Joe Brown was obviously not the right person for G4TV’s Attack of the Show to talk to about the issue of Internet Overcharging.

As AT&T begins notifying their DSL and U-verse customers they are about to face usage limits on their broadband service, G4TV sought out reaction from the features editor of Gizmodo.com, who was wholly unprepared to inform viewers about the facts behind AT&T’s usage caps and their implications for customers.

While Brown and G4TV were joking about users having to curtail game downloads, for millions of AT&T customers, it’s no laughing matter.

AT&T’s announced 150-250GB limits will eventually cost customers $10 or more for each extra 50GB allotment, on top of their already-expensive broadband service package.

“It really had to happen eventually I think,” Brown told viewers.  “People are using a lot of bandwidth.”

Gizmodo's Joe Brown talks with G4TV's Attack of the Show

But Brown’s observation conflicts with AT&T’s own claim “only a tiny minority of customers” will use more than the company wants to allow, with the average AT&T customer consuming 18GB per month.  AT&T isn’t telling the full story about that either.

For those “heavy users” AT&T wants to restrict first, the implications go well beyond curtailing Netflix and playing online games.

“As a software developer who works under a Linux environment and is forced to telecommute from home one week per month, these caps would absolutely kill me,” writes Joe Stein from Sparks, Nev.  “If you are a retired person using your computer to check e-mail and browse the headlines, you will obviously never exceed AT&T’s caps, but for technology innovators and those like me in the software development field, 150GB is nothing.”

Stein downloads regular updates for Linux, exchanges software back and forth with the office several times a day, and uses video conferencing regularly when he works from home.

“Not all online video is about adult entertainment or downloading movies,” Stein says.  “Usage caps hurt anyone who has to work with large files or business-related video, and after the events this week, AT&T can afford to leave off the caps.”

Brown claims AT&T conducted “a study” in two cities which found that 98 percent of their customers used far less than the usage caps would allow.  What Brown does not know is that those two cities are Beaumont, Texas and Reno, Nevada — hardly superstars in the tech revolution.

“Nobody moves to greater Reno to be a software superstar, which is why I am in San Jose, Calif., all the time,” Stein says.  “But there is more to this area than casinos.”

Stop the Cap! has been helping consumers in both cities avoid AT&T because the company’s “study” came at the same time it was experimenting with an Internet Overcharging scheme that limited customers to as little as 20GB of usage per month — a strong incentive for customers to avoid high bandwidth services,  or better yet AT&T.  So it’s no surprise broadband users who know better chose an alternative provider, including Stein.

“I first became aware of the usage cap debacle a few years ago when AT&T tested usage caps in the Reno area, which covers Sparks,” Stein says.  “I saw the impact first hand when customers started getting notified they would have to pay substantially more for basic Internet service.”

AT&T first limited their broadband customers to as little as 20GB of usage per month, then claimed the average customer only uses 18GB, making their 150GB DSL cap "generous."

Stein left for the cable company — Charter Communications, and they have usage caps too, but they are rarely enforced and much higher than what AT&T offers DSL customers, Stein says.

Brown claims AT&T is trying to “get out ahead of people using too much,” a point in conflict with the fact AT&T is willing to sell consumers additional bandwidth on its “overcongested” network.

Brown’s suggestion that “bandwidth costs money” is partially true, but not in the context of AT&T’s usage limits.  The company that can afford fiber optic upgrades to deliver limitless television and telephone service apparently cannot afford the pennies in bandwidth costs customers consume as part of their broadband service, which can run $50 a month or more.

Pondering broadband usage “fairness” is a losing proposition for consumers… and reporters, too.

Once someone blindly accepts the premise AT&T needs data caps, with no evidence usage presents a technical or financial challenge for the company, the debate is quickly reduced into a numbers game about “how much usage is fair.”

Clearly for Brown and his friends, who admit they are dangerously close to reaching or exceeding AT&T’s limits, the answer to Brown wondering aloud if the caps would “do it for him” should be no.

