Pacific Fibre's planned undersea fiber optic cable set to begin service in 2013. (click to enlarge)

Australia and New Zealand remain the two countries most notorious for Internet Overcharging schemes like usage caps and speed throttles.  The lack of international broadband capacity is routinely blamed for limiting broadband usage for consumers in both southern Pacific countries, and now a major undersea fiber optic cable project seeks to end those Internet Overcharging schemes once and for all.

Pacific Fibre hates usage caps.  The company, which is one of the partners in a planned 5.12 terabits per second undersea cable connecting the United States with New Zealand and Australia, believes limiting broadband consumption is bad for business — theirs and the digital economies of both nations.  Now the company is reportedly willing to put its money where its mouth is, charging broadband providers a flat rate per customer for unlimited access to its backbone network.

The company believes such pricing will force providers into selling more generous, often unlimited broadband service packages for businesses and consumers.  Providers have routinely blamed insufficient international capacity for restrictive data caps.  But increasing capacity, including Pacific Fibre’s new cable set to begin service in 2013, removes that excuse once and for all.

Co-founder Rod Drury believes there will be so much capacity, if providers continue to engage in Internet Overcharging schemes, most of the newly available bandwidth could actually go unsold.

“Why don’t we flip the model around and go to a per-person charging model and then try to give internet providers as much bandwidth as we possibly can for that?,” Drury told BusinessDay.  “The charges could be segmented by customer type; you could do it for mobile connections, home connections, schools, hospitals and businesses, and set a reasonable price.”

[flv]http://www.phillipdampier.com/video/CNBC Interview With Pacnet CEO June-July 2010.flv[/flv]

CNBC talked with Pacnet CEO Bill Barney, one of the partners in the Pacific Fibre project, about bandwidth needs in Asia and how new undersea fiber cables will meet the growing demands.  (Segment one of the interview was done in June, segment two in July.)  (10 minutes)

Telecommunications Users Association chief executive Ernie Newman said Drury’s idea was long overdue. “The way the world is moving is towards all-you-can-eat-type plans and any move like that has got to be the way of the future.”

But one of Pacific Fibre’s competitors, Southern Cross, which currently provides undersea fiber connections for South Pacific Internet Service Providers, said he wasn’t sure Drury’s idea would work.

Southern Cross marketing director Ross Pfeffer said broadband providers haven’t been justified limiting broadband usage for some time, as newly available capacity has already helped ease the bandwidth crunch.  Instead, critics contend existing providers don’t want to give up the massive profits they are earning limiting usage, maximizing revenue from users who think twice before using high bandwidth services, thus reducing required investments in network upgrades.

“New Zealand internet providers [are] using data caps to segment the retail market and maximize their own revenues,” Pfeffer noted.

Both Australia and New Zealand are embarked on National Broadband Plans to take back some control of their broadband futures from private providers many accuse of monopolizing an increasingly important part of both countries’ digital economies.

Drury’s project, and others like it, may become important components of newly constructed national fiber-to-the-home projects proposed in Australia, and dramatically improved service in New Zealand.

[flv width=”480″ height=”292″]http://www.phillipdampier.com/video/Underwater cable laying 1936.flv[/flv]

The history of deploying underseas cables is a fascinating one.  Check out this 1936 documentary showing how AT&T made undersea phone cables to connect the San Francisco Bay area.  Back then, companies didn’t use rubber or plastic cable jackets to keep the water out.  They used jute fiber and paper!  Some other companies used gutta percha, which is today best known for root canal fillings, or tar mixtures.  (5 minutes)

[flv width=”484″ height=”292″]http://www.phillipdampier.com/video/BBC Cable Under the Sea.flv[/flv]

Before there was telephone service, the challenges of connecting the far flung components of the British Empire were met by underseas telegraph cables beginning in the 1870s.  A fascinating BBC documentary visited Porthcurno, located at the tip of Cornwall, England, where 14 undersea telegraph cables stretched from a single beach to points all around the globe. Then something called “wireless” arrived and threatened to ruin everything.  (8 minutes)

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/Fiber Optic Cable.flv[/flv]

But what exactly is “fiber optic cable” and how is it made?  More importantly, how do they store thousands of miles of fiber optic cable on a single ship, ready to drop to the bottom of the ocean?  The answers to both are here.  (12 minutes)

Reardon is fine with this vision of your online future.

