While AT&T endures zoning-related delays to build out its fiber-to-the-neighborhood service U-verse, a scrappy anti-cap, pro-speed Internet provider in Santa Rosa has announced its intention to deliver gigabit speeds to San Franciscans over a fiber-to-the-home network that will begin construction early next year.

Sonic.net has been providing broadband services for years in northern California, using AT&T’s network of phone lines to deliver unlimited 20Mbps DSL service (including a phone line) for $40 a month.

Sunset District, San Francisco, Calif. (Courtesy: Stilfehler)

Now the company is branching beyond traditional DSL into fiber optics.  Sonic.net has already completed the first phase of its gigabit fiber network in Sebastopol, where it advertises 100Mbps service for $40 a month and 1000Mbps for $70 a month, both including phone service at no extra charge (two lines for the 1Gbps plan).

In San Francisco, Sonic plans to start with 2000 homes in the Sunset District, expanding its network to fully cover the city within five years.

Such a network could deliver serious competition to Comcast and AT&T, the currently-dominant providers.  AT&T’s U-verse buildout has been stalled over the need to install 768 large, unsightly metal cabinets on San Francisco street corners.  The company, as late as this summer, remains mired in zoning disputes and public protests.  Sonic’s fiber network will require similar equipment, and the San Francisco Chronicle reports Sonic filed its own application with the city Department of Public Works to install 188 cabinets, measuring 5 feet tall, starting next year.

Sonic may have a better chance if only because it does not have AT&T’s less-than-stellar reputation among some residents and customers who have been upset with the company’s wireless performance, and ongoing battles over cell tower placement.  Sonic.net CEO Dane Jasper tells the Chronicle:

“There is a huge demand in San Francisco for higher bandwidth services, and fiber is the only long-term way to meet this demand,” he said.

Given the fact that the company’s all-fiber network will bring “the fastest and cheapest” broadband service to the city, Jasper says he thinks the chances of overcoming the obstacles experienced by his larger rival are “pretty good.”

Sonic.net has gained a reputation for excellent customer service and vociferously opposes usage caps and other Internet Overcharging schemes.  The company has attracted the support of Google, which is using Sonic to manage its gigabit fiber network on the campus grounds of Stanford University in Palo Alto.

AT&T has previously dismissed fiber to the home service as too costly to provide, and has adopted in its place a fiber-to-the-neighborhood system that relies on traditional home phone wiring for the last part of its network.

Regular Stop the Cap! reader Alex dropped us a note sharing the bad news: Bell Canada is hiking rates for virtually everything effective Jan. 1.  Except Bell doesn’t call them rate increases.  To the phone giant, they are “price updates.”  They are also considerable, with sweeping rate increases for phone, Internet, and television.  They are even hiking rates for individual phone calling features like three-way calling.

Bell reserves rate increases for its long-standing customers. Potential new customers served by Bell in eastern Canada, where the company is rolling out its fiber-to-the-neighborhood service Fibe (similar to AT&T U-verse), report offers as low as $19.95 a month for selected services during the first year.  But prices increase dramatically when the promotion expires.  By how much is detailed below:

Prices listed are for customers in Ontario.

But Bell saves the worst for a footnote at the bottom of their Internet “price update.”  They are tinkering with the company’s notorious Internet Overcharging scheme, raising the bar on their overlimit penalty.  Customers who used to exceed their monthly broadband allowance originally faced a maximum penalty of $30.  But Bell has been revisiting that “maximum overlimit fee” regularly.  In 2010 the company raised the penalty cap to $60.  On Jan. 1, Bell is raising the maximum by an additional $20 — to $80 a month.  In our view, it is only a matter of time before the ceiling on overlimit fees is eliminated altogether, setting customers up for sky high bills.

Bell Fibe 25 customers with 25Mbps service will now pay $78.95 a month for Internet alone, and that plan comes with only 125GB of usage per month.  Want to use more?  You will have to buy Bell’s Usage Insurance in advance:

• $5/month for an extra 40GB
• $10/month for an extra 80GB
• $15/month for an extra 120GB

But that may not help you avoid at least one month of overlimit fees.  Bell pro-rates customers adding Usage Insurance to their accounts, which means the first month’s extra allowance is limited by the number of days before your next billing cycle.

