This slide, produced to sell "network management" equipment, is the best argument for Net Neutrality around.

Want to visit Facebook?  That will be two cents per megabyte, please.  Skype?  You can get a real bargain this month — your ISP is only charging you $5 for an unlimited monthly permission pass.  YouTube?  All customers with a deluxe bundled broadband plan get a special discount — just 50 cents for up to 60 videos, this month only!

All of these charges, levied by your Internet Service Provider, are real world scenarios being sold by two equipment vendors — Allot Communications and Openet, for immediate use on Net Neutrality-free wireless broadband networks.  Thanks to Stop the Cap! readers Lance and Damian for sending us the story.

Both companies are excited by the potential harvest of bountiful revenue — for themselves in selling the equipment that will carefully monitor what you do with your Internet connection and then control what kind of experience you get, and for providers who can finally bend the usage curve down while “finally” getting average revenue per customer shooting sky high once again.

In the webinar, run last Tuesday and moderated by Fierce Wireless, the two companies carefully divided their one hour presentation between the technological and financial benefits of “network management” technology.  For every statement about how their bandwidth management system would improve the predictable responsiveness of the provider’s network, another comment followed, touting the enormous new revenue potential this technology will bring providers, all without costly network upgrades.

Poor provider. His stuffed pockets of profit are leaking your money paid to access websites you want to visit. But with Allot and Openet's products, the pot 'o gold is just a few steps away.

On Tuesday, the Federal Communications Commission will vote on a watered-down Net Neutrality proposal that would do nothing to prevent this nightmare scenario from becoming reality.  The webinar and its accompanying slides couldn’t illustrate Net Neutrality-proponents’ arguments better:

1. Such technology requires providers to carefully track and monitor everything you do with your web connection, obliterating privacy and creating a potential data trail that could be exploited for just about anything.  Indeed, Allot and Openet treat the data tracking feature as a benefit, opening the door to marketing campaigns to upsell your broadband connection or target upgrade offers based on your web history;

2. It’s all about the money.  Allot and Openet see their products as a cost-saver for providers to control expenses by cutting speeds/access for heavy users to provide a more consistent service for others, reducing the urgency to upgrade networks.  The companies also heavily focus on the revenue opportunities available from Internet Overcharging schemes;

3. The webinar includes a slide showing that providers can charge individual fees just to visit and utilize third party websites and applications, while letting providers deliver their own content, services and applications for free.  Got a bothersome competitor?  Just make a quick change with Allot’s product and your customers will face a withering admission fee in the amount you choose before they can even use the application;

4. The technology allows providers to wreak special havoc on peer-to-peer traffic, always the bane of traffic-conscious ISPs;

5. Want to extract more cash from an individual subscriber?  Providers can custom-design packages based on web site habits, usage, speed, and even the time of day the person is most likely to use the web.  Providers can then develop so many different usage packages, comparison shopping becomes meaningless.  The price you pay may be different than what others on your street pay, and you may never know by how much or why.

These Big Telecom workmen are not hard at work upgrading networks to meet demand. They are wrangling an Internet Overcharging scheme to reduce your usage while charging you more. (All of these slides were produced by the vendors themselves.)

Public Knowledge legal director Harold Feld saw right through the slide show: “If you want the slide deck to show why we need the same rules for wireless and wireline, this is it.”

Listen to the audio portion of “Managing the Unmanageable: Monetizing and Controlling OTT Applications,” which does not include the slide show. (60 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

<

p style=”text-align: center;”>

Broadband advocates have been warning providers have been dreaming of this kind of pricing for a few years now.

“I have been saying that this is where they want to go for a while,” Barbara van Schewick wrote to Wired. “The IP Multimedia Subsystem (IMS), a technology that is being deployed in many wireline and wireless networks throughout the country, explicitly envisages this sort of pricing as one of the pricing schemes supported by IMS.”

Although the system described by the webinar is currently being sold for use on wireless networks, nothing prevents providers from adopting similar schemes on their wired networks, arguing their use is about “intelligent network management,” not content or pricing discrimination.

It’s a scenario likely to be tested soon, especially with FCC Chairman Julius Genachowski’s watered down Net Neutrality proposals.  More than one observer believes the chairman has made a deal with the Big Telecom Devil: observe our watered down rules, don’t sue to have them thrown out, and the Commission will not invoke Title II and reinstate regulatory authority over broadband.

But as anyone who watches the broadband industry must realize by now, providers always break these deals.  They will sue the moment a controversy erupts that is not in their favor, and they are very likely to win.

