A firestorm erupted this week on Broadband Reports over news that Shaw Cable was turning its existing “soft” Internet Overcharging scheme into a “hard” system filled with usage limits and overlimit fees.  One of Shaw’s social media representatives tried to throw some water on the fire:

I’ve seen a lot of discussion here about the new policy, and quite a bit of inaccurate or incomplete information and speculation, so I’d just like to set all of this straight.

Essentially, the system works like this: your package includes an allowance for a certain amount of traffic. If you exceed that traffic for one billing cycle, you will receive a notice on your bill advising you of the fact. We also automatically activate your traffic monitor so that you can monitor your usage from that time forward.

Since the bill arrives, of necessity, after your billing cycle ends, we give you a cycle’s grace between the period when you exceeded and when we start charging. That is to say that if you exceed in billing cycle one, you’ll receive your bill part of the way through billing cycle two, and so we won’t start charging for excess traffic until billing cycle three.

As to how much bandwidth will cost, here’s how it works:

If you exceed your monthly traffic allowance, you’ll receive a bill for $1 per GB for Extreme and above, $2 per GB for High Speed and High Speed Lite. Considering how much media, etc, you can obtain in 1 GB, $1 is not expensive.

However, if you plan to exceed by a considerable margin, data packs are also available, and what these do is allow you to increase the traffic allowance by the following amounts:

• $5 for 10 GB
• $20 for 60 GB
• $50 for 250 GB

So this gives you the option to increase your monthly traffic allowance to meet your needs. It’s also considerably less expensive than the standard $1-$2 per GB rate.

The best part about the data packs is that you can apply them at any time up to three days before the end of your billing cycle. So if you discover that you’ve exceeded your included usage allowance, and still have three days to the end of the billing cycle, just give us a call (or chat) and ask that we add the appropriate data pack for you.

[…]I’ve seen some posts here suggesting that this new policy has been financially motivated to avoid upgrading our networks. That’s actually not the case. In fact, just a few weeks ago we increased the included usage for all of our services by 25%, just in time for NetFlix. If you want to think about it in financial terms, just consider how much more bandwidth the network would need to allow a 25% increase for every customer, and how much that kind of network upgrade would cost. It’s pretty clear that our motives are not financial. If they were, increasing the included usage would not be very sensible, would it? It would, after all, considerably reduce the number of customers exceeding their monthly traffic allowance, would it not?

I hope that this clarifies the situation, but if there are any questions, please do feel free to ask.

James – Shaw

Shaw tinkers with their Internet Overcharging scheme

In part, this rebuttal was also directed to Stop the Cap!, because we are actively participating in that discussion.  Shaw’s argument about usage limits and how the company’s implementation of them benefits their customers is familiar to many of our readers who fought off usage caps proposed by Time Warner Cable last year.  Somehow, the same company that sets unjustified limits and penalty prices on already-overpriced broadband service is doing customers a real favor by offering alternative pricing plans for heavier users that reduces war-crime profiteering to pickpocketing.

That’s logic Stalin might have appreciated, but most customers already burdened with high cable and broadband bills won’t.

Our response:

Don’t you just love it when Internet Overchargers always claim their new gotcha fees are never about the money?

“James” from Shaw offers a classic example of what happens when your broadband provider implements a scheme to boost your broadband bill and then claims it’s good news that the company has some options to keep those overlimit fees from stinging too badly.

When Internet Overchargers tell you it’s not about the money, it’s really ALL about the money.

Here's what happens when a third provider ruins a Canadian broadband duopoly

Who knew that an invisible border that makes unlimited Internet possible in Vancouver, Washington makes it impossible in Vancouver, B.C. Using Shaw’s argument, providers south of the border are headed straight for bankruptcy court while companies like Shaw barely hold on with “free usage upgrades” of existing limits.

But of course the financial reports for shareholders Shaw’s social media mavens don’t talk about tell the real story. Shaw enjoys considerable revenue from their broadband division thank you very much, and plans to do even better now that they can achieve ‘revenue enhancers’ from their enforced Internet Overcharging schemes.

