Rep. Marilyn Avila (R-Time Warner Cable)

Rep. Marilyn Avila (R-Time Warner Cable) is coming under increasing scrutiny across North Carolina as her cable lobbyist-written, anti-community broadband bill — H.129 — faces negative reviews in the media across the state.

Avila’s bill would set conditions under which community-owned broadband networks could operate, while specifically exempting existing cable and phone companies.  Most observers on the ground predict Avila’s bill would kill any further expansion of public broadband networks in the state and tie the hands of those already in operation, which would inevitably drive them out of business.  Avila’s bill, ghost-written by the state’s cable companies, even has the prescience to allow the fiber systems to be sold off to cable and phone companies at fire-sale prices for as little as pennies on the dollar, without a public vote.

Last week, the state legislature’s Finance Committee put Avila’s bill on a temporary hold “to allow public input” on the bill, but also to permit scrambling by lobbyists to deal with several surprise amendments that attempt to exempt existing community networks.

That time-out has given the press a chance to examine the proposed legislation and its impact on North Carolina’s efforts to improve its mediocre broadband rankings, now 41st in the country.  More than a few in the media do not like what they see in H.129.

The Associated Press notes the state legislature was finally allowing the public to weigh in on a matter that directly impacts their Internet experience:

North Carolina lawmakers aiming to stop cities from building their own broadband networks decided Thursday to allow public comments the next time they consider the latest effort by telecom companies to keep local governments out of the business.

The House Finance Committee will hear from the public next Wednesday as it reviews legislation that would sharply restrict the chances for municipalities to step in when cable and phone companies decide not to build high-speed Internet systems in lightly populated areas. Opponents say telecom companies aren’t extending super-fast Internet at reasonable prices, and that keeps smaller communities behind in the wired world of commerce.

“They don’t want to provide these services in a lot of areas because it’s expensive, and they don’t want municipalities to offer these services. That’s an unlevel playing field for our citizens,” said Rep. Deborah Ross, D-Wake.

Legislation unveiled Thursday was changed to ease the rules for communities in which at least half the households have no access to high-speed Internet except through a satellite provider. Another change ensures the new rules don’t affect the municipal networks already established in Wilson, Salisbury, Morganton and Iredell County, which have borrowed to build their systems.

Cable and phone companies have been urging the General Assembly to restrict municipal broadband services since a 2005 state appeals court ruling upheld the right of towns and cities to offer their residents broadband. Companies argue that local governments have an unfair advantage because they don’t have to pay taxes and can subsidize their rates by shifting profits from their electricity or gas customers, undercutting the corporate competitors.

Except community broadband providers in North Carolina are not doing any of those things.

In fact, smaller providers start at a competitive disadvantage because they cannot enjoy the savings larger providers get from their extensive buying power — winning lower costs on everything from programming to equipment and services.

Community providers are not winning most of their customers from “underpricing” their service — they are earning them by delivering better service, which was precisely the point.

The original argument communities like Wilson and Salisbury had with state cable and phone companies was with the quality and level of service offered in their communities.  They solved the problem themselves with the development of fiber optic service that provides ultra-fast broadband connections that residents and small businesses simply could not get from other providers.

Some lawmakers believe community networks get in the way of cable jobs and phone company investment, and they want to “clear the playing field for business.”  But for many communities in the state, the playing field is empty and will remain so indefinitely.

Broadband: Utility or Convenience

For some lawmakers, the debate is both generational and philosophical.  Ruth Samuelson (R-Mecklenburg), told the AP she doesn’t believe providing broadband is a core part of government.

Among the older population who have not grown up with the Internet, broadband can be seen more as a luxury and less of a utility.  A few generations earlier, a similar debate erupted over telephone and electric service, which faced identical controversy in regions underserved by private utilities.

