Jenkins

The Wall Street Journal attempted to attach its own conventional wisdom in an opinion piece about cloud-based streaming that suggests Canada “is just ahead of the U.S. in introducing usage-based pricing [and] has bloggers and politicians accusing Bell Canada of unconscionable ‘profiteering’ from usage caps. The company, they rage, is reaping huge fees for additional units of bandwidth that cost Bell Canada virtually nothing to provide.”

The author, Holman Jenkins, is a regular on the ultra-business friendly editorial page of the Journal, and has been raging against Net Neutrality and for higher Internet pricing for several years now.

Jenkins’ latest argument, just like his earlier ones on this subject, falls apart almost immediately:

This critique, which is common, could not more comprehensively miss the point. Another car on the roadway poses no additional cost on the road builder; it imposes a cost on other road users. Likewise, network operators don’t use overage penalties to collect their marginal costs but to shape user behavior so a shared resource won’t be overtaxed.

Jenkins needs to spend less time supporting his friends at companies like AT&T and Bell and more time exploring road construction costs.  If you are going to try and make an analogy about traffic, at least get your premise straight.

Before debunking his usage-based billing meme, let’s talk about road construction for a moment.  In fact, the kind of traffic volume on a roadway has everything to do with what kind of road is constructed.  In the appropriately named “Idiots’ Guide to Highway Maintenance,” C.J.Summers explores different types of road surfaces for different kinds of traffic.  Light duty roads in rural areas can get results with oil and stone.  Medium duty side streets and avenues are frequently paved with asphalt, and heavy duty interstates routinely use concrete.  Traffic studies are performed routinely to assist engineers in choosing the right material to get the job done.

Digital information doesn’t wear down cables or airwaves.  If broadband traffic occupies 5 or 95 percent of a digital pipeline, it makes no difference to the pipeline.  Jenkins is right when he says Internet Overcharging schemes are all about shaping user behavior, but for the wrong reasons.

Jenkins thinks Netflix and other high bandwidth applications face usage-based pricing to allow providers to keep their broadband pipes from getting overcongested:

Netflix is one of the companies most threatened by usage-based pricing, and it has quickly geared up a lobbying team in Washington. In a recent letter to shareholders, CEO Reed Hastings downplayed the challenge to Netflix’s video-streaming business. In the long run, he’s probably right—the market will settle on flat-rate pricing once the video-intensive user has become the average user.

In the meantime, however, Netflix shareholders had better look out.

In fact, providers are reaping the rewards of their popular broadband services, but almost uniformly are less interested in investing in them to match capacity.  It is as if the AT&Ts of this world assumed broadband users would consume    T H I S    M U C H   and that’s it — time to collect profits.  When upgrade investments don’t even keep up as a percentage of revenue earned over past years, the inevitable result will be a custom-made excuse to impose usage limits and consumption billing to manage the “data tsunami.”

Canadian providers did not slap usage caps on broadband users because Netflix arrived — they lowered them. Telling users they cannot consume the same amount of bandwidth they used a month earlier has nothing to do with managing traffic, it’s about protecting their video businesses by discouraging consumers from even contemplating using the competition.  Jenkins works for a company that understands that perfectly well.  News Corp., has a major interest in Hulu as well as satellite television services in Europe and Oceania.

The rest of Jenkins’ piece is as smug as it is wrong.  In attacking Net Neutrality supporters as “crazies” trying to defend their “hobby horse,” Jenkins claims public interest groups are pouting about usage-based billing, too:

All along, what the net neut crazies have lacked in intellectual consistency they’ve made up in fealty to the business interests of companies that fear their services would become unattractive if users had one eye on a bandwidth meter. That’s why opposition to “Internet censorship” morphed into opposition to anything that might price or allocate broadband capacity rationally. But such a stance is rapidly becoming untenable, whether the beneficiary is Google, with its advertising-based business model, or Netflix, Apple, Amazon and others who hope to capitalize on the entertainment-streaming opportunity.