That’s another way of saying Shaw’s Wallet Biters are back for more of YOUR money.

Whether it’s 20 cents per gigabyte (at least a 100 percent markup) or $2 (rape and pillage pricing), these schemes are hardly good news for Shaw customers. Indeed, if Shaw was truly concerned about saving their customers something under their cap ‘n tier regime, they’d deliver those “usage paks” to customers automatically instead of forcing them to call the company to add them when they go over the limit. If you remember to ask, Shaw gets extra profits they can take to the bank. If you forget, Shaw throws a Money Party on the extra high everyday overlimit rates.

What Shaw forgets to tell you is the cost to deliver increased usage and bandwidth to customers is ALWAYS dropping, and dropping fast. The price charged to move 10GB of traffic not too long ago moves 100GB today. So it’s hardly rough on Shaw to expand yesterday’s unjustified limit to today’s higher, still unjustified limit.

When one also considers yesterday’s “soft cap” is about to become tomorrow’s budget-busting “hard cap,” few Shaw customers are calling 1-800-FLOWERS to send a thank-you bouquet to Calgary.

Having been to Calgary, I know the people in Alberta and elsewhere across western Canada know a ripoff when they see one. They ask, “why is our broadband so overpriced and usage limited?” They wonder where the CRTC has been. They wonder why countries in Asia and even eastern Europe are now beating the pants off Canadian broadband with faster speeds at lower prices.

The fact is, Shaw pulls these overcharging tricks on their customers because they can. The broadband duopoly in Canada from cable and phone companies deliver punishing usage limits on Canada that are being banished in other countries around the world. Even notorious cappers like Australia and New Zealand are finally ridding themselves of broadband that is always capped, always throttled.

What would be sensible is that Shaw, a multi-billion dollar major player in Canada would plow some of their enormous profits into network capacity upgrades that can accommodate the needs of Canada’s growing knowledge economy, not inhibit its growth. Then, earn additional profits by selling even faster speed tiers and content customers can access over those networks.

Considering even Shaw admits only a small percentage of customers create traffic problem on their networks, it’s not hard to see the company’s new reliance on hard Internet Overcharging is designed to capture new revenue from those hitting their caps, thanks to the increasing number of broadband customers using their fast connections for high bandwidth content.

And hey — bonus: it also discourages those customers from even considering pulling the plug on their cable package to watch everything online.

Reed Hastings, CEO of Netflix, shows off the company's growing reliance on broadband streaming, moving away from its original DVD-by-mail rental business.

Last week, Netflix CEO Reed Hastings was showered with questions from Wall Street during the company’s third quarter-results conference call.  At the top of the agenda — the company’s shifting business model away from DVD rentals-by-mail gradually towards instant on-demand streaming over broadband networks.

At issue is how Netflix can survive a broadband industry that controls the pipeline Netflix increasingly depends on for its continued existence.

Hastings tried to assuage his cable competitors by telling investors the company is hardly a threat to cable-owned movie channels and basic cable.  But he admits ultimately the company will be in a real mess if Internet Overcharging schemes like usage caps and speed throttles limit the amount of content customers can affordably access:

“We have some vulnerability depending on capped usage and what happens. Comcast has a cap, but it’s 250 gigabytes and so most users feel that they have an unlimited experience, and it gives us plenty of room to deliver a high-def stream. On the other hand, AT&T Mobile data on an iPad is now capped at two gigabytes, [and that’s] not enough room to deliver hours and hours of high-def.  We are definitely sensitive [to the issue] in the long term [whether] the industry ends up at 250 gigabytes or two at the other extreme.”

There is some limited evidence Netflix’s success in Canada is already being tempered by usage limits near-universally imposed in the country.  Rogers, a major cable company in eastern Canada, even reduced usage caps for certain tiers of service around the same time Netflix announced its imminent arrival north of the border.

Barry McCarthy, Chief Financial Officer notes fewer Canadians are converting their free trials of Netflix’s streaming service into paid subscriptions.