Marguerite Reardon confesses she’s confused.  She doesn’t understand what all the fuss is about regarding Google and Verizon teaming up to deliver a blueprint for a corporate compromise on Net Neutrality.  In a column published today, Reardon is convinced she’s on a debunking mission — to deliver the message that rumors of the Internet apocalypse are premature.

As I read the criticism of Google and Verizon’s supposed evil plan to demolish the Internet, and as I hear about “protests” of several dozen people at Google’s headquarters, I scratch my head and wonder: am I missing something?

The Google-Verizon Net neutrality proposal I read last week doesn’t sound nearly as apocalyptic as Free Press, a media advocacy group, and some of the most vocal critics out there have made it sound.

In fact, most of proposal sounded a lot like a plan FCC Chairman Julius Genachowski offered nearly a year ago, which many Net neutrality proponents seemed to support.

In short, Google and Verizon say they agree to a set of rules for the Internet that would prohibit broadband providers from blocking or degrading lawful content on the Internet. Broadband providers would also not be allowed to take action to impede competition.

This is pretty much what Genachowski has proposed.

OK, terrific. There is agreement.

But wait, Net neutrality zealots are still unhappy.

Hmmm… “zealots?”  Reardon probably just angered the majority of CNET’s readers, who now find themselves labeled as crazed Internet online freedom fighters — net fundamentalists who want absolute protection against big Internet Service Providers tampering with their Internet Experience.

Where can I get my membership card?

Reardon’s “debunk” consists of her narrow, inaccurate definition of Net Neutrality pounded into a pre-conceived notion of what is and is not possible in a competitive broadband marketplace.  In short, she’s satisfied we can all move along… there is nothing to see here:

What Free Press and Public Knowledge don’t seem to realize is that AT&T and Verizon already offer differentiated services today with enhanced quality of service to business customers. Verizon’s Fios TV and AT&T’s U-verse TV services are also examples of managed Internet services that are delivered to consumers. And the last time I checked, no one, other than their cable competitors, has complained about AT&T and Verizon offering competition in the TV market.

The truth is that if Verizon and AT&T wanted to cannibalize their broadband business with premium broadband services, they’d already be doing it. But they aren’t, because there hasn’t been a market for it.

The reality is that consumers are in control of what type of services are offered. If the public Internet can adequately deliver a service for free, then there’s no need to pay for it. But if someone can provide a better service over a dedicated network and there are consumers willing to pay for it, then why shouldn’t it be offered? Isn’t that why some people subscribe to a 768Kbps broadband service for $15 a month, and others pay $100 for a 50Mbps service?

So let’s debunk the debunk.

First, Net Neutrality is not about stopping broadband providers from offering speed-based tiers of service.  In fact, that’s the Internet pricing model we’ve all come to know and love (although those prices are just a tad high, aren’t they?)  Free Press and Public Knowledge do not object to ISPs selling different levels of broadband speed tiers to consumers and businesses to access online content.

Net Neutrality isn’t about stopping ISPs from selling some customers “lite” service and others “mega-super-zippy Turbo” service — it’s about stopping plans from some ISPs to establish their own toll booths on the Internet to charge content producers twice — once to upload and distribute their content and then a second time to ensure that content reaches a particular ISPs customers on a timely, non-speed-throttled basis.  Consider this: you already pay good money for your own broadband account.  How would you feel if you sent an e-mail to a friend who uses another ISP and that provider wanted to charge you 20 cents to deliver that e-mail?  Don’t want to pay?  That’s fine, but your e-mail might be delayed, as paying customers enjoy priority over your freebie e-mail.

A lot of broadband customers may never understand the implications of giant telecom companies building their own toll lanes for “preferred content partners” on the Internet because they’ll just assume that stuck online video or constantly rebuffering stream is the fault of the website delivering it, not their provider intentionally pushing it aside to make room for content from companies who paid protection money to make sure their videos played splendidly.

Second, Reardon need only look to our neighbors in the north to see a non Net Neutral Internet experience in Canada.  There, ISPs intentionally throttle broadband applications they don’t want users running on their networks.  They also spank customers who dare to try what Reardon insists Verizon would never stop — using their broadband service to watch someone else’s content.  With the application of Internet Overcharging like usage limits and consumption billing schemes, cable companies like Rogers don’t need to directly block competitors like Netflix.  They need only spike customers’ broadband bills to teach them a lesson they’ll not soon forget.

