Their bull got you right in your wallet.

The next time you hear a provider telling you usage-capped broadband is the way the rest of the world does business, understand one thing:

They are lying to you.

Stop the Cap! conducted extensive research on just what kind of broadband plans are sold around the world. We researched every member country of the Organization for Economic Cooperation and Development, and included several developing and non-aligned countries for good measure.

Our findings are conclusive: Unlimited broadband packages are the global norm. Some providers sell a mix of “light use” plans with usage allowances, but almost always side-by-side affordable, unlimited use options for those who want them. The only exceptions we found:

• Australia: The most common reason for usage caps comes from lack of capacity.  Countries in the South Pacific continue to experience international capacity shortages that are gradually easing with the introduction of new underseas fiber cables.  Several providers have promised to ease or eliminate caps as new capacity comes online.
• Canada: For reasons of marketplace concentration, lack of competition, and regulatory malpractice, Canadian broadband has lost its former status as a world-leader in broadband and has now become an also-ran, with almost universally usage-capped and throttled broadband from large cable and phone companies delivering expensive, comparatively slow service.
• Iceland: International capacity problems limit international broadband traffic with usage caps, but some providers offer unlimited service for domestic traffic.
• New Zealand: Just like Australia, New Zealand suffers from international capacity problems not seen in Europe, North America, or continental Asia.  Both Australia and New Zealand are using public finances to overcome broadband shortages and reduce or eliminate usage caps.

Some providers in the United States are following Canada’s lead attempting to monetize broadband traffic to maximize profits.  Some Canadian providers claim usage-based billing is necessary to finance the construction of broadband networks across the broad expanse of rural Canada.  Yet Russia, a far larger country with fewer financial resources, succeeds in delivering unlimited service where Canada fails.  Their arguments just don’t add up, and combined with the reality we present here proves providers are telling tall tales about the need for their Internet Overcharging schemes.

If Albania can deliver unlimited Internet access, why can’t your provider?

New Zealand’s Commerce Commission is planning to study Internet Overcharging schemes from Internet Service Providers as part of a review of the government’s planned investment of $1.35NZD billion to construct a state-subsidized fiber broadband network.

At issue is whether the government’s investment in broadband will not deliver value for money if broadband providers sell heavily usage-capped broadband services over the country’s new network.

The Commerce Commission serves as New Zealand’s antitrust regulator, charged with finding marketplace abuses and correcting them, especially in the absence of competition.  Included in the wide-ranging review:

• Network peering: Allowing broadband traffic to flow freely between Internet Service Providers without interference or punitive expense;
• Data caps: Whether ISPs will continue to limit broadband usage on a network paid for by public funds, pocketing the proceeds;
• Net Neutrality: Ensuring that content over the network is treated fairly and equally.

“Our aim is to promote competition in telecommunications markets for the long-term benefit of end-users of telecommunications services in New Zealand,” Telecommunications Commissioner Ross Patterson said in a statement. “The study will result in a report which will identify any factors which may inhibit the uptake of ultra-fast broadband services.”

Most of the investigation will likely target New Zealand’s dominant phone company – Telecom New Zealand.  The former state-owned monopoly has rebuilt part of its market dominance pitching broadband service across the country over its landline-based DSL network, by which most New Zealanders obtain broadband.  While the company competes with other providers who resell service over Telecom phone lines, many critics charge the phone company position as the owner of the infrastructure gives it a powerful position in the market.

The New Zealand government hopes to retire its aging copper-wire telephone network and replace it with a combination of fiber optics in cities and towns and fixed wireless service in rural areas.  A discussion paper is expected from the commission by June, with a final report due in December.

Phillip Dampier

I could spend all day refuting sloppy ‘accepted as true with no fact-checking’-reporting done by news organizations on the issue of Internet Overcharging.  Facts not in evidence:

• Assumptions that what is “fair” in wireless must be fair on wired networks;
• Everyone is doing it around the world so North America should do the same;
• People are not paying “their fair share” for the growing amount of usage.

It’s all a big bucket of wrong, and the only thing getting rolled over month after month are consumers.

Yesterday, it was GigaOM telling us “Comcast DSL” (?) had no usage caps at all.  (They do — 250GB per month, and they sell cable broadband, not landline DSL.)