“We anticipate we are seeing slightly lower conversion rates in Canada than we see in the U.S.,” McCarthy told investors.

As Netflix moves towards higher quality video streams, the amount of data consumed increases as well.  In Canada, that eats into broadband usage allowances, and fast. As soon as customers start receiving warnings they are nearing their monthly usage limit, or receive a broadband bill with overlimit fees, Netflix is likely to lose that customer.

Cable and phone companies in Canada are already warning customers that online video is a major culprit of exhausted usage allowances.  Both are also happy to remind their customers they are happy to sell them access to unlimited video — through cable or telco TV subscriptions.  Rogers owns a major chain of video rental stores as well.

What can Netflix do about usage capped broadband?  Not much, admits Hastings.

“There is a not a lot of improvement in compression techniques. But what we can do is just deliver a lower bit stream, a lower quality video experience. So, for example, not too high-def. So, that’s one possible way to partially mitigate that impact,” Hastings said.

Netflix will soon face increasing competition, especially from the cable industry’s TV Everywhere projects, and they won’t deliver a lower quality video experience.

Time Warner Cable and Comcast this month both formally introduced their respective video on demand services.

Comcast’s Xfinity online service arrives after months of beta testing.   Comcast customers can watch video selections from nearly 90 movie and television partners, including programming from HBO, Viacom, and Paramount.  Ultimately, the online video service is expected to deliver access to dozens of cable channels and individual programs from studios and networks at no charge to those who subscribe to a cable television package.

Time Warner Cable took a more modest approach last week by introducing ESPN Networks to its cable subscribers who register with the cable company’s MyServices website.  The new customer portal allows subscribers to review and pay their cable bill, add new services (but not cancel existing ones), remotely program DVR boxes, and also verifies subscriber status for future cable subscriber-only online video programming.

Netflix may soon find itself at the mercy of the cable and telephone companies which deliver broadband access to the majority of Americans.  Not only is it difficult to convince customers to pay a monthly fee for programming the cable industry may eventually give away for free, it may be downright impossible for Netflix to survive if those providers decide to squeeze the customer’s pipeline to unlimited Netflix content.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Comcast Xfinity Ad Spot 10-2010.flv[/flv]

Comcast Ad Introducing Xfinity Online.  (1 minute)

Shaw Communications is preparing to introduce a formal Internet Overcharging scheme for its customers across western and central Canada.  Although the company has maintained “soft caps” that have generally been unenforced, that is about to change.

An Edmonton reader of Broadband Reports first noticed the appearance of a new formal Internet Data Usage Policies section on Shaw’s website.  Some customers also received access to a usage meter that was roundly criticized for being inaccurate.

She's blown away by her high broadband bill.

In short, Shaw Cable plans a “three strikes and then you pay” approach to usage limit enforcement.  After a customer exceeding plan limits receives three warnings from the company, excess usage charges will start to appear on customer bills.

A participant on Broadband Reports inferring he’s a Shaw employee admits the company’s usage meter was so inaccurate, it has been pulled.  So has much of the information on Shaw’s website, which now provides a more general “stay-tuned” announcement:

Thank you for your interest in Shaw’s Internet Data Usage policies. Please stay tuned as we develop information specific to your area on this topic.

Shaw currently sells four levels of service in most areas (“Nitro” is available in limited areas with DOCSIS 3 upgraded service), sold by both speed and data transfer limits:

*Service availability may vary by market. Docsis modem required.
^† Limited areas that are not DOCSIS 3.0 ready will receive 25 Mbps download and 2 Mbps upload.

In contrast, most Americans pay lower prices for equivalent levels of service, with no data transfer limits.

Shaw customers will soon see usage graphs on their monthly bills and face the prospect of paying overlimit fees once they exhaust their usage warnings.  While Shaw works to implement its broadband overcharging scheme, it is also making hay out of its new 1Gbps fiber-based broadband trials in British Columbia (primarily to stay competitive with its nemesis — competitor Novus Entertainment) and Alberta:

This service launched in select Vancouver neighbourhoods in June – and Pinebrook, a suburb west of Calgary, will be the latest area to try out the 1 Gigabit Internet service FREE for six months!

