BitTorrent, the company behind the popular file sharing protocol routinely blamed by providers for overburdening broadband networks and by Hollywood for distributing pirated content, took a tentative step today to oppose Internet Overcharging schemes.

Eric Klinker, CEO wrote a guest piece for GigaOM calling out AT&T for its announced 150-250GB usage caps:

While the trend toward metered bandwidth is not inherently pro-consumer, ISPs have staked out a singular public rationale: data caps are necessary to limit the consumption of “bandwidth hogs” in order to protect the network experience for everyone else. Such concepts are simplistic and easy to imagine. They are also completely wrong.

And with that, Klinker stumbled into a public relations and marketing effort defending the company’s culpability for increasing broadband traffic, and proposing a resolution for their ‘part of the problem’:

Since any data traffic that doesn’t induce congestion on a fixed cost network is essentially free; applications can voluntarily play a role in traffic prioritization. And since BitTorrent is a high percentage of global Internet traffic, we have a responsibility to be a part of the solution.

This was the primary motivator around our release of a new protocol a year ago, called µTP. The protocol essentially senses congestion and self-regulates to avoid contributing to Internet traffic jams.

Because µTP can never induce network congestion, it doesn’t contribute to an ISP’s cost. An ISP still has regular network maintenance expenses, but remember, with a fixed-cost network, traffic only becomes an economic burden if it contributes to congestion and forces the need for expansion.

As a result, µTP is exceedingly friendly to ISPs and their business model. µTP is open-source, and we invite application and cloud services providers to work with us directly or in the IETF’s LEDBAT working group in the ongoing innovation and usage.

Klinker

Some providers and their allied interest groups have disputed the diminished impact Klinker cites as a benefit of µTP, but in provider-world, the BitTorrent “problem” is rapidly becoming yesterday’s news anyway — online video is the new boogeyman.  NPD Research just released numbers showing peer-to-peer use has dropped from 16 percent of all U.S. Internet users to 9 percent over the last three years.

After making a spirited sales pitch for what he hopes will represent peer-to-peer 2.0, Klinker surrenders on behalf of everyone else, arguing the solution to America’s ‘broadband crisis’ is speed throttles during peak usage periods, and time of day pricing.  Klinker suggests broadband users might need to plan their “on-demand” viewing well ahead, or face the kind of “congestion pricing” Londoners face if they attempt a journey by car into the city center at high noon.  Klinker suggests Netflix customers should pre-schedule downloads of their movies the night before watching them, or else pay a fee for instant gratification.

That assumes, of course, you know what you want to watch the day before you do, that you can download Netflix content (you cannot), and that you didn’t remember you could accomplish the same thing if Netflix shipped the DVD out to you by U.S. Mail.

Are broadband rationing coupons far behind?

Klinker’s willingness to submit his own company’s peer to peer technology to provider speed throttles is likely to earn him a dressing down by investors wondering what the future holds for a protocol that can be dosed with Xanax at provider will.  Handing over the power to make your file sharing technology painfully slow and frustrating is likely not going to win new converts, either.

Before willing to subject everyone to solutions for broadband providers’ scary predictions of a broadband exaflood, would it not be better to actually obtain verifiable evidence there is a congestion issue in the first place?

Craig E. Moffett joined Sanford C. Bernstein & Co. as the Senior Analyst for U.S. Cable and Satellite Broadcasting in 2002.

Craig Moffett, perennial cable stock booster, predicts AT&T’s move to implement usage limits on its broadband customers will provide cover for cable operators to rush in their own Internet Overcharging schemes, starting with budget-priced usage plans.

Moffett released a research note Monday claiming Charter Communications, Cox Communications, and Time Warner Cable are among the first most likely to move towards limiting their customers’ broadband usage, with Comcast standing on the sidelines, at least for the moment.

Moffett thinks AT&T’s announcement is excellent news for wired providers, who could reap enormous new profits on top of some of the world’s most expensive broadband packages.

“AT&T’s move provides air cover that makes it easier for all of them to follow,” Moffett told his clients. “We view the move as good news for all the terrestrial broadband operators.”

Moffett believes usage caps have everything to do with stopping the torrent of online video.  He notes AT&T’s caps are set high enough to target AT&T customers who use their connections to watch a considerable amount of video programming online.

“Only video can drive that kind of usage,” Moffett writes.

Moffett has repeatedly predicted any challenge to pay television models from online video will be met with pricing plans that eliminate or reduce the threat:

“[I]f consumption patterns change such that web video begins to substitute for linear video, then the terrestrial broadband operators will simply adopt pricing plans that preserve the economics of their physical infrastructure,” Moffett said. “Of course, any move to preserve their own economics has far-ranging implications. Any move towards usage-based pricing doesn’t just affect the returns of the operators, it also affects the demand of end users (the ‘feedback loop’).”