A reminder of these earlier challenges was part of the Winston-Salem Journal’s argument against H.129’s adoption:

“The broadband battle is not being waged in the heavily populated portions of the state such as the Triad. Here, the for-profit companies moved in a long time ago. They can make a very nice profit here because the population density is adequate to provide a good return on the infrastructure needed for high-speed Internet service.

“Over the past decade, however, North Carolina’s smaller municipalities, such as Wilson, Salisbury and Morganton, have built their own systems because their leaders recognized that broadband Internet is now an essential utility, just as electricity and natural gas are. The Internet-service providers did not step up to provide that essential service, so the municipalities did. In doing so, the cities followed a path they took nearly a century ago when the biggest electrical power companies did not provide service to these areas.”

North Carolina blogger-activist Mark Turner wrote in the News & Observer broadband has the capacity to transform North Carolina’s economic future in much the same way power and phone service did a century earlier:

While farm life has never been easy, at one time it was significantly harder. In the mid-1930s, over 97 percent of North Carolina farms had no electricity, many because private electric companies couldn’t make enough money from them to justify running the lines.

Aware of the transformational effect of electrification and recognizing the need to do something, visionary North Carolina leaders created rural electric cooperatives, beating passage of FDR’s Rural Electrification Act by one month. Through the state’s granting local communities the power to provide for their own needs where others would not, over 98 percent of farms had electricity by 1963, and our state has prospered.

The Internet is no less transformational than electricity. Through this world-changing technology, lives are being shared, distance learning taking place and innovative new businesses springing up. Sadly just as in the days before electrification, many North Carolina communities (particularly rural ones) are being left behind, stuck in the Internet slow lane.

The Journal argues Internet Service Providers essentially want to keep these communities in the slow lane, with a powerful cartel that doesn’t deliver service, and does not want cities to provide it either.  The cable and phone companies can’t have it both ways, the paper says. “They can’t delay bringing high-speed service to North Carolina communities but then turn around and lobby the legislature to deny local governments the authority to establish municipal service if their residents want it,” the paper editorializes.

“The private providers are trying to make a big-government argument here, one that includes clichés about unfairness and Big Brother. But that is not the case. In this situation, residents and businesses are tired of waiting for Internet-service providers to arrive, so they’ve exercised their democratic rights to seek an alternative solution through their local governments.

“Had the private companies tried to make their argument 15 years ago, they might have deserved some sympathy. But not in 2011. The Internet and high-speed access to it have now been available in North Carolina homes for well more than a decade.

“They ignored a market, and local governments stepped in to provide a critical service. The legislature should kill this bill.”

Mark Turner in the News & Observer argues nothing about H.129 is really an ideological right or left-wing debate.  He reminds readers the Internet itself was a government invention delivered through public rights-of-way established by local and state government, or over airwaves that are literally owned by the public.

“Like the electric lines that were once strung by hand to all corners of our state, our cities should retain the right to bring Internet service to their communities – especially where the private providers will not,” Turner wrote.

The Rural-Urban Disconnect: Choices in Raleigh, Sneaking Onto Wi-Fi in Spruce Pine

Spruce Pine, N.C., where one of the most popular hangouts in town is a parking lot where Wi-Fi signals deliver the only Internet service some residents can get.

The Journal points out North Carolina’s broadband debate is taking place in the state capital – Raleigh, a city much like the Triad region, served by both cable and phone companies.  Against that backdrop, legislators may assume ubiquitous urban and suburban broadband leaves local governments with few excuses for getting into the business in the first place — an argument the cable lobby is using to its advantage with some legislators.  But as soon as one ventures off Interstates 40, 77, or 95 — it does not take too long to find oneself in a broadband backwater.

“Here in Spruce Pine, broadband is a fabled, magical thing we read about, but don’t have — a big reason why my 17 year old son cannot wait to move out of here,” shares Stop the Cap! reader Morgan.  “Everything you see on television shows with people using the Internet for practically everything just does not happen here.”

Morgan shares one of the community’s broadband secrets: local hotels and other business establishments have parking lots filled with cars with people still in them sneaking online.