Our test neighbourhoods have the advantage of “future proofing” as they receive the best technology has to offer with Fibre-to-the-Premises (FTTP) and will be able to support new, cutting-edge Internet applications that will require faster download speeds – compliments of Shaw.

At the end of the six month trial, customers will still be able to retain their existing services without any change in features or function.

This is a great opportunity for our customers and we are thrilled to be the first provider in Canada to offer this incredible service.

Of course, most of the applications that require faster broadband speeds also consume plenty of data, and when Shaw formally introduces the fiber service, limits on its use are likely to come along for the ride.

Videotron last week unveiled 120/20Mbps broadband service loaded down with tricks and traps that will cost many Canadians far more than the $149.95CDN monthly asking price.

Québec’s largest cable operator introduced Ultimate Speed Internet 120 for “users who want to experience the fastest Internet access in Québec.”  But with a download limit of just 170GB per month combined with an upload limit of a paltry 30GB per month, what many Internet enthusiasts are also likely to experience is a huge bill.

Videotron is rolling out a high-speed Internet access service that will give residents of the Québec City area the fastest speeds in Canada. As of tomorrow, Ultimate Speed Internet 120 will support download speeds of 120 mbps and upload speeds of 20 mbps, a first for Québec City.

“Ultimate Speed Internet 120 pushes back the frontier for intensive Internet users,” said Robert Dépatie, President & CEO of Videotron. “Today, we are launching the high-speed Internet service of the future. With the pace at which users’ needs are changing, we are not so far from the day when 120 mbps will be a must-have convenience.”

Astonishing capacity
As of tomorrow, Ultimate Speed Internet 120 will be available in nearly 80% of the greater Québec City area, or to nearly 310,000 households and businesses. The service will be accessible throughout the Québec City area by December 31, 2010 and will then be gradually rolled out to other parts of Videotron’s service area.

Astonishing Overcharging

Yanette is going to the bank to withdraw more funds to pay her exorbitant Videotron broadband bill.

Unlike many other Internet Overcharging plans from Canada’s usage cap-happy providers, Videotron’s highest-speed plans don’t limit the amount of overlimit fees customers will be exposed to once their allowance is exhausted.  In little more than three hours of usage at near-maximum speeds, overlimit fees of $1.50CDN per gigabyte kick in until your usage allows resets the following month.  That’s more than $50 an hour in overlimit fees if running the service near top speeds.

Videotron’s press release says those limits are “well in excess of the current needs of heavy bandwidth users.”

Even worse, Videotron targets its highest speed broadband plan for “traffic management,” which throttles upload speeds dramatically for customers who “have uploaded a statistically significant amount of data,” which is never defined:

Every 15 minutes, a system checks the usage rate for each upload channel (each upload channel typically serves a few dozen modems). If the usage rate has reached a threshold beyond which congestion is imminent, the system identifies the USI 120 modems on that channel that have uploaded a statistically significant amount of data. Uploading from these modems is then momentarily given lower priority. Depending on the severity and duration of the congestion, uploading speed may be slowed for these modems.  […]The above measures are applicable at all times.

That assures customers of a less-than-blazing-fast broadband experience they have paid top dollar to receive.  In effect, this means Videotron’s customers who pay three times the regular price for a concierge-like-broadband-experience are pushed to the back of the line if they actually use it.

A Videotron customer on Broadband Reports wrote, “It’s like driving a jet-car in an alley. You can probably start the engine, but don’t open the gas too much!”

Another customer from Montreal noted it takes no time at all for customers to blow through those kinds of limits:

This is merely a political play to be able to advertise as “the fastest ISP in Quebec/Canada”. Obviously such ridiculous caps are nowhere near the needs of someone who would pay $150 for that kind of speed, but they don’t mind saying things like “well in excess of the current needs of heavy bandwidth users” because 90% of the population, even the journalists themselves, have no idea what gigabytes are in the first place.

