Providers establishing Internet Overcharging schemes like usage caps, so-called “consumption billing,” and speed throttles that force subscribers into expensive upgrades are planning for a growth industry in data consumption.

According to new research from a firm that specializes in market strategies, data usage is going up and fast.  Providers that seek to monetize that usage could win enormous new profits just sitting back and waiting for customers to exceed the arbitrary usage caps some companies are now enforcing with their customers and take the proceeds to the bank.

iGR says the demand for connectivity inside the home is at an all-time high, with the biggest growth coming from wireless Wi-Fi connections.  The more devices consumers associate with their home broadband connection, the greater the usage.

That is one of the reasons why providers are increasingly supplying customers with free or inexpensive Wi-Fi routers, to make the connections quick, simple, and potentially profitable down the road.

Comcast's Wireless Gateway: A Future Money Machine?

Comcast announced this week it would supply a free 802.11N “home gateway” free of charge to every new customer signing up for Blast!, Extreme 50 or Extreme 105 broadband service.  In addition to wireless connectivity for every device in the home, the Xfinity Wireless Gateway also includes a built-in cable modem and phone service adapter.  Time Warner Cable strongly encourages new DOCSIS 3 customers use their equipment for Wi-Fi service as well.  AT&T has included its own wireless gateway with U-verse for a few years now.

The offer is hard to refuse.  Nearly 80 percent of homes use wireless access, connecting cell phones, tablets, laptops, personal computers, game consoles, and even set top boxes that let customers stream video entertainment to their television sets.

iGR found average usage in heavily-connected homes at the all time high of 390GB per month.  By 2015, that will rise to more than 440GB per month.  Both numbers are well in excess of average consumption limits by providers like Comcast and AT&T, which top out at just 250GB per month.  Of course, not all Wi-Fi usage is based on traffic from the Internet.  Some users stream content between computers or devices within the home.  But the research is clear — usage is growing, dramatically.

Video is by far the biggest factor, according to iGR.  Their report, U.S. Home Broadband & WiFi Usage Forecast, 2011-2015, says the appetite for downloaded and streamed video is only growing.

Matt Vartabedian, vice president of the wireless and mobile research service at iGR, says home Wi-Fi has become inextricably woven into the personal, social and business fabric of today’s life.

Broadband is increasingly seen by consumers as an essential utility, as important as the home wired telephone, safe drinking water, and reliable electric and natural gas service.

Providers are positioning themselves to take advantage of the growth market in data by establishing what, at first glance, may seem to be generous (often inflexible) usage limits that remain unchanged years after introduction.  While only a handful of consumers may cross those provider-imposed thresholds at first, within a few years, it will be more uncommon to remain within plan limits, especially if you watch online video.

A Verizon Wireless 4G/LTE customer that managed to consume nearly 56GB of data over a two-week period has found he has temporarily lost his 4G privileges during peak usage times on Verizon’s network.

Droid Life reports Verizon’s speed throttle apparently also works on the company’s much-faster 4G network, because the customer found his 4G speeds reduced to dial-up during peak usage periods.  The throttle reduces speeds so much, even browsing web pages becomes a painful experience.  Remarkably, the customer tells Droid Life he still has regular speed access to Verizon’s more congested 3G network, which he now uses when his 4G speeds are reduced.

Verizon Wireless specifically exempts 4G customers from wholesale enforcement of their speed throttle, but the company’s standard Acceptable Use Policy still gives Verizon broad latitude to deal with customers who create an “adverse impact” on their network:

Network disruptions and unfriendly activity: Using the Services for any activity that adversely affects the ability of other people or systems to use either Verizon Wireless Services or other parties’ Internet-based resources. This specifically but without limitation includes excessive consumption of network or system resources whether intentional or unintentional. This also includes “denial of service” (DoS) attacks against another network host or individual user. Interference with or disruption of other network users, network services or network equipment is prohibited.

Such policies are commonplace at every Internet Service Provider, but they are typically enforced only in instances where a neighborhood or region is experiencing especially heavy traffic loads.  That seems to be the case with Droid Life‘s reader, because other customers report they have managed to rack up nearly 120GB in 4G usage over 10 days with no speed reductions.  Verizon reportedly told the throttled customer his speeds were reduced because his ‘excessive downloading’ was an “abuse of the network.”

To run up tens of gigabytes of usage over two weeks usually means the customer is using a tethering application or mobile hotspot app, services for which Verizon charges extra.  We don’t know if this customer is paying for those services or using one of the third-party apps Verizon frowns on.

The selective enforcement of speed throttles may be the result of an overeager Verizon employee subjectively cracking down.  It might also result from the subscriber using services on an especially congested cell site.  We cannot be certain, and Verizon isn’t commenting on the record.  The company officially claims it is standing by the terms of its original plans to throttle the top 5% of 3G users.

With the ongoing crackdowns on what providers deem to be “excessive usage,” it is safe to assume those attempting to use any wireless broadband plan as a home or office broadband replacement is risking the wrath of their providers who consider anything beyond 2-4GB of usage per month on an “unlimited data plan” to be “too much.”