Within days of Netflix announcing their imminent arrival in Canada, Rogers actually reduced the usage allowances of some of their broadband customers.  If you still want to watch Netflix instead of visiting Rogers pay-per-view cable menu or video rental stores, it will cost you plenty — up to $5 per gigabyte of viewing.

Reardon seems to think giant providers like AT&T, Verizon, and Comcast care about what their customers want and wouldn’t jeopardize the customer relationship.  Really?  She herself admits she hates paying for hundreds of channels she never watches, yet providers are deaf to complaints from customers demanding an end to this practice.  What about the relentless price hikes?  Wouldn’t that drive off customers?  Perhaps… if customers had real alternatives.  Instead, with an effective duopoly market in place, subscribers pay “the man,” pay an almost identical price from the “other guy,” or go without.

Providers understand their power and leverage in the marketplace.  Until serious competition arrives, it would be a disservice to stockholders not to monetize every possible aspect of broadband service in the United States.

The check against this naked aggression on consumers’ wallets is from consumer groups who are fighting against these big telecom interests.

Before dismissing Net Neutrality “zealotry,” Reardon should experience the Internet in Canada and then get back to us, and more importantly those consumer groups she flicks away with disdain, and join the fight.

Almost two years to the day Frontier Communications quietly introduced language in its customer agreements providing a monthly broadband usage allowance of just 5GB per month, the company has quietly removed that language from its terms and conditions.

The 5GB usage allowance was deemed generous by Frontier CEO Maggie Wilderotter.  Frontier claimed most of its 559,300 broadband subscribers (2008 numbers) consumed less than 1.5 gigabytes per month.  But news of the cap angered customers anyway, particularly in their biggest service area — Rochester, N.Y.  In fact, Frontier’s usage cap was what sparked the launch of Stop the Cap! in the summer of 2008.

While never universally enforced against the company’s DSL customers, Frontier has used that portion of its acceptable use policy to demand up to $250 a month from some “heavy users” in Mound, Minn.

Frontier’s usage limit language also played a role in a major controversy in April, 2009 when Time Warner Cable planned usage limits of their own for western New York customers already faced with Frontier’s 5GB usage limit.

The phone company used Time Warner’s planned usage cap as a marketing tool to switch to Frontier DSL service.

Frontier used Time Warner Cable's usage cap experiment against them in this ad to attract new customers in the spring of 2009.

This website has pounded Frontier for two years over its continued use of the 5GB language as part of its broadband policies.  We raised the issue with several state regulatory bodies as part of Frontier’s purchase of Verizon landlines in several states.  Several state utility commissions raised the usage cap issue with Frontier as a result, deeming it negative for rural broadband customers who would effectively endure rationed broadband service from a de facto monopoly provider.

We also criticized Frontier for promoting its MyFitv service, little more than a website containing Google ads and embedded videos already available on Hulu, while not bothering to tell its customers use of that service on a regular basis would put them perilously close to their 5GB allowance.

In the end, Frontier itself denied they would strictly enforce the 5GB limit, making its continued presence in the company’s terms and conditions illogical.

Now, the company has returned to the earlier language it formerly used, reserving the right to shut you off if you use the service excessively or abusively.  This resembles similar language from most broadband providers.  While not absolute in defining those terms, Frontier doesn’t commit to a specific number either.  Today’s “generous usage allowance” is tomorrow’s “rationing.”

If Frontier cuts off customers for using only a handful of gigabytes a month, deeming it excessive, we want to know about it.

Stop the Cap! opposes all Internet Overcharging schemes like usage caps, speed throttles, and so-called “consumption billing.”  We believe such limits retard the growth and potential of broadband service and are unwarranted when considering the ongoing decline in costs to provide the service.  We do not oppose providers dealing with customers who create major problems on their networks, but believe those issues are best settled privately between the company and the individual customer.

Providers must also be honest in recognizing that broadband is a dynamic medium.  They have a responsibility to grow their networks to meet demand, especially at current pricing which provides major financial returns for those offering the service.  We also believe broadband tiers should be limited to speed, not consumption.  Customers with higher data demands will naturally gravitate towards higher-priced, faster-speed tiers, providing higher revenue to offset the minimal costs of moving data back and forth.