Stop the Cap! believes no cap is worth living with, especially on AT&T’s enormous-sized broadband network, now increasingly designed to handle the multimedia rich Internet and their U-verse platform.

It is doubtful many will be assuaged by Brown’s comments that “AT&T sounded pretty cool” about how they will deal with those who exceed their arbitrary usage limits.  Why?  Because after the “fair warnings” AT&T will provide customers on its artificially limited network, they will drop the sledgehammer of higher bills on top of customers’ heads.

Brown should know better, especially after finding AT&T unwilling to discuss how often it intends to revisit its usage cap levels.  AT&T’s counterparts in Canada have already foreshadowed the answer.  Once the cap regime is in place, several companies lowered them, sometimes repeatedly, to further monetize broadband usage.  They also raised the prices of overlimit fees, often substantially.

AT&T depends on uninformed consumers and reporters not understanding the true facts about Internet Overcharging schemes.  It’s not too late for reporters like Joe Brown to undo the damage, however.

Stop the Cap! strongly encourages everyone to examine the evidence we have compiled here over the past two and a half years.  It’s not hard to discover AT&T’s usage caps have nothing to do with fairness, are arbitrary and unnecessary, and come as a result of providers seeking higher profits in an undercompetitive marketplace.

If we do not uniformly and loudly oppose usage limits, America’s broadband rankings, digital economy innovation, and high technology jobs are all at risk, just to satisfy AT&T’s insatiable appetite for higher profits.

(P.S. – Joe: How did you miss Comcast has been capping their customers at 250GB for two years now.  Say it ain’t so, Joe!)

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/G4TV Attack of the Show ATT Caps Their Data Usage 3-15-11.flv[/flv]

G4TV’s ‘Attack of the Show’ misses the boat on AT&T’s Internet Overcharging scheme.  They did better covering Time Warner Cable’s attempt at Internet Overcharging in 2009.  It’s time to revisit this issue and get involved in the fight that could hurt the very audience watching this show.  (6 minutes)

AT&T's revenue is on the rise, especially from its broadband and wireless service divisions.

AT&T’s announcement that it is will impose usage limits on its DSL and U-verse (wireline) customers this May is just another case of overcharging consumers for Internet access.

Stop the Cap! has been reviewing AT&T’s financial reports looking for justification for imposing usage controls on the company’s customers.  Most providers who enact these kinds of pricing schemes claim they are about controlling heavy users, reducing congestion, and covering the costs to provide the service.

But after reviewing some of AT&T’s financial reports, the only explanation apparent for these limits is a quest for additional revenue and profits from subscribers.

AT&T continues to earn billions every quarter — $7 billion in the last three months alone — from its data products division, the vast majority of which comes from selling IP — Internet access — services to customers.  At the same time, the company continues to cut operations and support expenses, reducing its operating costs, and increasingly relies on its wireless and wireline divisions for the majority of the company’s revenue.

There is no evidence AT&T broadband usage costs are significantly impacting the company’s revenue in any way.  In fact, its U-verse platform, which can deliver higher speed, premium broadband service (at a correspondingly higher price) is actually delivering higher revenue from the “heavy users” the company is now complaining about.

In short, AT&T wants to reap the financial rewards of selling more costly, higher speed broadband service, but wants to limit customers’ use of those services.

We reviewed both the quarterly and annual results for AT&T’s wireline division and discovered what we routinely find true among every provider that wants to implement an Internet Overcharging scheme: the company wants to raise prices on broadband customers even as it enjoys ongoing cost reductions to manage broadband traffic and reduces the amount of investment made to manage it.

AT&T's own facts and figures tell the story of a company that has no need to slap usage limits on its broadband customers.

Some interesting facts from AT&T:

• AT&T earns $5 billion (annualized revenue stream) from its U-verse platform;
• AT&T saw 30 percent revenue growth from residential broadband alone;
• 45 percent of AT&T’s revenue in wireline services comes from broadband/IP services;
• In 2011, AT&T says it has a “focus on growth” — of revenue and profit, that is.  The company seeks increases in its “operating margins,” plans capital expenditures that will be focused on a “slight increase in wireless spending,” and ongoing cost-cutting where possible.