Too bad Comcast doesn't allow their Internet customers to use the service until 'xfinity.'

A Comcast customer of seven years has been warned if he exceeds the company’s arbitrary 250GB usage cap one more time, his family will be cut off from the cable company’s Internet service for one year.

Jrodefeld is just one more example of a customer who never thought he would have to monitor an online usage gauge to enjoy the Internet service he pays good money to receive.  But Comcast has deemed him an Internet abuser for exceeding a usage limit the company takes pains to bury in its lengthy terms and conditions, far away from glitzy marketing promising a fast, always-on experience.

In my house there are five people with five computers, several smartphones, a Playstation 3 and AppleTV all connected to the Internet through a wireless router.  Several of us are tech minded people who need to be able to send and receive large amounts of data through our network and publish material on the Internet.

Not only that, but I have (legally) downloaded films through places like iTunes and downloaded games and software in the same manner.  I create digital content (web pages, animation, other content) and publish it on the Internet. Not only that, but I send this content to friends and colleagues through web hosting sites like Netload.  I download games and watch streaming Netflix through my Playstation 3.

I think it is absolutely beyond belief that Comcast can offer the speeds that they do, with the evolving demands of the Internet and modern digital demands that people have, and think that 250GB is sufficient for even the moderately tech savvy user.  This data cap is absolutely horrible and is an insult to my family and an abomination given how much money we have given to Comcast over the last several years for their service, amounting in the thousands of dollars.  Not to mention that we signed up with the idea of getting an “always on”, unlimited service.

Jrodefeld claims his family steers clear of the usual suspect of heavy usage consumption — peer-to-peer software.  But with five tech-savvy teenagers and high-tech workers living under one roof, Comcast’s usage meter reflected the family was several times over the company’s usage limits:

• In May, 2011 the total data used was:  1363GB
• In June, 2011 the total data used was:  758GB
• In July, 2011 the total data used was:  1271GB

Based on a review of the applications being run by those achieving that level of usage, online file backup is usually the culprit generating the most usage.  That is closely followed by avid online streaming and gaming.  While game-play itself is probably not much of a factor, the relentless number of game updates and new games distributed over an Internet connection can easily exceed several gigabytes each.  The family also streams some very high bitrate HD movies over a video rental service that uses their Comcast Internet connection to provide the video.  That can run nearly 10GB an hour in some cases, Jrodefeld says.

For usage cap opponents, this represents the perfect example of what can happen in families that rely on video streaming and have teenagers living at home.  While one individual may have little trouble staying within Comcast’s arbitrary 250GB limit, unchanged since its introduction in 2008, the more Internet-savvy members in a household sharing a connection, the bigger the risk for Internet Overcharging or a warning e-mail.

Comcast says their average user keeps usage well under 10GB per month.  But they don’t provide any demographic breakdown of usage profiles.  Older households may pay for an Internet account exclusively for web browsing and e-mail.  Younger households, those with teenagers, and cord-cutters who rely on Internet video streaming will almost certainly use considerably more.

Jrodefeld can’t believe Comcast has stuck his family with a “one size fits all” Internet experience.  And their reasons for the 250GB usage cap don’t make any sense.

“On the one hand, it is said that a user going over that threshold hurts the Internet experience for other users in your area, and on the other hand Comcast claims that the ‘average’ user uses only 2-4gb per month,” he notes. “If that is the case, then multiple users who average 250GB a month would slow down the Internet far more than one individual who uses, say, 500GB in a month.”

“If such a small number of users exceed the cap, Comcast’s network should easily be able to allow that without it affecting other users,” he argues. “If, on the other hand, many users are exceeding the cap, it means that the limit is far too small and Comcast should upgrade their infrastructure if they cannot keep up with user demands.”

The cap-free alternative for Comcast's "heavy users."

In fact, Comcast has upgraded the Internet experience for most of their customers considerably since they introduced a usage cap.  The company has aggressively deployed DOCSIS 3 upgrades, exponentially increasing the amount of bandwidth available in individual neighborhoods, allowing them to sell highly-profitable, faster tiers of service and eliminating congestion issues.  But no matter what speed you buy, or how much you spend, Comcast imposes the same 250GB usage limit on all residential accounts.

Comcast company officials had nothing to offer Jrodefeld, but several other Comcast customers did: upgrade to a Business Class account, if only to be rid of the usage limits.  Comcast Business Class service currently has no usage limitations, and carries this pricing in the northeast, before taxes and fees:

• Starter Plan — 12/2Mbps:  $59.95/mo Best Value
• Preferred Plan — 16/2Mbps:  $89.95/mo
• Premium Plan — 22/5Mbps:  $99.95/mo Best Speed/Performance Value
• Deluxe Plan — 50/10Mbps:  $189.95/mo
• Installation Fee: 1 year contract = $199, 2 years = $99, 3 years = $49

The alternative is to sign with a telephone company provider, but AT&T also has a 250GB usage limit on their U-verse service, and charges an overlimit fee of $10 for every 50GB of excess usage.  Verizon FiOS offers unlimited service.