Considering most recent games released on Steam/D2D can be over 20GB, one HD episode is 1.3GB to stream each, 170GB is very little.

The cable operator will also throw some small bones to their existing customers effective Oct. 13:

• Customers with Videotron’s standard High Speed Internet service ($42.95CDN – 7.5Mbps/720kbps) will get a 10 gigabyte usage allowance increase — to 40GB of usage per month.  The overlimit fee remains a stunning $4.50 per gigabyte, up to a maximum of $50 per month;
• Upstream speeds on Ultimate Speed Internet 50 service ($81.95CDN – 50/1Mbps) will be doubled from 1Mbps to 2Mbps with no price increase.  Considering that plan limits consumption to 125GB per month, the faster speeds mean unlimited overlimit fees of $1.50 per month will add up even faster.

Delivering high speed broadband at premium prices with usage limits and speed throttles is a business plan disaster.  Customers willing to pay the highest prices for fast broadband don’t seek those Cadillac plans to browse web pages.  They want to leverage the fastest possible speeds to make high bandwidth applications work better and faster.  In a business environment, those faster speeds save time, which saves money.  But broadband providers who engage in Internet Overcharging schemes that limit use and charge confiscatory overlimit fees destroy demand for their own products, because few customers are willing to pay the premium prices these plans charge -and- expose themselves to overlimit fees if they happen to exceed an arbitrary usage limit.

Further south in the United States, Americans are still rejecting overpriced DOCSIS 3-premium speed broadband plans, and they come with no usage caps.  Time Warner Cable’s DOCSIS 3 expansion delivers a premium price on the resulting faster speed tiers, and the company managed to sign up fewer than 2,000 customers as of January.

Now imagine a plan that commanded a premium price -and- slapped a limit on usage.

As they say in Québec: c’est ridicule!

Shaw's flyer distributed to Novus customers

The Supreme Court of British Columbia has thrown out Novus Entertainment’s 2009 lawsuit against Shaw Cable accusing western Canada’s largest cable operator of predatory pricing and other anti-competitive acts.

Last summer, Stop the Cap! gave considerable attention to the price war that broke out between Novus Entertainment, a fiber provider serving many Vancouver apartment buildings and condos vs. incumbent cable provider Shaw Cable.

Novus, which entered the BC market well after Shaw, faced what it alleged were incidents of fixing prices below cost and false advertising in an effort to drive competition out of the market.

At one point, last summer’s battle dropped prices as low as $30 a month for a package of HD cable, unlimited phone, and 16Mbps broadband service from Shaw.  Novus accused Shaw of recouping their losses in Vancouver from other Shaw cable subscribers across Canada who made up the difference with higher cable rates.

Novus sought relief before The Honourable Mr. Justice Greyell, in the Supreme Court of British Columbia.  Novus argued that under the recently expanded Competition Act, the court could order Shaw to cease unfair competition and face punitive fines for the cable company’s bad behavior.

Novus recited details of the price war:

Commencing February 2009, Shaw began a series of marketing campaigns specifically targeted at Novus’ existing customers in high-rise, multiple-dwelling units (“MDUs”) developments in Vancouver and Burnaby, British Columbia.

In February 2009, Shaw offered very low pricing on its Cable Television Services, Internet, and digital telephone services to certain Novus customers.  Customers were free to take one, two or all three of the services offered.  There were no contracts or commitments required:

• Cable Television Services:  Shaw’s “High-Definition TV” package including over 100 digital and HD channels, plus 1 year free rental of a high-definition personal video recorder (“HDPVR”), free for the first two months, and $9.95 for the next ten months (twelve months in total).
• Digital Telephone:  Shaw’s “Digital Phone Basic” package, which includes local calling and call display, free for the first two months, and $14.95 for the next ten months (twelve months in total).
• High-speed Internet:  Shaw’s “Xtreme-I Internet” package, free for the first two months, and $19.95 for the next ten months (twelve months in total).