AT&T plans to continue to invest in U-verse expansion, critical for a company that is rapidly losing revenue from departing landline customers. In the 2010 Annual Report, AT&T noted the vast majority of cash used in investing activities went towards construction costs related to improved wireless network capacity, which is dramatically different than wired broadband service, and U-verse.  This does not cover ongoing expenses from providing the service.

It’s an important strategy for AT&T, which needs to replace revenue from lost landline customers:

We continue to lose access lines due to competitors (e.g., wireless, cable and VoIP providers) who can provide comparable services at lower prices because they are not subject to traditional telephone industry regulation (or the extent of regulation is in dispute), utilize different technologies, or promote a different business model (such as advertising based) and consequently have lower cost structures.

In response to these competitive pressures, for several years we have utilized a bundling strategy that rewards customers who consolidate their services (e.g., local and long-distance telephone, high-speed Internet, wireless and video) with us. We continue to focus on bundling wireline and wireless services, including combined packages of minutes and video service through our U-verse service and our relationships with satellite television providers. We will continue to develop innovative products that capitalize on our expanding fiber network.

Unfortunately, the benefits U-verse provides broadband users will be tempered by usage limits on it.

Considering AT&T’s U-verse pipeline is one giant broadband connection, the disturbing fact the company will not implement these overcharging schemes on its voice or video services cannot be ignored.  Only the broadband service, on which customers could entirely bypass AT&T’s TV and phone products for a competitor, is impacted.  The risk of that happening with the company’s usage cap is now diminished.

As Stop the Cap! has warned for nearly three years — this is the ultimate end run around Net Neutrality. Instead of actively blocking or throttling competing services, AT&T simply uses a usage limit to discourage customers from using the competitor, relying on unlimited AT&T TV and phone services instead.

AT&T's annual report illustrates the ongoing wireline losses attributable to departing landline customers.

But things are much brighter in the broadband division. Notice the increasing revenue.

U-verse represents a successful example of benefits earned when companies invest in their networks to provide improved service to customers.

But what happens when companies gradually reduce their expenses and investments in those networks? They try and make up the difference with an Internet Overcharging scheme that places limits on service to keep costs down and profits up.

Mossberg

Walt Mossberg, a columnist for the Wall Street Journal, delivered some stinging remarks about how large telecom and media companies deliver broadband services and programming to North Americans.

“We really suck at broadband,” Mossberg complained during opening remarks at Beet.TV’s first executive summit held at the Embassy of Finland in Washington.  “We have terrible, terrible broadband.”

“The typical consumer either has been lured into broadband by a DSL service that in Finland would not count as broadband — 768kbps is not broadband,” Mossberg said.  “If [the government] adopted a regulation not allowing Verizon to call that crap broadband, it would help.”

Mossberg added that cable modem service in the US and Canada is so slow, it is the object of pity and pathos in countries like Japan and Korea, and we’re overcharged for it.

[flv width=”480″ height=”388″]http://www.phillipdampier.com/video/Verizon Should Stop Calling DSL Broadband 2-17-11.flv[/flv]

Mossberg’s comments come as part of a discussion about the online video revolution, which he says is being hampered by copyright controls, outdated advertising models, and broadband providers delivering sub-standard service.  (8 minutes)

Windstream, one of America’s largest independent phone companies, has reported lower profits in the fourth quarter, declining four percent year-over-year to $72.4 million.  Windstream’s core business continues to decline — losing another 36,000 landline customers during the quarter, as Americans continue to drop traditional telephone service.

But Windstream’s ongoing acquisitions, as structured, are helping boost revenues on the company’s balance sheet.  Windstream completed four acquisitions in 2010: the phone companies Iowa Telecom, Nuvox and Q-Comm Corp, and a data center operator, Hosted Solutions.

Although boosted revenue numbers can temporarily improve a company’s share price, investors are unlikely to ignore Windstream’s ongoing decline in profits for much longer.  Windstream officials expect revenue growth for 2011 to remain flat, or potentially edge up by 3 percent. But part of that revenue growth comes from $40 million in broadband stimulus funding the company expects to receive from the Obama Administration during the year.