“They are hopping on board business and motel Wi-Fi connections to pay their bills, apply for jobs, or just complete homework assignments that require an Internet connection,” Morgan shares.  “Some businesses have locked down their Wi-Fi with passwords to stop the traffic, so there is an active underground trade of passwords of different wireless connections around the area.”

Morgan called the phone company wondering when DSL service might reach her house.

“Never, came the eventual reply — and the guy was laughing about it,” Morgan says.  “He told me if I want something better, I should probably move.”

“What burns me up is these state legislators on the other end of the state are spending their time and energy defending the companies in the broadband shortage business.  If they spent half as much time working for better broadband in western North Carolina, we would not be in this position today,” Morgan writes.  “I mean we’re at the point where people take Internet access for granted in this society and they treat places like Spruce Pine as an escape from that technology ‘to get away from it all,’ all while we live in that world perpetually.”

Morgan is hardly alone living a life without broadband.  In communities from Mars Hill to Marshall, large sections of the state simply go without.  Avila’s bill does nothing to help — it actually hurts.

The Public-Private Partnership: A Solution for North Carolina’s Unserved?

In some areas of the state, public-private partnerships (PPP’s) — also rejected in Avila’s bill — are making a difference getting broadband into rural North Carolina, reports Craig Settles, a broadband activist.

“Last year, North Carolina broadband advocates began formulating policy recommendations to make PPPs something of a standard in business models for communities that want better broadband,” Settles writes in a piece for Government Technology. “When legislation was introduced earlier this year that would effectively end further development of municipal networks in the state, this seemed like the right time to promote PPPs. Unfortunately the legislators pushing the bill effectively shut out these muni-network proponents from offering a compromise in separate negotiations.”

PPPs over some creative solutions to rural broadband challenges — especially in addressing return-on-investment concerns that keep private providers from building out networks to reach rural populations.  A community or non-profit collaborative finances and builds the infrastructure to supply the service with a much longer payback period.  While many commercial companies want a return within five years, co-ops have been comfortable paying off infrastructure projects over 10, 20, or even 25 years.  Then, the private company can hop on board the constructed network at a wholesale price that helps pay off construction costs, and allows the provider to market its services and run its own business.  The only requirement, and the one some private companies hate, is that the network is operated in the public interest and good, meaning -any- competitor can compete over the same facilities.

A successful public-private partnership in western New York could be a model to help rural North Carolina get broadband.

In the Finger Lakes Region of western New York, a hallmark PPP project has brought Ontario County a fiber network that can deliver faster broadband than anything available in nearby Rochester.  And it has the support of TW Telecom, Verizon, Frontier Communications and other companies who can use it as part of their business plans.

“This is a winning scenario,” said Ed Hemminger, CIO of Ontario County, N.Y., and CEO of Axcess Ontario, the county’s 180-mile fiber network project. “It’s the only way some communities may be able to get fiber broadband. They can finance the buildout with bond financing with a 25-year payback term. If a muni is going to partner in this manner, be extremely cautious and ensure that it’s a true open access model that not only benefits providers in the area, but also allows others to come in and compete.”

“The beauty of this scenario is that it enables private-sector companies to overcome one of their biggest hurdles to deploying networks in rural and low-income areas: the cost of laying fiber or building wireless infrastructure,” Settles writes. “Municipalities, if they’re able to swing the financing, can take up to 25 years to pay off the debt. Providers, on the other hand, have to make their money back in three to five years.”

Rebuilding America’s Economy: Investing in Infrastructure

Providing suitable broadband infrastructure is increasingly important in small cities that are afterthoughts for many cable and telephone company providers.  For Wilson, N.C.,  creating the infrastructure of a 21st century broadband network is part of an investment to attract future jobs for a city reinventing itself.

“The city council realized that it would be a very competitive world to attract and retain the best jobs in the future,” Grant Goings, Wilson city manager told The Sun News. “Well, you can’t talk about jobs without talking about the infrastructure that brings them and keeps them. Short and simple advanced broadband is critical infrastructure.”

