unemployment.  Impacted consumers are paring back expenses, and while they are keeping phone and broadband service, cable TV is increasingly being dropped.

Earlier conference calls with Mediacom company officials note an increasing number of customers are only being rescued when the company discounts the cost of the service as a customer retention tool.  The company has been hard selling its “VIP Pak” — a triple play package of cable TV, phone, and Internet for $90 a month, but it comes with lots of fine print: mandating a 24-month contract, a required subscription to HBO, and gradually increased rates after the first year.  Mediacom’s bundled offers lock in customers with two year contracts, but don’t protect them from periodic rate increases, which are automatically applied as implemented.

Customers looking for standalone broadband or a “double-play” will also find high prices, two-year contracts and early termination fees in their future:

• Cable TV & Broadband: $79.90 for the first year, $99.90 for the second, with a $240 early termination fee
• Cable TV: $49.95 for the first year, $64.95 for the second, with a $240 early termination fee
• Broadband Only (12/1Mbps): $49.95 for the first year, $54.95 for the second, with a $240 early termination fee

Fox has turned off instant access to its network shows effective this afternoon for all but “authenticated” pay television customers.  But with only one partnered provider thus far — Dish Network — that leaves millions on an eight day waiting list.

Fox Network programming on its own website and Hulu is impacted by the new embargo, which means the vast majority will have to wait at least a week for access to new episodes.  Customers paying for Hulu + are not affected by the delay, and the network promises forthcoming partnerships with other cable and satellite providers shortly.

Fox says it’s all a part of “retransmission consent” agreements with pay providers.  Major cable operators don’t want to pay for Fox affiliates and cable networks if the network is willing to give away free access to programs online.  In return for blocking access to “cord-cutters,” cable companies hope to stop consumers from switching off cable television packages.

Viewers who try and access shows are brought to a new authentication page to “unlock” access to programming.  If they can’t because their provider isn’t listed, they can fill out an online form requesting their provider participate in the TV Everywhere project.

Most Fox viewers probably will not encounter the new FoxBlock until late fall.  That’s when new seasons of Glee, House, and The Simpsons get started.

“We’ve been talking for some time that broadband for us is not just about customer growth… it’s about revenue growth.” — Anthony Thomas, Windstream’s Chief Financial Officer

For the first time in some time, Windstream reported revenue growth during the second quarter of 2011.  The independent landline telephone company that last week acquired Rochester-based PAETEC Corporation managed to win new revenue from its business services unit and equipment sales, even as it continues to lose core landline customers, who are disconnecting service in favor of cell phones or cable telephone products.

It added up to a measurable, but meager growth of 0.1 percent for the company year-over-year during the second quarter.

Like many traditional wireline phone companies, Windstream is betting the farm in their largely rural and suburban service areas on selling broadband and maintaining the allegiance of their business customers, challenged in larger cities by increasingly aggressive “Business Class” products from competing cable companies.

Windstream executives responded to questions from Wall Street bankers during their second quarter conference call held last Friday.

While several investment firms were happy to see Windstream manage some revenue growth, several zeroed in on the company’s increased capital expenditures.  Windstream reports the company will continue major investments in fiber and broadband services, but not primarily for their residential retail customers.  Instead, Windstream hopes to capitalize on the “high margin” business of selling fiber-based cell tower services, primarily to support forthcoming 4G deployments.

Windstream officials faced some hesitancy from Wall Street about the company’s spending during Friday’s conference call, particularly from Bank of America and Goldman Sachs.

Anthony Thomas, chief financial officer for Windstream, defended the investments.

“The most important part of fiber-to-the-tower projects are the initial investments. Those are very high-margin businesses,” Thomas said. “But you have be comfortable with the upfront capital and be patient at recognizing those are 6-to 12-month investment time horizons. But once you start bringing those revenues in, the actual cost of operating a tower is low.”

Wall Street also expressed concerns about consumer broadband traffic growth, but did not broach the subject of usage control measures like usage caps or metered billing.  Windstream acknowledged the growth, primarily from online video, and said it had well-equipped data centers to handle the traffic.

Windsteam’s Consumer Strategy: Bundle Customers & Keep Them Away from Cable TV

It's all about the bundle.

Online video may be an asset for Windstream, which is facing increasing challenges retaining landline customers and up-selling them other products like broadband.  That competition comes primarily from cable companies, who are targeting Windstream customers with invitations to cut their landline service and bring all of their telecommunications business to cable.