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.

Canada’s House of Commons Standing Committee on Industry Science and Technology has taken an in-depth look at Internet Overcharging in an ongoing series of hearings to explore Bell’s petition to charge usage-based billing.  The request, earlier approved by the Canadian Radio-television and Telecommunications Commission (CRTC), would end flat rate, unlimited usage plans across the country, and mandate Bell’s proscribed usage cap regime on every ISP in Canada.

Remarkably, even Canada’s Conservative Party, which laid the deregulatory framework that allowed Canada’s barely-competitive market to stick it to consumers and small businesses, refuses to defend the overcharging schemes.

So far, the three hearings deliver everything Stop the Cap! has warned about since we began this fight in the summer of 2008:

1. Proof that usage caps, and consumption-based billing have nothing to do with cost recovery or fairness.  They are, at their root, economically engineered to discourage use of the Internet and protect revenue from the provider’s other businesses, especially video.
2. There is no evidence of a data tsunami, exaflood, or whatever other term providers and their financially-connected allies in the equipment business cook up to warn about an explosion of data usage mandating control measures.  Data usage is increasing at a slower rate than the development of new equipment and fiber pipelines to manage it.
3. Nobody ever saves a thing with Internet Overcharging schemes.  While Bell and other providers make up scary stories about “heavy users” picking “innocent” users’ pockets, it’s the providers themselves making all the money.  In fact, bytes of data have no intrinsic value.  The pipelines that deliver data at varying speeds do, which is why providers are well-compensated for use of them.  Levying additional charges for data consumption is nothing more than extra profit — a broadband usage tax.  Providers make plenty selling users increasingly profitable connections based on speed.  They do not need to be paid twice.
4. For all the talk about the need to invest in network expansion, Bell has reduced infrastructure spending on its core broadband networks the last three years’ running.  They are spending more on deploying Internet Protocol TV (IPTV), a service the company swears has nothing to do with the Internet or their broadband service (despite the fact it travels down the exact same pipeline).
5. Caps and usage billing never bring about innovation, except from providers looking for new ways to charge their customers more for less service.

I strongly encourage readers to spend an evening watching and listening to these hearings.  At least download the audio and let Canada’s broadband story penetrate.  You will laugh, cringe, and sometimes want to throw things at your multimedia player.

In the end, the hearings illustrate the points we’ve raised here repeatedly over the past three years, and it only strengthens our resolve to battle these Internet pricing ripoffs wherever they appear.  If you are a Canadian citizen,write your MP and demand an end to “usage-based billing” and make it clear this issue is paramount for your vote at the next election.  Don’t debate the numbers or waste time “compromising” on how much you want to be ripped off.  There is no middle ground for usage-based pricing.  It should be rejected at every turn, everywhere, with no compromises.  After all, aren’t you paying enough for your Internet connection already?

The Standing Committee on Industry, Science and Technology

Meeting # 54 – Usage-based Billing Practices

February 3, 2011

This video is encoded in the Windows Media format which presents some technical challenges.  Full screen or 200% zoom-viewing mode is recommended.

[For Windows users, right click the video and select ‘Zoom->Full Screen’ or ‘Zoom->200%’.]

This hearing was televised and had the most media attention.  Testimony from the CRTC was decidedly defensive, and almost entirely in support of usage-based billing and Bell’s petition.  The Commission found no friends in this hearing.

Appearing from the Canadian Radio-television and Telecommunications Commission: Konrad W. von Finckenstein, Chairman; Len Katz, Vice-Chairman, Telecommunications; Lynne Fancy, Acting Executive Director, Telecommunications.  (1 hour, 29 minutes)

If you want to take the hearing audio along for a ride, you can download the MP3 version.

The Standing Committee on Industry, Science and Technology

Meeting # 55 – Usage-based Billing Practices

February 8, 2011

The second in a series of hearings exploring Usage-based billing included witnesses from independent Internet Service Providers who could face extinction if they are forced to pay higher prices for wholesale broadband access.

Appearing: Rocky Gaudrault, CEO of TekSavvy Solutions Inc., Matt Stein, vice-president of network services for Primus Telecommunications Canada, and Jean-François Mezei, a Montreal-based telecommunications consultant who most recently petitioned the CRTC to repeal its decision. (120 minutes)

You must remain on this page to hear the clip, or you can download the clip and listen later.