Windstream's 2009 announced purchase of Iowa Telecom expanded Windstream's reach.

Windstream has made inroads in expanding broadband service in its largely rural service areas.  The company added 12,000 broadband customers during the quarter, mostly for its DSL product.

Windstream’s results show a growing disparity between its residential customers and its business services unit.  While growth on the residential side has been flat to anemic at best, the company is finding better results from its business customers.  The decision to acquire a data center is part of the company’s growing strategy towards those clients.  Windstream plans to spend a considerable amount of its capital during 2011 on improving its data hosting and wireless backhaul product lines to service these customers.

“We’ve made great strides in our business channel, which now represents roughly half of Windstream’s total revenue and importantly, these revenues are growing,” said Brent Whittington, chief operating officer at Windstream.

Windstream’s acquisition plans for 2011 appear cooler than in previous years as it attempts to reduce its leveraged debt.  Most of Windstream’s growth has been attributed to its aggressive mergers and acquisitions strategy.  The company, created in 2006 from Alltel’s landline division and Valor Telecom has grown into a national player, serving nearly 3.4 million customers in 23 states.  Among its larger acquisitions — CT Communications (2007), D&E Communications (2009), and Iowa Telecom (2010).

Despite the lower profits, Windstream’s dividend payout ratio was 57 percent for the year, and the company expects to pay between 52 percent and 59 percent of earnings for 2011.

Slaterville Springs is a hamlet in the town of Caroline, N.Y.

Frontier Communications issues press releases promoting the expansion of low speed DSL service into new areas, but for many existing customers, extended service outages ruin their broadband experience.

Just ask Stop the Cap! reader Paul from Slaterville Springs, just outside of Ithaca, N.Y.  Much of his hamlet was without Frontier’s DSL service for more than two weeks, leaving dozens of families with poor-to-non-existent access to broadband for the better part of January.

It Was Supposed to Be Restored in Two Days — But Three Weeks Was More Like It

“It was supposed to be restored in two days, but after repeated calls, they told me it was a “common cause” failure impacting a large number of subscribers,” Paul told us. “Later, we were told Frontier was waiting for parts to fix some equipment at the central office.”

Paul heard the same excuse a week later, as he and other local residents remained cut off from the Internet.

Paul has been underwhelmed by the attention Frontier has given to the town of Caroline, which includes Slaterville Springs.  He has complained to the town supervisor and the New York Public Service Commission.  Frontier has already offered him a refund for the extended interruption in service, but Paul would really like a stable Internet connection that performs well with today’s bandwidth-intensive Internet.

“Before the outage, I got about two-thirds of the promised 3Mbps speed from Frontier, which means any interactive applications can be difficult, and YouTube videos require lengthy buffering before one can watch,” Paul says.  “I think being able to watch YouTube without painful slowdowns should be a key metric for today’s broadband.”

At the end of January, Paul reached out to Ann Burr, Frontier’s regional president of operations.  She called up Claudia Maroney,  the general manager of Frontier’s Central New York division.

“I was told right away that I’d get a service credit for two months and that the problem would be dealt with quickly,” Paul said. “The technician in the central office contacted us and said the solution was to further reduce my speed, because he thought we were too far away from the central office to sustain even the slow speed we had before.”

That turned out not to solve the problem either.

Finally, Frontier brought Paul a new DSL modem which, in concert with repairs in the central office, finally resolved his problems.

Frontier claims it will also increase capacity in his area, which apparently also suffers from evening congestion.

Poor Internet service is not just limited to Caroline.  The entire Southern Tier region between Corning and Binghamton is hard-pressed to access high-speed service.

Eleven towns in Tompkins and Cayuga County have jointly applied for a federal grant to create the infrastructure needed to make high speed wireless or fiber optic-to-the-home service available throughout the area.

The Case of Proctor Creek and Coffield Ridge, W.V.