Traditional phone companies have a major weakness in their product bundle: video.  Independent phone companies, in particular, are usually reliant on satellite TV partners to support the television component of a traditional “triple play” bundle.  Windstream’s network is capable of telephone and slow speed broadband in most areas, but the company’s involvement in video is largely left to a third party satellite-TV provider.

Customers who do not want satellite TV service may be easily attracted to a local cable provider.  But as an increasing amount of video viewing is moving online, Windstream may find customers increasingly tolerant of doing their viewing online, reducing the importance of a video package.

Windstream’s strategies to keep customers:

• Sell customers on product bundles, now enhanced with online security/antivirus options and on-call technical support for computer-related technical issues;
• Pitch Windstream’s Lifetime Price Guarantee, which locks in a single price for basic services, good as long as you remain a customer;
• Challenge cable competitors head-on with its “Quitter Campaign,” which tries to convince cable customers to “quit cable” in favor of Windstream;
• Offer faster broadband speeds in limited areas to satisfy premium customer demand.

Windstream Tries to Convince Customers the Broadband Speeds It Doesn’t Offer Do Not Matter for Most

Windstream’s efforts at winning over new broadband customers have been waning as of late.  One of the primary issues Windstream faces is the cable industry’s effective portrayal of DSL as “yesterday’s” technology, incapable of delivering the broadband speeds consumers crave.

Instead of investing in improved broadband speeds for everyone, Windstream spends its time and efforts trying to convince most customers they don’t need the faster speeds being pitched by most cable companies in the first place.

Windstream tries to convince customers they can make do with less speed (as low as 1.5Mbps), and there is no difference in speed between different providers — both questionable assertions.  (4 minutes)

The COO says 3Mbps is Windstream's biggest seller -- their website says something else.

Windstream chief operating officer Brent Whittington says his customers “don’t want to pay for incremental speed,” but is expanding their capacity to offer somewhat faster speeds.

“We still see that long term as [an increased revenue opportunity] because we know the demand is going to be there,” Whittington told investors.  “As we’ve rolled it out currently, it’s largely to — from a marketing benefits standpoint to talk about our competitiveness relative to our cable competition, but [consumers] are largely buying at 3Mbps.”

Either Whittington is mistaken, or Windstream’s website is, because it promotes the company’s 6Mbps $44.99 option as its “top seller.”  Many of Windstream’s cable competitors charge less for almost twice the speed, which may be another reason why Windstream’s broadband signup numbers are lagging behind.

Finding More Revenue: Universal Service Fund Reform & Business Services

Among the most important components of Windstream’s strategy for future growth are reform efforts underway in Washington to overhaul the Universal Service Fund.  Rural, independent phone companies like Windstream have reaped the rewards of this subsidy for years in its rural service areas.  But now Washington wants to transform the program away from simply underwriting rural landline phone service and redirect revenues to enhancing broadband access in areas too unprofitable to service today.

Windstream sees the reform as a positive development.

“It focuses USF on high-cost areas,” said Windstream CEO Jeff Gardner. “If you were a customer in a rural area of Windstream versus a customer in a rural area of a small carrier, your subsidy would much be higher, and we would get very little USF for that going forward. In this proposal, USF is really targeted towards those high-cost areas, so we kind of deal with this issue that we refer to as the rural-rural divide.”

Gardner says USF reform will end disparity of access.

“All rural customers are going to have the opportunity to get broadband out to them under this plan,” he said. The more customers paying monthly service fees, the higher the company’s revenues, assuming nothing else changes.

While redirected subsidies may help rural broadband customers, Windstream’s capital investments in expanding their network are going primarily to benefit their business clients, not consumers.

“On the small business side, our service there is very superior to our cable competitors,” said Windstream’s chief financial officer Anthony Thomas. “We’ve made investments in our network to offer VDSL and higher-speed data services. That’s going to be directed predominately toward those small business customers.”

Whittington added most of the company’s efforts at deploying VDSL technology are focused on the company’s small business segment to bring faster speeds to commercial customers.  For consumers, Windstream’s efforts are targeted primarily at keeping up with usage demands.

“Like a lot of folks in the industry, we’ve definitely seen increases in network traffic really due to video consumption,” Whittington said. “No question Netflix and other related type services are driving some of that demand. We continue to invest in broadband transport like we have in years past. And the good thing with a lot of things we’ve been doing from just a network perspective like rolling out as I mentioned before, VDSL technology in our larger markets. That’s really all about fiber deployment, which helps solve some of those transport issues. So we feel like we’ve been in good shape there, but it’s certainly something we’ve been very focused on operationally so our broadband customers don’t see a degradation in the quality of their experience.”