All are betting heavily on the cloud. All need to start dealing realistically with the question of how the necessary bandwidth will be paid for.

Part of Jenkins’ theory calls back on his usual Google bashing — he perceives the company as a parasite stealing the resources bandwidth providers paid for, while forgetting the success of their businesses ultimately depends on content producers (who indeed pay billions for their own bandwidth) making the service interesting enough for consumers to buy.

But there is nothing rational about Jenkins’ support for Internet Overcharging.  North Americans already pay some of the highest prices in the world for the slowest service.  While providers attempt to lick the last drop of profits out of increasingly outdated networks (hello DSL!), their future strategy is less about expanding those networks and more about constraining the use of them.

Jenkins is ignorant of the fact several of Net Neutrality’s strongest proponents, Public Knowledge being a classic example, have not historically opposed usage-based pricing, much to my personal consternation.  As we’ve argued (and I submit proved), Net Neutrality and Internet Overcharging go hand in hand for revenue hungry providers.  If they cannot discriminate, throttle, or block traffic they consider to be costly to their networks, they can simply cap demand on the customer side with usage limits or confiscatory pricing designed to discourage use.  That is precisely what Canadians are fighting against.

It’s all made possible by a broken free market.  Instead of hearty competition, most North Americans endure a duopoly — a phone company and a cable company.  Both, particularly in Canada, have vested interests in video entertainment, television and cable networks, and other entertainment properties.  As long as these interests exist, companies will always resist challenges to their core business models, such as cable TV cord cutting.  It’s as simple as that.

The “realistic” way bandwidth will be paid for escapes Jenkins because his quest for condescension takes precedence over actual facts.  Content producers already pay enormous sums to bandwidth providers like Akamai, Amazon, and other cloud-based distribution centers.  Consumers pay handsomely for their broadband connections, part of which covers the costs of delivering that content to their homes and businesses.  AT&T and other providers don’t deserve to get paid twice for the same content.  Indeed, they should be investing some of their enormous profits in building a new generation of fiber-based broadband pipelines to keep their customers happy.  Because no matter how much data you cram down a glass fiber, the ‘data friction’ will never cause those cables to go down in flames, unlike Jenkins’ lapsed-from-reality arguments.

Shaw Communications held the first in a series of nearly three dozen upcoming “town hall meetings” on the issue of usage-based billing, starting with a gathering in Vancouver last evening.

Readers of Broadband Reports are reflecting on Shaw’s management of the meeting, particularly the lack of adversarial tone they anticipated going in. Several in attendance report company executives strenuously avoided arguments with customers and steered well clear of pro-UBB propaganda, which makes considerable sense when gauging the audience, which was likely almost entirely opposed to Internet Overcharging.

“They said they made a lot of mistakes concerning UBB,” one Broadband Reports reader shared. “It was almost a mea culpa.”

Company officials also admitted their usage caps will expose an increasing number of customer to overlimit fees if they go unadjusted — they respect the fact everyone will be defined as a “heavy user” under today’s usage limits in a few years.

“It was probably a bit of PR damage-control, and in that regard they did a good job,” the reader shared.

Another reader in attendance suspect the company misjudged the resulting backlash over UBB.

“It really felt like Shaw got blindsided by the righteous anger over UBB, and they’re truly surprised at how poorly they’ve judged the zeitgeist of their customers,” a reader wrote.

The cozy business relationship of Canadian telecommunications companies, who have maintained comfortable, barely-competitive markets for years might also be an issue of concern, writes one reader.

“They seem to be scared of the idea the cozy business-as-usual approach they’ve been taking [could go] away with the possibility of foreign ownership rules being relaxed or various other game-changing rulings being made. They sure sounded like they’re interested in making concessions [for] customer satisfaction, if only to stave off increased competition from outside Canada.”