Today, it’s ComputerWorld‘s Matt Hamblen, who blows it right in the first paragraph:

Data caps on nearly all wireless and wired networks in the U.S. seem likely to be in place soon, despite the latest unlimited data offers from Verizon Wireless and Sprint.

Impressive crystal ball gazing there.  Nearly all networks will be capped?  Even though Sprint is banking its near-future on selling unlimited use plans and the economics of wireless are considerably different than wired broadband, Hamblen boldly predicts near-universal usage caps, even as most providers have no formal caps at all.

Hamblen’s journey starts with a survey of capped broadband offerings on the wireless side.  Spectrum issues and the nature of wireless technology makes providing unlimited use plans more challenging, especially when users consider their mobile broadband service a home broadband replacement.  Some have even left peer-to-peer software running in the background 24 hours a day.  It was this, according to Clearwire, that did in that provider’s unlimited service, which is now heavily speed-throttled in many areas.

Stop the Cap! has argued repeatedly current generation wireless broadband will never be a suitable replacement for traditional wired broadband, unless your use is confined to web browsing, e-mail, and occasional multimedia.  The capacity isn’t there and the technology is susceptible to serious speed loss in congested areas.  That is not to say future wireless technology might not change this reality.  The political debate over re-purposing unused UHF television channel frequencies for wireless broadband is just getting underway in Washington.

But trying to draw arguments from the wireless world for usage caps across wired broadband networks is where the line ends.

Hamblen predicts because AT&T wants to gouge its wired broadband customers (many who are now cancelling service and heading back to the cable company, when possible), now everyone will be going to the Internet Overcharging party:

Data caps on both wired and wireless customers are widespread, even if they annoy some smartphone early adopters in the U.S. Ars Technica listed the policies of 11 different wired network data caps for several different countries.

Hamblen’s report isn’t simply false — it’s sloppy.  Wired broadband usage limits are not widespread in the United States, and despite Ars Technica‘s sampler, the trend globally is away from usage-capped wired broadband, not towards it.  Evidently Hamblen didn’t bother to read Matthew Lasar’s piece, which includes references to BT in the United Kingdom moving towards unlimited use service in the near future, Canadian consumers’ victories against usage-based billing preserving unlimited use plans from resellers, and Australia’s own ever-increasing usage allowances.

In fact, even Lasar missed the fact several Australian ISPs now sell unlimited use plans themselves — something unheard of just a few years ago.  As in Britain, some users who consume over 300GB in a month may find their speeds reduced at peak usage times, but only until capacity improvements allow the throttles to be removed.  Even South Africa, one of the most challenging places to deliver 21st century broadband, has providers delivering unlimited use service.

Hamblen then moves on to another inaccurate argument — consumers will simply reserve their high bandwidth downloads on smartphones for the office Wi-Fi network, that will also face usage caps.

Except virtually every usage cap that does pop up in the United States applies to residential accounts only.  Commercial accounts are exempt, as are the Wi-Fi networks powered by them, especially for cable broadband-based service that is increasingly popular with small and medium sized companies.

Although Wall Street wants usage caps and regularly says they are inevitable, that does not make them reality.  Consumers certainly do not want them and will cancel service with a provider if an uncapped alternative exists.  While certain providers, their backers on Wall Street, and some dollar-a-holler groups defending them all have a financial interest in pushing memes about Internet Overcharging, members of the media should not.

Lynch

Verizon’s ambitions to provide 285 million people with the option of ditching their cable or DSL broadband account for its new LTE/4G wireless network is a dream that will never come true with the company’s wireless Internet Overcharging schemes.  With a usage cap of 5-10GB per month and a premium price, only the most casual user is going to give up their landline cable or DSL service for Verizon’s wireless alternative.

Dick Lynch, executive vice president and chief technology officer at Verizon spoke highly of Verizon’s new next generation wireless network as a perfect platform to deliver broadband service to landline customers, including many of those the company sold off to Hawaiian Telcom, FairPoint Communications, or Frontier.

“[LTE] provides a real opportunity for the first time to give a fixed customer in a home, broadband service — wireless — but broadband service,” Lynch said. “In wireless, I see a great opportunity within the LTE plans we have to begin to service the customers who don’t have broadband today … They will be able to have mobile LTE and also to be able to have fixed broadband.”