The Sun News reports on the state’s broadband controversies from the epicenter — Wilson is the first city in the state to deliver a fiber optic-based broadband network that beats all the others on speed.

This year, Wilson signed on its first 100 megabits per second residential customers and is the first to have residents using the highest speeds available in North Carolina, said Brian Bowman, Wilson public affairs manager.

For Wilson and other communities building out better broadband networks, using fiber optics was a natural decision because of its capacity and future ease of upgrades. The cable industry has long argued broadband is a constantly-changing business and cities have a poor track record of keeping up, but Wilson’s GreenLight service has turned the tables on that argument, leaving Time Warner Cable — the state’s largest operator — well behind the municipal provider cable interests predicted would be a failure.

Wally Bowen, founder and executive director of the nonprofit Mountain Area Information Network (MAIN), which provides broadband services in and around Asheville, says this year’s anti-broadband bill, like the others, leaves cities vulnerable to political posturing and special interest legislation. He’s tried to outmaneuver legislators who work for the interests of Time Warner and CenturyLink by building non-profit or co-op ownership into the infrastructure, if only to protect networks from being forced to play defense year after year as private companies try to pick them off in the state legislature.

“Government-owned infrastructure creates political vulnerabilities given how incumbents are behaving,” Bowen said. “Our nonprofits are comprised of representatives from private-sector companies, private colleges, hospitals and so forth, in addition to local government. So there are limited legal grounds for attacking the nonprofit via laws passed in the legislature.” Some incumbent Internet service providers still will try these tactics anyway, but the makeup of these nonprofits can give them a stronger position from which to defend themselves.”

For many voters in the state, watching certain legislators toil on behalf of billion-dollar phone and cable companies while ignoring North Carolina’s broadband problems should bring consequences.

“My friends and I continue to watch these events with interest and will vote against those legislators who obviously would feel more comfortable working inside Time Warner Cable’s headquarters, because they are effectively on their payroll already,” Morgan says.

Good news to report for North Carolina consumers.  With a coordinated pro-consumer pushback, we’re achieving some victories in the battle to stop big cable and phone companies from pushing community broadband networks out of the state.  Since Rep. Marilyn Avila (R-Time Warner Cable) was not amenable to withdrawing the bill cable lobbyists authored, your appeals to members of the Finance Committee made a major difference: winning exemptions for the state’s existing community networks and redefining an under-served area to any community where 50 percent of households cannot obtain high-speed broadband service.

North Carolina’s local media is becoming increasingly aware of H.129 for the first time, and so are many consumers — outraged over reports state government is spending its valuable time working on the cable industry’s wishlist.

Today was a very important victory and we are glad to have done our part to win it, but this battle is by no means over.  We fully expect Time Warner trickery — their lobbyists will be back next week to try and undo what we have accomplished together.

We’ve been here before.  A de-fanged bill is okay, but a bill voted down altogether is better.

Please thank Chairman Mitchell S. Setzer for his call for a recorded vote, which helped us track who represents consumers and who fights for the cable company’s agenda.

We’d also like to thank Rep. K. Alexander, Rep. Faison, Rep. Luebke, Rep. Ross, Rep. H. Warren, and Rep. Womble for their strong support for better broadband in North Carolina.  There will be more to thank along the way, but this is a good start.

We are continuing the consumer fight to see H.129 shot down as the travesty it represents.  This proposed legislation does not deliver a single new broadband connection, improve ones that already exist, or deliver lower prices to anyone.

Citizens in Raleigh are making their feelings known on WRAL-TV’s website:

“NC should be encouraging and assisting rural cities and towns looking at doing this, not putting up obstacles. But I’m sure the Time Warner, Comcast and AT&T lobbyists have deep pockets full of excellent graft.”