Wetzel County, W.V.

One of the most challenging areas to provide DSL service is in the Panhandle section of West Virginia.  Hilly terrain and large distances between neighbors assure a challenging broadband environment.  Cable television is out of the question in many areas, and Verizon’s legacy network was in decrepit condition before selling operations to Frontier and fleeing the state.

So it was with great excitement Frontier announced incremental progress in expanding DSL service to two small sections of Wetzel County.  Proctor Creek, close to the West Virginia-Ohio state line, and the relentlessly hilly Coffield Ridge area was finally getting DSL from Frontier — three years after Verizon promised to make the service available.

Wetzel County EMS President Jim Colvin and Del. Dave Pethtel joined Frontier’s Bill Moon at the Grandview EMS Squad station on Jan. 4, to learn more about Frontier’s expansion plans, as the Wetzel Chronicle reported.

Moon informed customers that DSL was now available in both areas and it’s only the beginning of Frontier’s plans to deliver expanded broadband service across West Virginia.  He said Frontier aims to “do things right the first time,” taking more time to establish service in efforts to prevent customers from dealing with the inconveniences of repeat visits from technicians.

“We want to bring the feel of a local company with the advantages of a big company,” Moon said. He went on to say that being a manager specifically for one region meant day-to-day decisions could be made at the local and personal level. “A lot of the red tape is gone,” he told the Chronicle. “We can make things happen directly and get things resolved quickly.”

“There is nothing quick or personal about Frontier Communications,” Shirley tells Stop the Cap! from her home in Proctor.  Her sister signed up for Frontier’s broadband service Jan. 15, and it has worked for exactly three days.  “She has never dealt with a more disorganized company.”

Shirley says nobody from Frontier ever marketed DSL to her sister’s family.

“I read the story in the Chronicle and called her right away, because they have been waiting for broadband for at least 10 years,” Shirley says.  “Calling Frontier was the first mistake — the company couldn’t bring up her account for 15 minutes.”

Shirley says her sister finally succeeded in ordering the service after her line was “qualified.”  She specifically told Frontier “no thanks” to a heavily pushed big package of services from the company, and she did not want to get into a term contract.  But Frontier signed her to one anyway.

“Installation turned out to take almost two weeks because the installer never showed up and she actually got her first bill with DSL charges on it before they installed the service,” Shirley says.  “She called me right away — they signed her up for a calling plan she didn’t want, a hard drive backup service she never ordered, and a one year contract she won’t accept.”

Frontier took all of the extra services off her bill without a fight, even as she still waited for the installer to show up.

“It worked for three days — three days,” Shirley reports.  “Ever since the last heavy rain, the modem lights just blink and Frontier tells her it must be a line problem, but she’s still waiting for someone to come fix it.”

Frontier is charging Shirley, and her neighbors, nearly $40 a month for 1.5Mbps DSL service.  It was supposed to be 3Mbps, but Moon admitted to residents the farther a customer is from a hub, the slower the connection will be.

Common Congestion Symptoms?  Frontier Promises Relief

National Radio Astronomy Observatory in Green Bank

Meanwhile, residents in Pocahontas and Webster counties in eastern West Virginia have DSL service, but intolerable congestion has made it practically unusable since last Thanksgiving.

Nate in Marlinton has had DSL service since Verizon ran it, and believes Frontier has successfully run DSL straight into the ground in the state.

“Frontier actually managed to achieve slower speeds than my neighbor’s satellite Internet service, which is simply amazing,” Nate tells Stop the Cap! “He had Frontier DSL as well, but he went back to the satellite because it was actually better in the evenings.”

Nate’s in a good position to know he has a good quality line to Frontier’s central office — he can see the building from his house.

“When Verizon ran DSL, I actually got better speeds than they promised because you can count the line length between me and the central office in yards, not tens of thousands of feet,” Nate says.  “Now the problem is with Frontier’s own pipeline to the rest of the Internet, which has become hopelessly congested.”

Nate criticizes Frontier for claiming their network has loads of fiber optics for their broadband service.