The Standing Committee on Industry, Science and Technology

Meeting # 56 – Usage-based Billing Practices

February 10, 2011

The third in a series of hearings exploring Usage-based billing included witnesses from Bell Canada, which originally proposed the idea, and additional testimony from independent Internet Service Providers and their trade association, and consumer advocates who oppose the pricing scheme.

Appearing: OpenMedia.ca: Steve Anderson, Founder and National Coordinator. Bell Canada: Jonathan Daniels, Vice-President, Law and Regulatory Affairs; Mirko Bibic, Senior Vice-President, Regulatory and Government Affairs. Shaw Communications Inc.: Jean Brazeau, Senior Vice-President, Regulatory Affairs; Ken Stein, Senior Vice-President, Corporate and Regulatory Affairs. Canadian Association of Internet Providers: Monica Song, Counsel, Fraser Milner Casgrain LLP. MTS Allstream Inc.: Teresa Griffin-Muir, Vice-President, Regulatory Affairs. Union des consommateurs: Anthony Hémond, Lawyer, Analyst, policy and regulations in telecommunications, broadcasting, information highway and privacy. Canadian Network Operators Consortium Inc.: Bill Sandiford, President; Christian S. Tacit, Barrister and Solicitor, Counsel. (128 minutes)

You must remain on this page to hear the clip, or you can download the clip and listen later.

Verizon Wireless isn’t entirely rolling out the welcome mat for new iPhone customers.  PreventCAPS, one of our regular readers, dropped us a note indicating Verizon quietly added something new to the terms and conditions for new customers as of Feb. 3rd, which just so happens to coincide with the date the company started taking orders for the Apple iPhone — it reserves the right to throttle your speeds and “optimize” your browsing experience with caching and network management techniques that could reduce the quality of online videos and other bandwidth-intensive graphics.

Important Information about Verizon Wireless Data Plans and Features

As part of our continuing efforts to provide the best experience to our more than 94 million customers, Verizon Wireless is introducing two new network management practices.

We are implementing optimization and transcoding technologies in our network to transmit data files in a more efficient manner to allow available network capacity to benefit the greatest number of users. These techniques include caching less data, using less capacity, and sizing the video more appropriately for the device. The optimization process is agnostic to the content itself and to the website that provides it. While we invest much effort to avoid changing text, image, and video files in the compression process and while any change to the file is likely to be indiscernible, the optimization process may minimally impact the appearance of the file as displayed on your device. For a further, more detailed explanation of these techniques, please visit www.verizonwireless.com/vzwoptimization

If you subscribe to a Data Plan or Feature on February 3, 2011 or after, the following applies:

Verizon Wireless strives to provide customers the best experience when using our network, a shared resource among tens of millions of customers. To help achieve this, if you use an extraordinary amount of data and fall within the top 5% of Verizon Wireless data users we may reduce your data throughput speeds periodically for the remainder of your then current and immediately following billing cycle to ensure high quality network performance for other users at locations and times of peak demand. Our proactive management of the Verizon Wireless network is designed to ensure that the remaining 95% of data customers aren’t negatively affected by the inordinate data consumption of just a few users.

These kinds of “network management” techniques, which include speed throttles, reduced quality graphics, and caching (which can result in stale web pages being served to your mobile device), are all made possible by the Federal Communications Commission’s failure to implement Net Neutrality protections for wireless providers.  While Verizon stresses it will treat all content to the same network management techniques equally, the “improved” broadband experience Verizon claims to offer is more likely to improve the company’s bottom line from reduced spending on network upgrades.

Like most providers, Verizon isn’t willing to be specific about what amount of usage is likely to trigger the throttle, why it needs to be maintained for the remainder of the billing cycle even when network congestion is not a problem, and what speed customers will be stuck with for the rest of the month.

Broadband Reports reached out to Verizon for specifics and discovered the provider has not actually implemented these measures… yet:

“The notice yesterday simply reserves the right for new customers or renewing their contracts,” Verizon spokesman Jeffrey Nelson tells Broadband Reports. “We’re reserving the right to actively manage the network in specific ways should that need exist – and only for customers who are under contract that includes that provision,” he says. “Because this is down the road – if at all – it’s too early to tell what those triggers might be, or what throughput limitations would look like.”

Verizon may be concerned about the potential impact millions of data-craving iPhone customers will bring to its network in the coming weeks.  Existing customers with Android devices or Blackberry handsets are safe for now — the provision only impacts customers who sign new contracts as of last Thursday.

Verizon says it will retain its unlimited data option (with the right to throttle service) for a “limited time only.”