Our Take

Stop the Cap! views such public meetings with some suspicion, if only because we have attended a few like these in the past and seen them used as intelligence-gathering operations for a marketing department charged with implementing the pricing schemes on customers.

While Shaw still seems to be holding onto the notion it can bring back a more palatable UBB scheme at the end of its “listening tour,” you can be certain other Canadian Internet providers are engaged in research and focus group testing with a less engaged audience, trying to find “fairness scenarios” that work in the court of public opinion.

As Shaw opens its next meeting in Calgary (and beyond), the best response people can give in these meetings is a clear, unified, and absolute message:

NO UBB.

NOT NOW.

NOT EVER.

UPGRADE YOUR NETWORKS!

The region of Canada that faces the end of flat rate broadband (namely, everywhere)

As soon as you enter into discussions about what represents a “fair amount” of usage, you have lost the argument.  Debating the numbers is their game, not yours.  Is 100GB enough, 250GB? 500? 1000?

What about tomorrow?

What is “reasonable” mean anyway?

“Reasonable” should not be how much Internet you are able to consume at Shaw’s everyday high prices.

Instead, Shaw’s absolutely massive profits demand that upgrades be maintained to accommodate users of their product. Shaw has plenty on hand to manage growth with upgraded facilities from Vancouver to the prairies and still have plenty of money left over.  Their revenue from broadband is soaring.  The costs to deliver it are dropping.

When you go to these meetings, explain politely, persuasively, and persistently that you are not prepared to accept the return of any UBB system, period. That inconvenient truth may be difficult for them to accept, but tell them you have every confidence a company as innovative as Shaw can find a way to keep customers and shareholders happy, and you’ll work with them to that end if they deliver the flat rate broadband experience that your neighbors to the south get.

If the USA and other countries around the world can manage it, so can Canada.

The Openmedia.ca folks have created several “parking tickets” designed to call attention to the issue of Internet Overcharging among ordinary Canadians.

Appearing under a windshield near you, these clever notices educate consumers about unjustified usage caps and so-called “metered billing” which only exists to drive up provider profits.

Even Bell trucks are not immune, as an enterprising protester found time to share the news with the company that seeks to eliminate flat rate Internet access in the country.

CanadianDownload fills the marketplace niche of delivering websites that are now too big to download under Canada’s Internet Overcharging schemes.

America, the home of the free and the brave… and the unlimited use Internet service plan, is coming to Canada’s rescue.

Want to watch the latest CRTC hearing about broadband or download a Linux distribution, but don’t want to blow through your puny usage allowance?  Let a new website do the downloading for you.

American-based CanadianDownload.com is part mission of mercy, part online embarrassment for Canadian officials who have allowed the country’s broadband to lapse into a highly expensive, slow, and irritating mess.

Justin Bowman and his business partner Matthew Neder Laden are behind the website, which fielded 130,000 visits on its first day of operation.  The two run a security camera outfit that has nothing to do with Canadian broadband, but considering their headquarters are in the mountains of North Carolina, one of the hotbed states for Internet Overcharging experiments south of the Canadian border, they strongly sympathize with the plight of ordinary citizens paying too much, for too little service.  And because many of their customers want to remotely access the cameras they sell, their business could ultimately be impacted by paltry usage limits, too.

“The initial idea was just a protest of the ludicrous bandwidth caps that [Canadian ISPs] have placed on their customers,” Bowman told the Financial Post. “But the other part of it was just to provide a service.”

“We had no idea it would actually catch on and that people would actually give a rat’s ass about [the site], but they did,” he said.

Considering most Canadian cable and phone company Internet service plans are limited to 60 or fewer “rat asses” per month (and dropping), their surprise might be unwarranted.

Visitors are invited to enter the URL of the website they want shipped north, and the service will mail the discs at no charge using the cheapest possible shipping method, which you learn more from ArdentX.