Broadband customers will be loyal to the providers that treat them right.  We applaud Frontier Communications for finally removing the last vestiges of its infamous 5GB usage allowance.  Hopefully, going forward, Frontier will spend its time, energy and money improving its broadband service instead of trying to convince customers to use less of it.

AT&T offers up the common practice of boasting about how much you can do with a usage-limited account, based on the thousands of e-mails you'll never send, the 500 pictures you'll never take, or the one minute YouTube clips you'll never watch. Notice they never seem to include figures for streaming multimedia applications like music, movies, and TV shows or playing more bandwidth-intensive games. To do so would only upset customers further.

AT&T claims that 98 percent of its customers will save money under its new lower-priced usage-limited data plans, but an analyst predicts those savings will vanish for half of AT&T’s customers by 2013, exposing them to steep overlimit penalties.

Independent analyst Chetan Sharma crunched the numbers:

The average customer will consume more than 2 gigabytes of data a month within three years, up from 150 megabytes in 2009. Though AT&T could change its rates in the future, the cost of such data use at current rates is $35 a month. That would make it more costly than the $30 AT&T previously charged for unlimited data use.

“The devices are getting much, much better so the opportunities to multitask are more attractive,” said Sharma, who has written five books on mobile technologies and consulted for companies such as Motorola Inc. and Qualcomm Inc.

It’s not only heavy data users who may be affected, Sharma said. By year’s end, the average AT&T customer will have doubled their data consumption from 2009 to 320 megabytes, according to his estimates. Only 35 percent of AT&T’s smartphone customers use 200 megabytes of data or more, the company said.

Sharma’s forecast that half of AT&T’s smartphone customers will use more than 2 gigabytes of data is “not unreasonable,” said Christopher King, a Stifel Nicolaus & Co. analyst in Baltimore, though he said it’s difficult to predict such trends because they depend on the introduction of new phones, applications and wireless technologies.

AT&T’s new Internet Overcharging scheme has built-in profits as customers increasingly bump into the subjective limits the company imposes on its wireless customers.  Many customers have complained the 200 megabyte plan is too small to accommodate anyone but the most casual data user, while others find 2 GB too small to make video viewing more than an occasional treat.  Customers who exceed either limit face higher bills:

• Customers exceeding 200 MB in a monthly billing cycle face a $15 overlimit penalty, which nets them another 200 megabytes of service;
• Users who exceed the 2-gigabyte level will be forced to pay an additional $10 per month for an additional 1 gigabyte of service.

Even King believes AT&T’s limits are too low.

“There’s no way that AT&T is going to maintain their tiered pricing as they do today,” he said. “They’ll have to raise the caps on data usage.”

Time Warner Cable CEO Glenn Britt told Wall Street the company is backing AT&T’s decision to cease unlimited access to its wireless data services.

“In most businesses when usage goes up, that’s a good thing because people pay more,” Glenn Britt, Time Warner Cable’s chief executive officer, said at a Sanford C. Bernstein Wall Street investor conference Friday in New York. “It’s going to get the industry better aligned with consumer behavior.”

But Britt also said AT&T’s decision was “more sensible than when we did it,” referring to the company’s April 2009 aborted experiment to charge customers up to three times as much for broadband service with a consumption billing scheme that got a hostile response from consumers.

Britt was speaking about the network capacity constraints that wireless data networks have that do not compare with the much wider pipeline available to wired provides like Time Warner Cable.  Britt cited AT&T’s still-exclusive iPhone as being the single most significant factor in AT&T’s decision.

Britt told Business Week that “at the time” consumption “pricing was needed to maintain the expense and expansion of the network.”

But consumer advocates suggested the company targeted its overcharging experiment in cities where customers didn’t have strong competitive alternatives.  That was particularly the case in Rochester, N.Y. and Greensboro, N.C., where alternative broadband meant significantly slower telephone company DSL service.  In the case of Rochester, that service included a monthly 5GB usage allowance in Frontier Communications’ Acceptable Use Policy.

Without equivalent competing alternatives, broadband consumers would be trapped in a broadband backwater with significantly worse service than neighboring cities.

Despite Britt’s acknowledgment that his company backed off because of strong consumer opposition, he’s still willing to talk about bringing the overcharging scheme back, telling Business Week, “Exactly how it works and what the PR around it will be is something we can talk about.”

[Note: We will have some audio up soon. — Editor]