Clearwire’s often-unclear “network management” policies are the subject of a lawsuit filed yesterday in Seattle seeking class action status.

Angelo Dennings vs. Clearwire Corporation was filed in the Western District of Washington federal court, and seeks refunds for consumers who were mislead by the company’s failure to disclose its network speed throttling and usage limitations, and charged early termination fees when subsequently canceling service.

Clearwire promises that its high-speed Internet service provides a “fast” and “always on, always secure” Internet connection allowing users to “[d]ownload pictures, music and videos.” But Clearwire does not provide an “always on,” “high-speed” connection as it promises. Clearwire purposefully slows the connection of its users because it cannot accommodate the high volume of traffic. Clearwire engages in a practice known as “throttling,” which is the intentional delay and/or blocking of Internet communications. This practice deprives Clearwire customers of the ability to “[d]ownload music and videos,” and leads to slow connection speeds.  Clearwire engages in throttling at times when demand for Internet use is highest, beginning at approximately 7:30 p.m. and ending at about 1:00-to-2:00 a.m.

If users attempt to cancel their service, Clearwire claims that, pursuant to its “contract” with them, it is entitled to collect an early termination or a re-stocking fee. The “contract” referred to by Clearwire is not a contract between it and its customers. The contract between Clearwire and its customers is simply that the customers will pay for, and Clearwire will provide, “unlimited” Internet usage at certain speeds, depending on the speed and payment plan selected in Clearwire’s stores, kiosks, or online.

The remaining “terms” invoked by Clearwire at its convenience are embedded in a document that consumers never see prior to subscribing to Clearwire’s service. Clearwire sells its services in its stores, kiosks at shopping centers, and online. Clearwire’s stores and kiosks do not have copies of this “contract” on hand for potential subscribers to read before they “agree” to its terms. Users who subscribe through Clearwire’s website never see the contract either because the link to it is at the bottom of a page, in substantially smaller font and lighter shade than all of the other text on the page. The text states: “Want to read the fine print (and who doesn’t read the fine print?) It’s all there in the CLEAR Legal Index.” No one wants to read fine print legalese and almost no one does. The statement is obviously and sharply ironic, and mocks anyone who may have been fussy enough to have considered continuing.

Despite not showing its terms to consumers, Clearwire refuses to allow users to cancel their service without paying the unconscionable fees it claims it is owed under this “contract.” These fees include an early termination fee (“ETF”), which penalizes consumers that want out before the end of the two-year term. Although Clearwire breached its contract with its customers, Clearwire insists on the payment of this ETF when customers realize they are not getting what they bargained for.

The suit argues that Clearwire has oversold its wireless broadband network, and allegedly quotes a company representative at one point telling Dennings, “Clearwire had signed up more customers than its cell towers could accommodate, and that therefore it was ‘managing’ users’ accounts.”

Attorney Clifford Cantor argues in the filing that Clearwire reduces customer speeds to 300kbps or lower when their network is congested, making the service unsuitable for most broadband applications.  Dennings, who lives near Ft. Worth, Tex., was outraged to learn Clear sold him a home and mobile broadband account that was advertised as a replacement for wired cable or DSL broadband, but was left with service he considered largely useless when throttled.  Even more upsetting, the suit alleges, Denning was asked to pay a $219 early contract termination and restocking fee when he tried to cancel service over the matter.

Cantor is asking for a court ruling declaring Clear’s policies to be unconscionable, attorneys’ fees of at least $5,000, and refunds for all impacted subscribers.

Thanks to Stop the Cap! reader Michael in Chicago for sending along a copy of the lawsuit.  He runs the “Clear/Clearwire internet not as advertised” Facebook group.

Hobbs

Landel Hobbs tendered his resignation today, leaving as Time Warner Cable’s chief operating officer after serving nine years at the cable operator.

The Wall Street press is characterizing Hobbs’ departure as a leadership shakeup created as the company explores who will eventually succeed CEO Glenn Britt.

Hobbs lost out to Rob Marcus, the company’s current chief financial officer.  Marcus joined Time Warner Cable in 2005 from then-parent company Time Warner Inc., where he led mergers and acquisitions.

Marcus will assume Hobbs’ former position almost immediately, also becoming Time Warner Cable’s president.

Marcus

Hobbs was deeply involved in Time Warner’s 2009 attempt to impose Internet Overcharging schemes on its broadband customers.  Hobbs was a major defender of the company’s plans to charge customers up to three times more for their existing level of broadband service, telling customers the need to impose such pricing was “urgent.”