Cogeco Cable customers are about to pay for the company’s tragic financial results from its Portuguese operations in the form of broad-based price increases the company is selling as service “improvements.”

July’s financial results for Cogeco, which owns cable systems in Ontario, Quebec, and Portugal, are not good.  With mass subscriber defections and downgrades from Cogeco’s Portuguese cable system Cabovisao, company officials have decided to write off their European investment, resulting in a $56.7 million loss in the third quarter.

Tempering the damage is the company’s decision to raise broadband prices for Canadian customers by $2 a month for their Standard broadband package, soon to be priced at $48.95.

(Courtesy: 'Gone' from Fort Erie, Ontario)

“To add insult to injury, they are calling these changes ‘improvements,'” writes Stop the Cap! reader Claudette, who is a Cogeco customer in Ontario.  “In fact, the only thing Cogeco is improving is their skill at overcharging us.”

Cogeco's financial mess in Portugal.

Cogeco has sent letters to subscribers notifying them about the “improvements,” mostly in the form of a name change for the company’s ‘Standard’ plan, soon to be renamed ‘Turbo 14.’  They have also launched a new section on their website to break down the changes.

The only benefit Cogeco is introducing for customers with their Standard plan is a slight bump in usage allowances, from 60 to 80GB.  But that change comes with a major catch.  Cogeco charges customers a $1.50/GB overlimit fee with a monthly maximum overcharge of $30.  When ‘Turbo 14’ premieres Oct. 1, the maximum overlimit fee will jump to $50 a month.

“That is a total ripoff, because the next plan up with bigger allowances — just over 100GB a month — costs nearly $77 a month, for a whopping 16Mbps,” she adds.  “They just raised our rates last July and now they want more.”

Cogeco is punishing their premium customers even more by taking the maximum overlimit fee cap completely off their DOCSIS 3-based Ultimate 30Mbps and 50Mbps plans.  Available in some Cogeco service areas at prices of $60 and $100 a month respectively, the plans come with usage limits of 175-250GB.  The sky is the limit for overlimit fees, racked up at $1 per gigabyte.

Cogeco customers are outraged, and have begun shopping for alternatives, just like their counterparts in Portugal who have put their cable service on the chopping block.

The ongoing Portuguese financial crisis has been met with tax increases and benefit reductions by the government, and Portuguese consumers have responded with wholesale cord-cutting, cancelling Cabovisao cable-TV service in droves.

Cogeco's systems in Ontario (click to enlarge)

“You now have customers squarely opting out of [cable TV],” said Louis Audet, Cogeco’s president and chief executive officer. “These are economic circumstances that we have not, nor has anyone here, witnessed in North America. These are very unique to the circumstances in Portugal.”

At least Audet hopes they are.

With fewer competitive choices in the rural and suburban Ontario and Quebec markets Cogeco favors, consumers have a tougher time finding alternative providers, but not an impossible one.  Many are dropping Cogeco’s phone and broadband packages, moving to Voice Over IP or cell phone service for the former, and independent broadband providers like TekSavvy for the latter.  TekSavvy still retains unlimited use plans and has been traditionally more generous with allowances for the usage-based plans the company also sells.

Investors have been placated with a boost in Cogeco’s dividend payout… for now.  But many have adopted a “told you so” attitude about the company’s controversial decision to invest in overseas cable to begin with.

Scotia Capital analyst Jeff Fan said he had a negative view about Cogeco’s Portuguese venture.

“We hope this paves the way for a sale,” he wrote in a note to investors, “as Portugal is still cash-flow negative and dilutes the strong Canadian results.”

In fact, many investor groups dream of an even bigger sale — of Cogeco itself.

Joseph MacKay of Mackie Research said Canada’s fourth-largest cable company is ripe for a takeover by a larger cable operator, presumably Rogers or Shaw Communications.  Rogers already blankets Ontario with cable services, so Cogeco’s operations in eastern provinces would be a ‘natural fit’ for the company.  Shaw’s interest in expanding eastward could also get a boost from the buyout of Cogeco.

But one significant roadblock remains — the controlling interests of the Audet family, which have no intention of selling and control enough voting shares to stymie a hostile takeover.  In fact, despite the poor showing of the company’s Portuguese operations, the Audet family claims to be interested in acquiring other providers and expanding Cogeco’s size.

With the benefit of a two-dollar rate increase and the proceeds of Internet Overcharging, they’ll be in a position to put more dollars toward that goal.