“This all comes down to the city of Wilson. They offered every telecom and cable provider to provide 100Mbps internet access to 100% of the people in the city if they want it at a rate of $50/month (I think that was the amount). Every single private company laughed and said it was not profitable and they would take the contract. So, the City of Wilson took it upon themselves to provide the product the city wanted. Now, all of the companies are whining? Provide what the City of Wilson did at the price they did and there would be no problem. Don’t blame this on taxes. The simple issue is that TWC, Charter, and you name it want to make 100-200% profit and offer substandard high speed internet. “

“Come on NC. Reject the Bill and approve an order to allow cities to provide this technology if the monopolistic companies will not. Get them out of our state.”

“Frankly, if it were to mean that I could dump Time Warner Cable and their cra**y service and their “Oh we’re raising our rates again due to the Sun coming up 5 minutes late” attitude, I would be elated!”

“When will it ever be enough for the cable and phone companies? Their lines and equipment have been in place for YEARS and what do we get….rate increases every year, outages, lines cut, spotty internet service. It’s high time they have some competition. If they can afford to give new customers discounts for 12 months, why not keep the prices at that level with only moderate increase over time and then KEEP MORE customers in the fold? Just a thought!”

“The internet service offered by Wilson ROCKS. Twice the speed at half the price of TWC. No wonder they’re trying to block this from happening.”

The people are speaking, and they do not want state legislators moonlighting for the interests of cable and phone companies.  Remind your legislators you want more choice, not less.  Tell them to oppose H.129 and ask Rep. Avila to withdraw her bill.

Rep. Marilyn Avila (R-Time Warner Cable) at today’s House Finance Committee Meeting (1 Hour, 13 minutes)

South Africans won uncapped broadband service one year ago tomorrow when an upstart provider — MWeb — unveiled its “Free the Web” campaign, delivering usage-limit free Internet access to customers across South Africa.

The company’s move to unlimited, flat rate service was heavily criticized by competing providers, who enforce draconian usage limits and have tried to convince customers the global trend was moving towards metered broadband.  But MWeb president Rudi Jansen dismisses the notion limiting broadband is the way to go, suggesting usage caps and meters are more about profits than serving customers.

Today, MWeb’s uncapped broadband is a runaway success, with more than 50 percent of its customers switching to the meter-free service.  It has been profitable, too.

“We are running ahead of our business plan and all our products are profitable,” Jansen tells TechCentral.

Now the nation’s semi-privatized, 39% state-owned phone company Telkom is widely expected to stop the erosion of its own broadband customers by adopting flat rate broadband service itself.

For Jansen, that would represent a welcome move.  The Internet visionary wants to transform South African broadband away from its current expensive pricing model and throw the Internet wide open.

“I’m looking forward to it,” Jansen says. “The sooner they launch it the better.”

The arrival of flat rate broadband made headlines across the country in 2010. (click to enlarge)

South African broadband has coped with challenges few other countries endure.  International connectivity has always been one of the biggest — sustaining traffic on satellite backbone links or underpowered undersea cables first forced providers to limit Internet use because of capacity concerns.  But new fiber-based underseas cables from Seacom and Wacs, including the forthcoming 5.1Tbps West African Cable System project will dramatically increase capacity and slash costs.

Jansen (Courtesy: TechCentral)

Yet several of his competitors want to keep the caps on and prices high, earning lucrative profits on a service Jansen says is becoming less costly to deliver every day.

Jansen admits MWeb is currently forced to traffic shape certain activities on his network, particularly bandwidth-intensive peer to peer traffic, because other providers in the country don’t agree with his wide-open view of the Internet.

He wants every provider in South Africa to agree to “open peering,” a practice that allows providers to exchange traffic with each other without charging transit fees.  He also wants to see wholesale mobile wireless pricing come down.  In Africa, mobile broadband has a strong place in a market where cable infrastructure (and broadband speed) is often lacking.

Telkom, South Africa’s equivalent to AT&T or Bell, is cited by Jansen as the biggest impediment to his plan to deliver truly unfettered, unlimited access.

