Netflix continues to step up its attacks on providers who implement Internet Overcharging schemes on their wired broadband customers.

That concern is understandable as Netflix increasingly transitions to broadband streaming instead of mailing DVD’s to customers.

Getting in the way are five of the nation’s seven largest broadband providers, all imposing limits on customers just as they discover they might be able to do without cable television.

Netflix’s streamed HD shows now consume around 2GB per hour, according to Netflix general counsel David Hyman.  That can eat through usage allowances quickly.  Hyman penned an op-ed in the Wall Street Journal last year blasting the practices of usage caps and consumption billing.

Hyman

“Wireline bandwidth is an almost unlimited resource due to advances in Internet architecture,” Hyman wrote. “The marginal cost of providing an extra gigabyte of data—enough to deliver one episode of 30 Rock from Netflix—is less than one cent, and falling.”

That doesn’t seem to matter much to Comcast, CenturyLink, Charter Communications, and Cox.  All four providers have introduced hard usage limits on customers — a usage cap.  Exceeding it gives any of those providers the right to cut off your broadband service.  AT&T, always one to see a financial angle, charges for excess use of their DSL and U-verse service — $10 for every 50GB. Time Warner Cable recently announced its own experimental “optional” usage pricing package for very light users who consume fewer than 5GB per month.  It will slap overlimit fees on those participating customers who break through the 5GB ceiling at a rate of $1/GB, an enormous markup.

Providers with strict caps usually argue they come as a result of their own network’s capacity problems.  Cable operators who do not consistently manage their network traffic can experience traffic clogs by overselling service without upgrading capacity to sustain user demand.  But providers like Comcast, Cox, and Charter resolved those capacity problems with upgrades to DOCSIS 3 technology, which offer operators an exponentially bigger pipeline for Internet traffic.

Although Comcast promised to regularly review and adjust usage caps since implementing them four years ago, the nation’s largest cable operator has thus far seen no need to raise them.

“We feel that that is an extraordinarily large amount of data,” says Comcast’s Charlie Davis. “That limit is there to make sure we provide a great online experience for every single paying customer.”

Wall Street bankers have closely monitored the industry’s early results from Internet Overcharging, and have been encouraged, so long as operators implement it carefully.

Credit Suisse in a 2011 report to its investor clients suggested the key for successful usage-based pricing is to introduce it slowly and keep “sticker shock to a minimum in the early days” to reduce backlash by consumers and lawmakers.

Once established, the sky is the limit.

Netflix itself is also battling an Internet Overcharging scheme it faces — double-dipping by cable operators like Comcast.  In addition to the fees Comcast collects from customers for its broadband service, the cable operator also wants to be paid directly by Netflix to allow the movie service’s traffic on its network.

That’s an Internet toll booth, charges Netflix and consumer groups.  It’s also uncompetitive, says Hyman.

This month Comcast unveiled its own movie and TV show streaming service — Xfinity Streampix — from which, unsurprisingly, the cable company has not sought extra traffic payments from itself.

Opposed to Internet Overcharging

Three providers which don’t cap customers don’t see a reason to try.

Verizon Communications says its fiber network FiOS has plenty of capacity and has no plans to restrict customers’ enjoyment of the service.  In 2009, Cablevision’s Jim Blackley told one panel discussion usage caps are not in the cards.

“We don’t want customers to think about byte caps so that’s not on our horizon,” Blackley said. “We literally don’t want consumers to think about how they’re consuming high-speed services. It’s a pretty powerful drug and we want people to use more and more of it.”

California’s Sonic.net Inc., goes even further.  Its CEO, Dane Jasper, believes the Federal Communications Commission needs to be more assertive about protecting America’s broadband revolution and the customers that depend on the service.

The fact different operators can take radically different positions on the subject, despite running similar networks, suggests technical necessity is not the reason providers are implementing usage restrictions and extra fees on customers.

As Hyman writes:

Bandwidth caps with fees piled on top are a lousy way to manage traffic. All of the costs of supplying residential broadband are for supporting peak usage. Bandwidth consumed off-peak is completely free. If Internet service providers really wanted to manage traffic efficiently, they would limit speeds at peak times. If their goal is instead to increase revenues or lessen competition, getting consumers to pay per gigabyte is an excellent strategy.

Consumer access to unlimited bandwidth is good for society. It fosters innovation, drives commerce, and advances political and social discourse. Given that bandwidth is cheap and plentiful and will only grow more so with time, there is no good reason for bandwidth caps and fees to take root.

Consumers and regulators need to take heed of what is happening and avoid winding up like the proverbial frog in a pot of boiling water. It’s time to jump before it’s too late.

A Burlington, Ontario customer of Cogeco Cable, convinced by the company to upgrade his broadband service to a usage plan with a higher allowance, has been billed nearly $700 in broadband usage overlimit fees in a single month after the company quietly removed the cap on overlimit fees associated with the plan.

The customer first learned about the change in Cogeco’s usage-based billing policies when the company’s “auto pay” billing service deducted nearly $900 from his checking account to pay his cable bill, he told Broadband Reports.