“If we don’t act, consumers’ Internet experience will suffer,” he wrote. “Sitting still is not an option.”

Time Warner Cable shelved those plans and has since embarked on a broadband upgrade program, introducing DOCSIS 3 technology which provides a much larger broadband pipeline to customers.  The company is expected to upgrade most of its service areas, including the cities where it tested its Internet Overcharging scheme, by the second quarter of 2011.

Marcus’ primary task is expected to be addressing the ongoing loss of Time Warner Cable customers, who have been disconnecting service at a greater rate than the company is adding customers to replace them.

HP's Snowjob: The company that brought you the $70 ink cartridge supports an end to flat rate Internet service to "save" you money.

HP’s Joe Weinman argues consumers are behind the drive to abandon flat rate, “all you can eat” broadband pricing.

Weinman, whose company sells products and services to some of America’s largest broadband providers, has taken up their position that flat-rate Internet service is bad for you, claiming many are paying too much for Internet service they use too little.

In an essay posted on GigaOM, Weinman brings back the all-y0u-can-eat buffet metaphor:

For the record, I like unlimited Internet access just as much as anyone else. However, such plans appear to be on their way out, and here’s why. As I’ve explored in ”The Market for Melons” (PDF), pay-per-use is not an evil plot by greedy robber barons, but a natural outcome of independent, rational consumer choice. Consider a town with an all-you-can-eat (flat rate) buffet and an a la carte (pay-per-use) restaurant. Smart shoppers on diets will save money by patronizing the a la carte restaurant, whereas heavy eaters will save money by visiting the buffet. As patrons switch, the average consumption of the buffet will increase, driving price increases for the luncheon special, causing even more users to switch to pay-per-use.

Bottom line: it is not the proprietors driving this dynamic, but the customers themselves acting out of pure, rational self-interest—light users, by deciding not to subsidize the heavy ones, foster the vitality of the pay-per-use model.

Unfortunately for Weinman, most American broadband customers don’t believe a word of this, and even he was forced to admit as much when he noted consumers “often prefer to overpay for flat-rate rather than save money but risk bill shock.”

Karl Bode at Broadband Reports wasn’t suckered for a moment either, noting:

[…]Cable industry lobbyists would like the public to believe that such a shift isn’t about making more money, it’s about helping the poor. Not only is the metered billing push absolutely about making money, it’s about artificially constricting the pipe to protect uncompetitive carriers and TV revenues from Internet video. But instead, there’s a very concerted effort afoot to portray this shift as necessary, inevitable, and even altruistic.

Most consumers prefer the simplicity of flat rate pricing, and understand that ISPs are perfectly profitable under the flat-rate pricing model. They also understand that this is a pipe dream forged by never-satisfied investors, and once implemented ends with ever soaring per gig fees and ever shrinking usage caps.

Weinman’s essay completely ignores the reality his preferred pricing model already delivers to those who live under it in Canada.  Canadian broadband rankings continue to decline as customers there pay higher prices for a lower level of service, with usage caps that actually decline when new competitive threats from online video emerge.

Just what the doctor ordered: HP's Rx for American Broadband

We had to take time out to respond directly to Weinman and his cheerleading friends (see the comments section), some who wrote comments below the piece and couldn’t be bothered to disclose they owe their day jobs to industry-backed dollar-a-holler groups that are committed to delivering on behalf of their provider benefactors:

When Big Telecom comes ringing with promises of savings from metered or capped broadband, hang up immediately.

These plans save almost nobody money and expose dramatic overlimit fees to consumers, creating the kind of bill shock wireless phone users endure.

The OPEC-like Internet price-fixing on offer from big players delivers broadband rationing and sky high prices, while retarding Internet innovations that providers don’t own or control.

Consumers are forced to double check their usage and think twice about everything they do online out of fear of being exposed to huge overlimit fees up to $10 a gigabyte for exceeding an arbitrary limit ranging from 5-250GB.

Americans already pay too much for Internet service and now the providers want more of your money. The rest of the world is moving AWAY from the pricing schemes Weinman would have us embrace. It’s such a serious issue in the South Pacific, the governments of Australia and New Zealand are working to address the problem themselves.

Providers are already earning BILLIONS in profits every quarter from their lucrative broadband businesses. Now the wallet biters are back for more, with the convenient side benefit that limiting consumption is a great way to prevent Internet-delivered TV from causing cord-cutting of cable TV packages.