Bell’s prices for new customers are much lower, with Fibe 25 priced as low as $34.48 a month during the first year.  The real bite arrives when the promotion expires, when the price more than doubles.

Internet Overcharging schemes bring even more profits to a cable industry that already enjoys a 95% gross margin on broadband service.

At least one major national cable company plans to implement a usage-based billing system in the coming year, predicts Sanford Bernstein analyst Craig Moffett.  Bloomberg News quotes Moffett in a piece that thinly references Time Warner Cable as that operator, whose CEO strongly believes in further monetizing broadband usage.

Moffett is among the chief cheerleaders hoping to see operators charge customers additional fees for their use of the Internet.

“In the end, it will be the best thing that ever happened to the cable industry,” Moffett said.

For customers, DISH Satellite chairman Charlie Ergen predicts it will lead to at least a $20 monthly surcharge for broadband users who watch online video, which could bring already sky-high broadband pricing to an unprecedented $70-80 a month, the same amount most cable operators now charge for standard digital cable-TV service.

The cable industry’s interest in being in the cable television business has waned recently as subscribers increasingly turn away from expensive cable packages.  Now companies that used to consider broadband a mildly-profitable add-0n increasingly see Internet access as the new mainstay (and profit center) of their business.

Time Warner Cable, for example, wasn’t even sure its entry in the broadband business in the late 90s would ever amount to much.  Fast forward a dozen years, and it is an entirely different story:

“We’re basically a broadband provider,” Peter Stern, chief strategy officer for New York-based Time Warner Cable, said Nov. 17 at the Future of Television conference in New York. “As a convenience for our customers, we package and distribute television and provide service around that.”

Bloomberg reports the cable industry profit margin on broadband is nearly 95 percent, a testament to the lack of competitive pressure on Internet pricing.  The industry is going where the money is to make up for increasing challenges to their video business, which currently “only” brings them a 60 percent profit margin.

Suddenlink, already enjoying a 12 percent increase in broadband revenue in the last quarter alone, is implementing its own Internet Overcharging scheme, charging $10 for every 50GB a customer exceeds their arbitrary usage allowance.  That, despite the fact CEO Jerry Kent admits Suddenlink’s broadband margins are double those earned from the cable company’s video business.

Complicit in the parade to Internet Overcharging is Federal Communications Commission chairman Julius Genachowski, who publicly supported usage-based pricing in public statements made last December.  Cable operators were fearful Genachowski might lump the pricing scheme in with the Net Neutrality debate.  Providers have since used Genachowski’s loophole in an end run around Net Neutrality.  If providers cannot keep high volume video traffic from competitors like Netflix off their networks, they can simply make using those services untenable on the consumer side by increasing broadband pricing, already far more expensive than in other parts of the world.

That is a lesson already learned in Canada, where phone and cable companies routinely limit usage and slap overlimit fees on consumers who cross the usage allowance line.  Canada’s broadband ranking has been deteriorating ever since.

Moffett - The chief cheerleader for Internet Overcharging

Bloomberg says such a pricing regime would discourage investment in online video products that currently are held responsible for some cable cord-cutting:

“It’s the reason why Apple or Google would inevitably be reticent about committing a significant amount of capital to an online video model,” Moffett told Bloomberg. “You can’t simply assume just because you can buy the content more cheaply, you can offer a product that’s cheaper to the end user.”

The only way around this might be video providers like Google getting into the broadband business themselves, something Google is experimenting with in Kansas City.  Google’s “Think Big With a Gig” project is partly designed to prove gigabit broadband delivered over a fiber network is practical and doesn’t have to be unaffordable for consumers.  It will also finally bring competitive pressure on a comfortable broadband duopoly, at least for residents in one city.

So far, video providers who depend on an Internet distribution model are not putting much money in the fight against usage-billing.  Instead, companies like Netflix are releasing occasional press releases that decry the practice.

“[Usage billing] is not in the consumer’s best interest as consumers deserve unfettered access to a robust Internet at reasonable rates,” Steve Swasey, a Netflix spokesman, said previously.