“Not for ordinary West Virginians they sure don’t,” Nate says.

The Pocahontas Times covered Frontier’s molasses-slow broadband speeds, getting promises that better broadband was on the way late last week.

“But you have to read further down in the story to find the company is spending its time, attention, and money on a fiber network connecting the National Radio Astronomy Observatory in Green Bank with West Virginia University in Morgantown,” Nate complains. “Although that fiber travels down the same phone poles and streets our phone lines do, that sure doesn’t mean we’ll be able to access it.”

Reed Nelson, Frontier’s Director of Engineering for West Virginia, vaguely offered the $5.9 million, 66-mile fiber project will indirectly benefit consumers through fiber loops installed along the way.  He was joined by an apologetic Dana Waldo, Frontier’s senior vice president for West Virginia.

“We know we’ve had some bumps in the road,” Waldo said at the outset of the meeting.

“This is very much like being on the Interstate highway at rush-hour,” he said. “It gets congested. What we’re trying to do is look for paths where we can reduce that congestion. That’s the short-term fix.”

Nate remains unimpressed.

“This is a residential broadband improvement project through osmosis — somehow Frontier’s congested network problems in the area will be resolved by an institutional network we cannot access,” Nate says. “The fact the company turned up at the Observatory to make these announcements before an audience of NRAO technical and executive staff, Pocahontas County Commissioners and representatives of the local schools and libraries, tells you all you need to know — this is an institutional, not residential network.”

Pocahontas County's Cranberry Glades: Go for Nature's Mountain Playground, but don't stay for Frontier's broadband.

Our regular reader DJ, also in the affected area, says speeds have been downright terrible since Thanksgiving, and despite Frontier’s “new capacity” coming online last week, his service is as slow as ever.

“I’m getting anywhere between 0.5Mbps – 2Mbps if I’m lucky,” he shares.

For most customers in eastern West Virginia, Frontier’s ironically-named High Speed Max service delivers a whopping 1Mbps broadband experience.

“Customers have been paying for value not received,” Pocahontas County Commissioner Martin Saffer told Nelson.

Constituents in both counties regularly complain to elected officials about the dreadful broadband service Frontier delivers.

“This company got more than one hundred million in broadband stimulus funding and it sure isn’t helping people in eastern West Virginia,” Nate says.

Another part of Frontier’s problems is an overcongested access point in Bluefield, where Frontier exchanges traffic with the Internet’s national backbone.  Sending the majority of the state’s traffic through one data center has proved untenable, so the company plans additional access points in Charles Town, Charleston, and Clarksburg.

Frontier promises speed boosts are forthcoming, bringing 5Mbps service in the days ahead, according to the Times.

John Mutscheller, Frontier’s Technical Supervisor in Marlinton, told the Times local crews are working to increase capacity whenever they go out to service equipment in Pocahontas County.

“When we put in a new site or we augment an existing site, if they’re at one meg–we have some at three–we’re jumping them up to 5 megs,” he said. “That’s the company policy.”

An installation at Thornwood will be the first 5 Mbps site to come online in Pocahontas County, Mutscheller said. Eventually, all sites in the county will be upgraded to that level, he said.

But as the newspaper points out, not everyone will get those speeds. Generally, with the copper lines that connect customers to Frontier’s equipment, connection speeds drop off as the distance from the equipment increases. Nelson said advances in modems, like those Frontier provides customers for connecting to its network, could fix that in coming years.

Frontier continues to navigate political minefields in the state with the help of employees hired from county governments. Reta Griffith, a former county commissioner today is Frontier’s General Manager for the territory that includes Pocahontas County.

Reporters pressed Griffith on the question of refunds for beleaguered customers experiencing very un-broadband speeds from Frontier:

“We will take those concerns into consideration,” Griffith responded.

Frontier’s service agreements with customers state that speeds received are not guaranteed, but rather will be ‘up to’ the specified speed, she added.

Frontier’s own marketing materials have added to the billing headaches of the company and its customers.

“‘High Speed Max’ doesn’t mean the same thing every place,” Griffith explained.