Some South Africans deride the state phone company as "Hellkom"

In South Africa, broadband customers pay two providers — Telkom for the monthly rental of the telephone line and an ISP for the DSL service that connects through it.  Jansen says Telkom’s broadband line rental prices are too high.  But more importantly, the interconnection fee Telkom charges providers to access its network is “absolutely ludicrous.”

“Those prices are far more than the price of international connectivity,” Jansen says. “Telkom charges us to get access to their last mile and then charges end users to get access to the same last mile, so they make double money on it. And it’s completely mispriced.”

Despite the challenges from other providers, MWeb will celebrate the first anniversary of uncapped broadband tomorrow with a surprise announcement, probably targeting small business clients.

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.

Phillip Dampier: The Blizzard of BS from Canadian ISPs is getting salted and plowed by Canadian media and outraged citizens.

A major ongoing Internet Overcharging campaign by Canadian Internet Service Providers to extract more revenue from consumers has sailed under the radar for more than two years now in most of the Canadian press.  Although some newspapers have occasionally covered various telecommunications atrocities related to cell phone pricing, lagging broadband speeds, and an overall lack of competition in the country, specifics about efforts to curtail broadband usage (or monetize its claimed “overuse”) has been a topic mostly discussed on online forums.

No more.

As Stop the Cap! turns more attention to Canadian Internet Overcharging schemes, let this be an object lesson to our American readers about how the game is being played.  What starts in Canada could finish American flat rate broadband as well.

CRTC Ruling Lights the Flame

This week, the Canadian Radio-television and Telecommunications Commission (CRTC) finalized rules that will effectively end unlimited broadband service in the country.  Remarkably, the Commission’s ruling completely ignores the one group such “usage-based billing (UBB)” impacts the most: individual customers.

The game-changing rules, found in the obliquely-named “Telecom Decision CRTC 2011-44,” effectively establish false usage-based pricing on both the wholesale and retail levels.  No provider will actually sell broadband packages that charge only for what a consumer actually uses.  Instead, each provider will set arbitrary usage allowances — usage limits — on their broadband accounts.  Any remaining unused allowance is forfeit at the end of the month, but “overuse,” at the discretion of the provider, will be penalized with overlimit penalty fees running several dollars per gigabyte.

The CRTC acknowledges, and big providers admit, these Internet Overcharging schemes are all about getting consumers to change their online activities.

[Providers] submitted that UBB rates shape end-user behaviour and that different UBB rates would lead to different behaviours by carriers’ and competitors’ end-customers.

Perish the thought.  Without such pricing, Canadian broadband could ultimately offer an alternative to overpriced cable-TV and telephone packages sold by the very providers that advocate limited use plans.  Providers insist on predictable, uniform usage.  The Commission apparently agrees.

The Commission even acknowledges today’s unlimited use plans in Canada almost always recover the actual costs incurred to provide them, and then some:

The Commission also notes that the flat-rate component of the carriers’ retail Internet service rates recovers most, if not all, of the associated retail UBB costs. In the Commission’s view, this situation provides carriers with the flexibility to adjust or waive retail UBB rates on a promotional basis.

With this in mind, why the CRTC felt radical changes were warranted is only a mystery until you realize most of the commissioners were former employees of the various telecommunications companies themselves.

Birds of a feather….

The only audience the CRTC listens to.

All of the falderal about the merits of UBB aside, in the end the CRTC threw a small bone to independent service providers not affiliated with super-sized players like Bell, Rogers, Shaw, and Videotron — the Commission ordered they be given a “whopping” 15 percent price break off wholesale rates.

Major carriers were outraged even by this token amount, arguing that providers forced to charge correspondingly higher prices (higher than major carriers charge) could still eke out a place in the market by offering other services or better support.  They didn’t need, or deserve a discount.

But independent competitors warned without discounts approaching 50 percent, many will be gone within five years.  Many providers argued the major companies, some who received taxpayer subsidies to construct national telecommunications networks, would be able to set wholesale prices artificially high to drive them out of business.