It is clear consumers despise usage pricing.  In every survey conducted, a majority of respondents oppose limits on their broadband usage, especially at today’s prices.  But that may not be enough to get companies like Time Warner Cable to back off.  The company has reportedly been quietly testing usage meters since last summer.  CEO Glenn Britt, with a considerable drumbeat of support from Wall Street analysts like Mr. Bernstein, has never shelved the concept of usage pricing, seeing it more lucrative than hard usage caps.  The company retreated from a 2009 plan to charge up to $150 a month for flat rate access after consumers rebelled over planned trials in Texas, North Carolina, and New York.

But without a solid message of opposition from consumers, and an about-face from an FCC chairman that should know better, they’ll be back looking for more money soon enough.

[Thanks to regular Stop the Cap! reader Ron for sharing the news.]

Stop the Cap! reader Davey in Arizona was displeased to receive notification his Internet Service Provider, CommSpeed, suddenly announced an Internet Overcharging scheme that limits customers to two levels of service: a basic $40 plan with a ridiculously stingy 10GB monthly usage allowance, or a more generous (and double the price) $60 plan that comes with a 200GB usage cap.

Davey is particularly upset the company plans to punish customers who exceed the allowance with a stinging $2/GB overlimit fee.  It will not be difficult for customers to blow past  CommSpeed’s standard 10GB plan limit if they discover file backup, online video, or downloading.  If they do, CommSpeed’s overlimit fee will be coming soon to a bill in their mailbox. For those who use the Internet to watch television and movies, the only real options are to watch less or upgrade to a more expensive plan with a more realistic usage allowance that can accommodate high bandwidth applications.

CommSpeed claims their “advanced 4G network combines the best features of cellular, cable modem & DSL, and Wi-Fi networks, without the inherent limitations associated with these legacy systems.”  The company brands itself as “Tomorrow’s Internet Today.”

What they don’t mention is today’s wireless ISP’s are increasingly challenged by the growing usage demands consumers place on providers.  CommSpeed’s claim that their network “was designed and built, from inception, to deliver a full range of broadband content and applications” flies in the face of their 10GB usage limit. Fiber, cable broadband and even telephone company DSL has a better track record handling increasing usage demands, as long as providers maintain investments in their respective networks.

CommSpeed’s usage cap tells the real story — their network may not be able to handle the growing traffic from customers in their northern Arizona service area.

“The Internet has seen tremendous growth in total usage over the last year. New applications are being developed everyday and these applications are causing an ever increasing demand for bandwidth. Quite simply, the content of the Internet has evolved,” CommSpeed explains on a page dedicated to explaining their new caps.

Unfortunately for wireless, until more spectrum and better technology is available, usage limitations are an increasing reality for customers stuck using these networks. It’s why Stop the Cap! rarely recommends wireless broadband as a primary Internet service except as a last resort, when other choices simply are not available.

Still, we’ve seen much worse from other Wireless ISPs.  CommSpeed’s 200GB limit on their $60 tier is more generous than average.  Plus, the company takes the limits off during the overnight hours of midnight to 6AM.

We also think the company’s usage guestimates are a more honest approximation of real-world usage, not the ridiculous “send 10,000,000 e-mails and download 500,000 songs” reassurances we usually see from Internet Overcharging ISPs:

CommSpeed’s old plans ranged in price from $34.95 for basic 768kbps-1.5Mbps service to $54.90 for 1.5-6Mbps service, depending on the technology in use in the area. The new plans bring a $5 rate hike and usage caps — just two reasons why customers like Davey are so upset. They’ll be even more upset if their bill also include overlimit fees. Stay tuned.

[flv width=”608″ height=”380″]http://www.phillipdampier.com/video/CommSpeed 4G – Tomorrow’s Internet Today.flv[/flv]

CommSpeed heavily promotes its newer 4G wireless broadband service, claiming its great for online video, downloading, gaming, and more, as long as you don’t use it too much.  In 2012, CommSpeed throws up limits on their wireless experience.  (3 minutes)

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

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

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

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

Comcast's Wireless Gateway: A Future Money Machine?

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

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

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

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

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

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

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