Netflix continues to get a lesson on broadband economics from the Internet Service Providers out to scare their customers away from spending too much time watching the company’s online streaming service.  As some Canadian ISPs lowered usage caps in response to Netflix’s imminent arrival, the video streaming service just announced it was letting customers turn down the bit rate of online videos to conserve their monthly usage allowance.

Neil Hunt, Netflix Chief Product Officer, told customers about the bit rate reduction in a company blog post:

Starting today, watching movies and TV shows streaming from Netflix will use 2/3 less data on average, with minimal impact to video quality.

Now Canadians can watch 30 hours of streaming from Netflix in a month that will consume only 9 GBytes of data, well below most data caps.

We made these changes because many Canadian Internet service providers unfortunately enforce monthly caps on the total amount of data consumed.

In the past, viewing 30 hours of Netflix could consume as much as 70 GBytes, if it was all in HD, and typically about 30 GBytes. While there is some lessening of picture quality with these new settings, the experience continues to be great.

Video compression reduces data consumption, but also sacrifices video quality and enjoyment. An example of high video compression on the left can be more than noticeable.

Unfortunately for Hunt, providers can continue to lower data caps to the point where Netflix would have to present their video library as a slideshow to keep customers under their limits.

Stop the Cap! responded directly to Hunt imploring Netflix to get involved in the battle that consumers have thus far fought alone:

While some customers appreciate Netflix for turning down the video bitrates, I am here to tell you it’s not nearly enough.

For nearly three years, our consumer group — Stop the Cap! has fought Internet Overcharging schemes in both Canada and the United States.

Whether it’s Bell’s proposal to eliminate flat rate broadband across all of Canada, Time Warner’s 2009 pricing experiment to limit broadband users to just 40GB of usage per month, or AT&T’s 150-250GB cap taking effect this spring, your competitors are on a mission to scare customers away from using your online video streaming service.

[…] The fact is, Netflix MUST engage in this fight. Consumers cannot do it alone, especially when up against billion dollar companies spending millions on lobbyists trying to convince lawmakers usage caps are about “fairness” when they are really about monetizing broadband traffic and scaring off cord-cutting.

Amazon.com today unveiled a new personal online file storage service allowing customers to access and stream up to 5GB of their music collection to their Android phones, tablets, or personal computers for free.

The new suite of services includes Amazon Cloud Drive, an online file storage locker which holds the files, Amazon Cloud Player for Web, a web-based player that accesses MP3 files stored on a customer’s cloud drive, and Amazon Cloud Player for Android, which delivers streams over a wireless broadband connection to an Android-based wireless device.

“We’re excited to take this leap forward in the digital experience,” said Bill Carr, vice president of Movies and Music at Amazon. “The launch of Cloud Drive, Cloud Player for Web and Cloud Player for Android eliminates the need for constant software updates as well as the use of thumb drives and cables to move and manage music.”

“Our customers have told us they don’t want to download music to their work computers or phones because they find it hard to move music around to different devices,” Carr said. “Now, whether at work, home, or on the go, customers can buy music from Amazon MP3, store it in the cloud and play it anywhere.”

Apple's MobileMe service will likely need to dramatically cut prices to compete with Amazon's new cloud storage service.

Those with established Amazon accounts will find their Cloud Drive already activated and ready to store up to 5GB of files.  Customers who buy a digital MP3 album from Amazon will automatically get a free upgrade to 20GB of storage space for the first year.

Those looking for more than 20GB of online storage can purchase it for $1/GB per year, up to 1TB per account.

Although the service was intended mostly as an MP3 storage locker, any file can be saved to a customer’s Cloud Drive, which uses Amazon’s Simple Storage Service (Amazon S3).  This means the Cloud Drive could be used to store videos, documents, or even system backups.

“Free” is a good deal for consumers.  Competitor Dropbox only gives out 2GB and Apple’s MobileMe charges a comparatively overpriced $99 a year for 20GB of combined email and file storage and 200GB of monthly data transfer.  Amazon does not limit data transfers.

Online cloud storage moves files off of individual hard drives and makes them available online for immediate access, anywhere.  But Internet Overcharging schemes mean consumers will face the potential of dramatically higher broadband bills if they use these services, which are extremely data intensive.  Using Amazon’s MP3 storage and streaming service is unlikely to put a customer past their usage limit on home broadband accounts, but using the service for regular file backups could.  Usage-capped broadband and so-called “usage-based billing” threatens the viability of business plans that require consumers to use their broadband accounts to send and receive substantial amounts of data.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Amazon Cloud Player.mp4[/flv]

Amazon.com introduces its new Cloud Drive and Cloud Player.  (2 minutes)

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

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

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

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

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

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

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

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

Klinker

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

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

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

Are broadband rationing coupons far behind?

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

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

Cope

In another example of providers telling the public (and lawmakers) one thing, while saying something very different to their own shareholders, Bell Canada’s CEO made a remarkable admission about why the company imposes Internet Overcharging schemes on its customers:

“As we see a growth in video usage on the Internet, making sure we’re monetizing that for our shareholders through the bandwidth usage charges,” CEO George Cope told listeners in a financial conference call last autumn.

That is a far cry from the story Mirko Bibic, Bell’s government affairs representative tells to anyone who will listen. Michael Geist, a Canadian syndicated columnist on technology law issues notes Bibic has told a different tale while appearing before Parliament’s Standing Committee on Industry to answer questions on usage based billing held in February.

For Bibic, usage-based billing is about “fairness” and solving alleged congestion issues.

“As for small businesses, which are generally on the same network as residential users, what you have is really a case where the congestion during peak periods is largely a residential phenomenon. It’s in that area that we’ve addressed the usage-based billing issue, and all we’re asking the CRTC for is to follow a fundamental principle of fairness,” Bibic told MPs. “If we asked 97% or 98% of Canadians if they would be prepared to pay more so that the 2% of heaviest users pay less, I’m pretty sure of what the answer would be.”

Bibic

Bibic’s argument has been repeatedly undercut by his own bosses, Geist notes.

In August, Cope told shareholders “our data revenue growth was 3.8% for our Residential Services business, particularly driven through an increase in Internet ARPU of 3.3%. And interesting, almost all that increase now coming from usage based billing as the demand for Internet use explodes through the use of video services, and we’re continuing to see an increase in the revenue per customer.”

By November, Cope was turning Bibic’s bandwidth “fairness and congestion” lemons into lemonade, celebrating data revenue growth of 5 percent, “driven principally by the bandwidth usage revenue being up 83% year-over-year.”

Cope not only decapitates his company’s arguments for usage-based billing, he also shines the light on who they will impact: if providers are to be believed that usage caps will only affect a tiny percentage of customers, how can data revenue be up a whopping 83 percent year-over-year. Are a handful of Canada’s “heavy” broadband users responsible for this growth, or are an increasing number of Canadian consumers finding themselves over the “generous” limits Bell has established because they used their broadband connections to stream movies and television shows.

As Geist notes, “no one should be under the illusion that UBB is anything other than a revenue maximization strategy in a market with limited competition, not one premised on fairness or network congestion.”