Unfortunately, Verizon’s LTE network comes with usage limits and a premium price — $50 a month for 5GB or $80 a month for 10GB.  At those prices, rural America will have two bad choices — super slow 1-3Mbps DSL ($30-60) with allowances ranging from 100GB-unlimited or LTE’s 5-12Mbps (assuming the local cell tower is not overloaded with users) with a usage cap that guarantees online video will come at a per-view cost rivaling a matinee movie ticket.

Still, Verizon is likely to test market the service as a home broadband replacement, particularly in territories they no longer serve.  Verizon has done much the same thing pitching a home phone replacement product that works with their wireless network to residents of Rochester, N.Y., and the state of Connecticut, neither currently served with landlines from Verizon.

Despite the pricing and cap challenges, Deutsche Bank — one of the Wall Street players that follows Verizon — thinks the company’s DSL-replacement has merit, if:

1. If you are a regular traveler that needs a wireless broadband service anyway;
2. You use broadband exclusively for web browsing, e-mail, and very occasional multimedia access;
3. You are wealthy enough not to care about the overlimit penalty.

For everyone else, sticking with traditional DSL service will continue to be the most affordable option, assuming usage caps are kept at bay.  Where available, cable broadband service from companies that serve smaller communities, including Comcast Cable, Time Warner Cable, and Cablevision, among others, will probably continue to deliver the most bang for the buck in rural America.

Phillip Dampier

In response to one of our pieces today about AT&T, I replied to a reader’s question about why providers are not subject to oversight when it comes to their traffic meters.  The answer is, providers want all of the benefits their monopoly/duopoly status deliver, with none of the oversight and regulation that is supposed to come along with the deal.

When I am asked by reporters if our group would support the concept of usage-based billing if prices were lower, I know some education is in order before answering.

Frankly, what providers define as “usage-based billing” isn’t really usage-based at all.  It’s simply a double-tiered pricing scheme.  Consumers already pay for broadband service based on speed, which informally includes a usage limit of sorts — your maximum amount of consumption is governed by the speed of the connection you purchase.  Not satisfied with the enormous profits already earned selling broadband that way, some companies want to monetize Internet use by inserting usage limits or inserting a new tier of service based on usage allowances, which generally increase with higher-priced levels of service.

When broadband providers attempt to use the argument consumers already pay for usage of essential services like water, gas, and electricity, they are trying to conflate broadband traffic much the same way.  But apart from the fact broadband carries no generation costs and represents a limitless resource, the “fairness” argument falls apart when you consider the provider is effectively double-charging customers by implementing a use-based pricing scheme on top of a speed-based pricing model.

The equivalent would be charging you today’s prices for gas, electric, or water service, but then adding a surcharge or tax based on how fast or when you are using the service. Here’s the kicker: they are not lowering the price of their speed-based tiers, they are simply layering a use tax on top.  In short, it extra-bills customers for what they already paid for.

A true usage-based billing scheme would carry a monthly minimum charge for infrastructure costs (maintenance of the delivery system, meter measurements, etc.) and a traffic cost.  In a regulated utility environment, most providers are required to sell service at a price verified by regulators to cover costs and a small profit.  No gouging.  No provider dares sell service under these terms because it would dramatically slash the cost most consumers pay for the service.  Instead, they sell “usage tiers” that include arbitrary “allowances” that provide no rollover or discount for unused traffic.

Imagine what would happen if AT&T or Comcast sold broadband like electricity?

CartelCountry Broadband & TV

From coast to coast, we put the cartel in cable!

• Monthly Minimum Charge: $9.95
• Broadband traffic delivery $0.05/GB
• Amount consumed 20GB = $1.00

• Payment Due: $10.95

Thank you for your prior payment of $9.95. We hope you enjoyed your vacation. No broadband traffic consumed equals no broadband traffic charges.

That is why there is no such thing as true usage-based billing. Providers wouldn’t dare because they would lose the enormous income they earn from those “98 percent” of “light users” they keep suggesting are in the majority.

Even “heavy users” probably would not object to this kind of pricing. A 500GB per month user would pay $34.95 at these prices, and providers would STILL be making a profit.