In March 2009, Shaw began offering a free HPDVR to keep, plus the first month of service for free, to customers that switch back to Shaw. Customers were only required to commit to six months of pre-authorized payments.

In July 2009, Shaw offered even lower pricing than it marketed in February:

• Cable Television Services:  More than 200 digital channels, including all analogue and digital television channels, 25 high-definition television (“HDTV”) channels, a movie channel package, plus two rental HDTV set-top boxes with personal video recorder (“HPDVR”), free for the first two months, and $9.95 for the next ten months (twelve months in total).
• Digital Telephone:  Shaw’s “Digital Phone” package, including local telephone service, over a dozen calling features including voicemail, call display and call waiting, unlimited calling within Canada and the US, 1,000 International minutes to selected countries per month,”) free for the first two months, and $9.95 for the next ten months (twelve months in total).
• Shaw’s “Xtreme-I” high-speed Internet: with advertised download speeds of up to 16 Mbps, “Powerboost”, 10 personal email addresses and 100 GB monthly data transfer”), free for the first two months, and $9.95 for the next ten months (twelve months in total).

To add insult to injury, according to Novus, Shaw began advertising Internet “now 50 percent faster.”  In Novus’ opinion, the advertising implied Shaw’s Internet service was now 50 percent faster than broadband offered by Novus.

The text from Shaw’s ad read:

Feel the need for extra speed?  Shaw high-speed Internet is now 50% faster that’s fast.  Downloading your favourite music, videogames, and movies will take no time at all.  Plus Shaw high-speed Internet comes loaded with no cost extras like Powerboost, Shaw Secure and much more.  Get Shaw high-speed Internet for the amazing new price of only $19.95 per month for the first three months including modem and installation.  There’s never been a better time to order.  Call 310-Shaw today.

Signs sponsored by Shaw Cable were placed in front of buildings wired by Novus

The decision by Mr. Justice Greyell was carefully watched across Canada as it represented the first test of expanded authority granted by Parliament for courts to impose significant monetary fines against bad actors.  Commentators noted the new authority theoretically granted courts the power to determine anti-competitive activity itself — a power formerly held by Canada’s Competition Tribunal.

Those commentators need not have worried if the BC Supreme Court decision stands intact.

Mr. Justice Greyell dismissed Novus’ claims and ruled that in the absence of a determination of anti-competitive behavior by the Competition Tribunal, the court had no right to declare Shaw guilty of such behavior in the case.

“I conclude that in the absence of an order from the [Competition] Tribunal under s. 79 of the [Competition] Act, those portions of the statement of claim alleging a breach of s. 79 of the Act be struck out,” the chief justice ruled, effectively dismissing Novus’ anti-competitive claims against Shaw.

Mr. Justice Greyell also was unconvinced consumers would be confused by Shaw’s “50 percent faster” advertisement, believing the cable company now delivered faster service than Novus.

“In applying these tests to the ‘Now 50% Faster’ advertisement I am unable to conclude a reasonable person would view the words used as referring to the plaintiff’s business.  I am of the view the interpretation any reasonable person would place on the words is that Shaw is directing the advertisement to its own customers, and anyone else who might be interested, that its services are 50% faster than they used to be.  This fact is made clear by Shaw’s use of the word ‘Now’ – which implies that in the past Shaw’s services were slower and that Shaw has ‘Now’ improved the speed of its services   The advertisement makes no reference to Novus or to any Shaw competitor,” the chief justice ruled.

Novus effectively walks away from the BC Supreme Court empty-handed, and a little lighter in the wallet.  The chief justice also ruled Novus is responsible for Shaw’s legal bills associated with defending itself against Novus’ lawsuit.

[flv width=”630″ height=”375″]http://www.phillipdampier.com/video/Novus – 10 Bucks Too.flv[/flv]

Novus released this video as part of an outreach campaign arguing cable customers across western Canada should qualify for the same incredibly low promotional pricing Vancouver residents pay for Shaw Cable. (2 minutes)