As far as consumers are concerned, and Weinman admits as much, people are happy with today’s unlimited price models. When Big Telecom complains people are overpaying for broadband, wouldn’t their shareholders be telling them to shut up and take the money? There is more to this story.

Weinman defends the extortion proposition Big Telecom would visit on us: either give us limited use pricing or we’ll raise all of your prices.

But as consumers have already figured out, these providers never reduce prices for anyone. When was the last time your cable bill went down unless you dropped services?

Don’t be a sucker to Big Telecom’s “broadband shortage” or pricing myths. Broadband is not comparable to water, gas, or electric. The closest comparison (and the one they always leave out) is to telephone service, and as we’ve seen, that business is increasingly moving TOWARDS flat race, unlimited pricing.

Want to know what metered pricing does to the wallets of consumers? Just ask Time Warner Cable customers in Rochester, Greensboro, San Antonio, and Austin what they thought about the cable company’s “innovative” pricing experiment that tripled the price for the same level of broadband customers used to get for $50 a month. After the torches and pitchforks were raised over $150 a month broadband service, Time Warner backed down.

Either with or without metered pricing, the cable company raised its prices three times last year alone.

The industry’s meme that “usage-based pricing” in inevitable is only true if consumers allow it to happen.  The parade of Internet Overcharging advocates all share one thing in common — they earn a living from the providers that dream about these pricing schemes.  Always follow the money.  As we’ve exposed repeatedly, the vast majority of defenders of these kinds of pricing schemes are not consumers.  They are:

• The providers themselves;
• Wall Street banks, investors, and the business media catering to them;
• Non-profit groups receiving substantial contributions from providers;
• Industry-funded “think tanks” and research that can carry the industry’s public policy agenda, hoping the media that quotes them are too lazy to follow the money;
• Equipment and service vendors, unions, and other groups who depend on the business or jobs they get from providers.

If you are a Frontier DSL customer, your unlimited Internet service is at risk of being arbitrarily limited by a company that wants to cut costs and increase revenue… at your expense.

Suburban Sacramento residents deemed to be “using too much” Frontier Internet service are being told they have to ration their Internet usage or pay more — a lot more — for the same speed service.  Even worse, many customers are paying extra for a “Price Protection Agreement” from Frontier that protects Frontier’s profits while your Internet bill doubles.  That’s a price protection racket only the Sopranos could love.

Frontier’s own representatives are literally at a loss for words when told it’s easy to exceed their “5GB” limit just by web browsing and checking e-mail.  But they are even quieter when customers report Frontier’s own video website – my fitv, a “free online video service” heavily promoted by Frontier, is ultimately responsible for their looming $99.99 monthly Internet bill.

Frontier wants to get tough with some of their best customers.  As a result, many are exploring disconnecting service for a cable competitor.  The best way to fight these Internet Overcharging schemes is to make it clear to Frontier you will not submit to them.  The first step is to bring wider media attention to the issue.

Sacramento-Elk Grove Customers

• Contact the Sacramento Bee, the Elk Grove Citizen and other local newspapers and ask them to write a story about this;
• Contact KOVR-TV’s consumer reporter and ask him to do a story;
• Contact other stations and local call-in shows and draw attention to Frontier’s abuse of its customers;
• If you are on a “price protection agreement” contact the California Public Utilities Commission and file a complaint.

Points to consider raising:

• Frontier’s usage caps are easily broken using the company’s own video website, my fitv;
• What the company suggests most people will not exceed today is not reasonable tomorrow.  Besides, how much customers actually use is considered proprietary and we have to take their word on it;
• Customers on price protection agreements are being asked to pay more than double for the exact same quality of service they used to receive for less.  Where is the price protection?;
• Frontier is generous with their shareholders, paying outrageously high dividends out of step with their earnings, but are notoriously stingy with the customers that deliver them that revenue;
• Where’s the fire?  This is the same company that said it had more than enough capacity to take on millions of ex-Verizon broadband customers, but now suddenly can’t deliver the same level of service to existing customers in Elk Grove without doubling the monthly price?;
• Customers are being asked to pay $1 a gigabyte for a service that costs Frontier far less to actually provide;
• At a time when Frontier continues to lose landline customers, can they afford to alienate more, who take all of their business elsewhere?

Frontier alienating its own customers who pay for their landline and broadband DSL service does not sound like a winning business strategy.  Let Frontier know you will not do business with a company that abuses its big-spending customers.  Let them know in clear terms you will cancel all of your services if the company maintains its Internet Overcharging practices and you will encourage your friends and family to take their business elsewhere as well.