Canada’s Media Reacts

The effective end of flat rate service across Canada finally sparked significant national media coverage of the imminent death of Canada’s broadband revolution, soon to be relegated to a nickle-and-dime metered pricing scheme that will give providers the monetary power to control usage, limit innovation, and have their hands into picking marketplace winners and losers.  Don’t like Netflix?  Slash usage allowances.  Want to protect your cable-TV revenue?  Exempt your own online content from the meter as long as you keep your subscription.  Want to drive down Canada’s broadband standing in the world?  Turn the marketplace over to a handful of companies dreaming of revenue opportunities afforded by monetizing broadband usage.

The Globe and Mail — A metered Internet is a regulatory failure: The CRTC has decided to allow Bell and other big telecom companies to change the way Canadians are billed for Internet access. Metering, or usage-based billing (UBB), will mean that service providers can charge per byte in addition to their basic access charges. The move is sure to stifle digital creativity in Canada while the rest of the world looks on and snickers.  […] So there you have it. Just as the world is ready to feast on what Canadians might cook up in the way of multimedia 3.0, Canada decides to meter the Internet, tilting the table sharply towards old-school TV networks and big corporations that can absorb the higher cost of doing business.

Canadian newspapers have covered the story in the greatest detail, but now — finally — Canada’s television news has discovered the story, which for many media critics mean the story is actually “real.”

“If you don’t see it on television, it didn’t really happen,” writes Jim from Halifax, Nova Scotia.  “A lot of Canadians don’t read newspapers, and the magazines certainly are not covering this story, so it has been an online-only event  until CBC, CTV, and Global put it on their newscasts.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CBC News Extra Billing for Internet 1-18-11.flv[/flv]

CBC Television reports on the Internet Overcharging controversy.  (2 minutes)

Some critics say much of Canada’s commercial media is already in the hands of a tightly controlled, vertically integrated empire.  Most of the cable and phone companies have ownership in many major commercial broadcasters, cable networks, and even newspapers and magazines.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Vertical Integration.mp4[/flv]

30 Rock’s Liz Lemon and Jack Donaghy explore the concept of “vertical integration.”  Then see how it relates to Canada’s media.  (3 minutes)

But even a controlled media environment cannot stop outrage over UBB going viral, as ordinary Canadians realize they are about to pay much higher prices for a service they depend on more and more.

Outrage Commences

Charlie Angus (NDP) -- "This pricing is a ripoff."

While these pricing schemes have been around awhile, now that they are getting well-publicized exposure, consumers have realized the implications of counting how many YouTube videos they watch.

Tens of thousands have signed Openmedia.ca’s online petition, others are complaining to the media and writing their members of Parliament, demanding action.

That will only get louder when consumers start receiving bills for double, triple, or even higher for the exact same quality of service they used to pay less to receive.

“There will be a huge wake-up call for many customers,” said Jared Miller, president of Youmano, a provider based in the Town of Mount Royal.

Charlie Angus, the NDP member of Parliament who speaks about digital issues, said he he thinks the entire pricing scheme is a ripoff that will lead to huge increases in customers’ bills.

“What we need to have is clear and transparent rules so it’s being used in a measured capacity, and it’s not just instituting the principle that every time you turn on the Internet, they can ding you for fees like they do with cell-phones,” Angus said. “We’ve seen this before; when we were told that deregulating cable rates would give customers a big benefit. We were paying 60-to 100-per-cent more in no time.”

“Canada is already falling behind other countries in terms of choice, accessibility and pricing for the Internet,” Angus added.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/CTV British Columbia – Canadians rank among most enthusiastic web users 12-28-10.flv[/flv]

CTV British Columbia explores Canada’s love affair with technology and how its integration has dramatically changed the social lives of many families.  That’s no surprise, considering Canadians are North America’s most enthusiastic net users.  (2 minutes)