The telecommunications industry better not take a tip from some Texas power companies that have found new ways to increase profits: charging customers a penalty when they do not use enough electricity during the month.  Imagine if broadband providers with Internet Overcharging schemes followed suit.

After Texas deregulated electric utilities, an increasing number of companies are using their freedom to find new, creative ways to tack on additional fees and surcharges that might normally be considered the cost of doing business.

CenterPoint Energy, a Fortune 500 corporation providing service in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas would like to introduce you to its Minimum Usage Penalty — a $9.95 fee applied to Texans caught using too little electricity from the company.

While most utility companies set a basic customer charge applicable to everyone, which covers the cost of your electric meter, power lines and their upkeep, billing, and other administrative expenses, many Texas power companies are billing consumers a monthly fee for conserving too much electricity.

The concept flies in the face of common sense, especially as the state contends with dozens of 100+ degree summer days and pleas from utilities for customers to cut back on energy use.  But if some do, especially low-consumption customers in apartments or those who maintain part-time residences, they’ll pay a penalty for doing so.

The Texas Electricity Ratings Blog found more than a dozen power companies with similar policies, with penalties as high as $12.96 for using less than 1,000 kWh per month:

Ambit Energy: $9.99 for less than 1000 kWh per month
Amigo Energy: Depending on the plan it is $9.95 of $6.95 for less than 1000 kWh per month
Bounce Energy: $4.95 for less than 1000 kWh per month for almost all of their plans, except intro plans are $6.96 per month for less than 1000 kWh.
Champion Energy: $4.95 for less than 500 kWh per month
Cirro Energy: $5.25 for less than 1000 kWh per month
Direct Energy: I couldn’t find a Monthly Fee in their Terms of Service or EFLs
Dynowatt: $6.95 for less than 1000 kWh per month
First Choice Power: $5 for less than 650 kWh per month, plus a $4.95 base charge
GEXA Energy: Seems to simply use a sliding rate per plan for different usage w/o a minimum charge
Green Mountain Energy: Didn’t seem to see any minimum usage charge in the EFL or Terms of Service
Mega Energy: $12.96 for less than 1000 kWh per month
MX Energy: Seems to simply use a sliding rate per plan for different usage w/o minimum charge
Reliant Energy: $9.95 for less than 800 kWh per month
Southwest Power & Light: I didn’t see minimum usage but they had a $7.95 monthly meter fee.
Spark Energy: $8.99 for less than 1000 kWh per month
StarTex Power: $4.99 for less than 500 kWh per month
Tara Energy: $6.95 for less than 500 kWh per month
Texas Power: $10.00 for less than 1000 kWh per month
TXU Energy: TXU uses a base $4.95 charge and sliding rates for less or greater than 1000 kWh, per plan.

[flv width=”600″ height=”358″]http://www.phillipdampier.com/video/KTRK Houston Higher Bills for Not Using Enough 7-11.flv[/flv]

KTRK in Houston provides surprising information about Texas utility usage-based-billing rates — power companies will charge you a penalty for not consuming enough electricity.  Better hope broadband providers angling for UBB don’t catch on.  (3 minutes)

Sprint’s 4G experience has been nothing to write home about for a number of their customers, who are increasingly disabling the service to save on battery life.

Speed tests of Sprint’s 4G WiMAX experience show increasingly unimpressive results, as the network grows exponentially more crowded with customers trying to capitalize on the higher speeds 4G is supposed to deliver.  The result?  BTIG Research in April found, after exhaustive testing, the average Sprint 4G customer was now getting around 1/1Mbps service from a network that promised to deliver speeds many times that.

This isn't even a contest. (Source: BTIG Research)

Now an increasing number of customers are simply switching the 4G service off completely to extend battery life.

Doug Mahoney, a contributing editor for TechZone360, says he has about given up on WiMAX:

WiMAX tends to stay turned off so I run 3G and there’s no big differences in the convenience of reading email or using simple apps like Twitter and Foursquare.  With more public places starting to offer free WiFi, the case for WiMAX — or LTE — on a smart phone starts to grow weaker between the extra cost and the battery life issue.

Mahoney complains Sprint’s 4G network is simply not robust enough to support consistent speeds and access.  In suburban Washington, he compares Sprint’s 4G coverage to an open air tree, with spotty service scattered across the region.  As a result, his 4G phone spends a lot of time desperately-seeking-signal — a process that accelerates battery depletion.

Given Sprint’s WiMAX “tax” of an additional $10 a month for the service, Mahoney isn’t so certain he’d pay it again on a future Sprint phone.

Are the same speed reductions in store on Verizon’s currently-lightning-fast LTE 4G network few customers use right now?  Perhaps, but Verizon’s brand may force the company to make sure coverage is much stronger than what Sprint customers currently tolerate:

LTE has the same power consumption issues as WiMAX. I suspect Verizon will have better, more ubiquitous LTE coverage just due to the characteristics of the 700 MHz spectrum and physics involved, so I should have faster broadband available in more places rather than the abstract green tree coverage map.