Bowman and Laden

The two have spent countless hours burning DVD’s for consumers across Canada since the site launched earlier this month.  But there are limits.  Nearly 90 percent of the requests are “not serious,” according to Bowman.  Requests for “Google” as well as racy online content can’t be fulfilled, and the service is careful to avoid running afoul of copyright law.

“I don’t want to mess with that, having the FBI on my ass because I’m shipping bootleg items across international lines, I’m just not going to do that,” Bowman said. “Basically we’re keeping it to open source software, a lot of those data files are pretty massive.”

All in all, CanadianDownload.com exists to make a point — that broadband service in Canada can never be a success story with Internet Overcharging schemes hanging over its head.  Just as a carrier pigeon in South Africa proved it could deliver faster service than the overpriced broadband incumbent, an American website has called out the current Canadian broadband nightmare of high prices and usage caps.  The scariest part of the story is that mailing DVD’s with web content could eventually become financially viable.

At least the United States Postal Service and Canada Post, who will reap the revenue delivering all those discs, hope so.

“We’ll [continue] for as long as we can,” Bowman told the Post. “So long as we can still make rent and feed ourselves… yeah we’ll keep on mailing you guys stuff.”

From CanadianDownload’s blog:

The metered bandwidth decision was and always has been about Netflix, iTunes, torrents, and other threats to dying media business models. From CRTC to Comcast, here in the states, the international business community must fight back against the monopolies who (for the most part) ran their cables on the back of public subsidies and now want to dictate how these pipes are used. We broke up big-Bell, it’s time to do the same here.

Here at SCW, we have been very concerned with bandwidth caps. We’ve been called [innovative] for our work with CanadianDownload.com, but we aren’t; we just hearkened back to old school business models. Bandwidth caps reduce innovation; they don’t increase it. Also for all the talk of “smarter way to ship data,” we have to state that we want this business model to fail. Although there is a need for this type of service in places like South Africa, Australia, and many other parts of the world, more innovation will be possible with an open and accessible Internet than with the “innovation” associated with bottling it up and shipping it.

The actions by ISP monopolies puts all online business at risk – and not just services like Netflix, imgur, and iTunes. In a world of metered bandwidth, low bandwidth versions of sites will have to be created — which squashes rather than creates innovation. Furthermore, this puts any site that serves online advertising at risk. If you bandwith is metered, who could blame someone for using tools such as ad-block-plus to take more control of your bandwidth allowance. This translates to a direct reduction in revenue for sites that support themselves via advertisement. The saddest part of this is that even the portal sites for ISPs, (where you can see your bandwidth usage), show ads.

EchoStar Corporation, which makes equipment and provides satellites for Dish Network, today announced it has agreed to buy Hughes Communications, Inc., for about $1.32 billion.

The deal means Dish, the second-largest U.S. satellite television provider, could be one step closer to providing a national data service to its customers.  Hughes operates a “broadband” satellite network, which almost entirely serves rural areas.

Much maligned by its customers, who consider the service’s high prices, low speeds and even lower usage caps “fraudband,” Hughes’ satellite service has been up for sale for some time.

The purchase “brings together the two premier providers of satellite communications services and delivers substantial value to our shareholders,” Pradman Kaul, chief executive officer of Hughes said in the statement.

Satellite television companies have increasingly been at a disadvantage because they cannot sell a true “triple-play” package of television, Internet, and phone service to customers who commonly bundle the three services together.  Instead, Dish and its larger competitor DirecTV have been relying on partnerships with telephone companies who provide phone and Internet service with a satellite television package.

The current generation of satellite broadband services are not well-rated by their customers.  Capacity shortages force providers to place strict limits on usage, which makes the service largely useless for high bandwidth applications — especially video.

The deal is expected to close later this year.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Hughesnet.flv[/flv]

Watch HughesNet’s advertisement promising “blazing fast” speeds in contrast to an actual speed test completed by one of their customers, at a non-peak-usage time.  (2 minutes)