Further charges and late fees have now racked up to almost $1,200 and so far Cogeco has only been willing to provide its customer with a $50 “courtesy credit.”

Cogeco claims it notified customers last fall it was removing the maximum overlimit penalty cap from two of its broadband plans, including the one the Burlington customer was persuaded to choose by a company representative.  Prior to October, The Ultimate 30 plan, designed for so-called “heavy users,” included a 125GB usage allowance with an overlimit fee of $1/GB, capped at a maximum of $50.

Canadian broadband users likely to exceed a broadband usage allowance typically upgrade to a service plan with a higher allowance or factor the capped, fixed overlimit fee into their assumed monthly cost for service.  But when providers like Cogeco quietly increase the maximum overlimit fee, or remove it altogether, usage-based billing shock often follows.

The customer claims he never received any change of terms notification until the first bill with unlimited overcharges arrived, and Cogeco admits it cannot assert every customer received the notification much less absorbed its meaning.  According to the Burlington man, Cogeco told him customers often don’t read the letters or throw them out, unopened, assuming it is advertising.

Even if Cogeco did send a letter, the man believes the company has gone out of its way to avoid prominently alerting customers about the possibility of explosive increases in broadband usage expenses.  Instead, they have framed the changes as an “enhancement” that will “help you get more from the Internet.”

When bill shock becomes an enhancement -- An informational message included on a recent Cogeco billing statement.

Cogeco customers upset about the change say it is easy for people to miss the implications buried in a rate chart that the maximum overlimit penalty has been removed.

“A Cogeco salesperson called me to change my service based on my usage,” said the Burlington man. “[The Ultimate 30 Plan] would cost me less money and in return I would receive faster internet and an increased data transfer capacity.”

Now the customer also gets hundreds of dollars in overlimit fees, too.  Even worse, the man complains, he was never given an opportunity to adjust his usage or service plan to avoid the enormous bills he has since received.

“I would have stepped down to the Turbo 20 package that has a maximum of $50 for usage or the Business Ultimate 50 package which [has] unlimited data transfer,” the man complains. “Either option would have saved me hundreds of dollars.”

The cable bill in your future?

Cogeco’s unwillingness to forgive overlimit usage charges seems strange to the Burlington man because several other Cogeco plans retain a fixed limit on overlimit fees.  Other Cogeco customers have begun to question the company’s logic in usage billing more generally, because hundreds of gigabytes consumed on a slightly slower usage plan would result in a bill a fraction of the cost the Burlington man now faces.

“Why does Cogeco’s bandwidth cost a ridiculous $1 per gigabyte on one plan, and considerably less on others with capped overlimit fees,” asks Stop the Cap! reader Jeff, another Cogeco customer who shared the story. “It’s a usage shell game and it’s all about the money because they won’t give a decade-long customer a break on fees they would never have charged many of their other customers.  The bandwidth costs to Cogeco are the same no matter what plan you are on.”

Jeff wonders whether customer goodwill matters anymore at telecommunications companies.

“They’d rather harass this man for hundreds in phantom ‘costs’ and destroy their reputation in the process.”

The customer says he can’t even be sure the bill is correct.

“Internet usage based billing is flawed,” he says.

He points out the methodology and devices that determine the bandwidth are not certified or regulated by Measurement Canada. There is no recourse for customers to ensure the integrity and accuracy of the bandwidth measurements. Cogeco customers must rely on an ‘Internet Usage’ meter Cogeco has on the website. The meter is not always up to date and has frequent outages, customers report.

Against this backdrop, the Canadian Radio-television and Telecommunication Commission new rules governing the practice of usage-based billing are set to take effect tomorrow, Feb. 1st.

“We are moving ahead with the implementation as planned to ensure that independent ISPs will continue to offer competitive and innovative services to Canadians,” said Leonard Katz, the CRTC’s acting chairman and vice-chairman of Telecommunications. “Some temporary adjustments have been made to ensure a smooth transition to the new billing regime and to ensure consumers are not inconvenienced.”

As an interim measure, independent ISPs who are customers of the Bell companies will have the flexibility to either merge their business and residential Internet traffic, or keep them separate.

In November 2011, the CRTC established how large telephone and cable companies should charge independent ISPs for the use of their networks.

In turn, cable and telephone company Internet Service Providers can continue to use usage-based billing practices similar to what Cogeco uses, or switch to a combination of flat-rate and usage-based billing.  But with the revenue potential Cogeco has illustrated it can earn from UBB, few large providers are anticipated to sell residential customers flat use plans.

“Caveat emptor,” says our reader Jeff.

Polly wants a $20K "stipend" for parroting the cable industry agenda.

Time Warner Cable is back again for the third year offering $20,000 in “dollar-a-holler” money to write “research reports” that meet the cable operator’s wish-list of current topics of interest.  While the cable company raises rates on customers, some of the proceeds pay for the Time Warner Cable Research Program on Digital Communications, which they say “awards stipends designed to foster research dedicated to increasing understanding of the benefits and challenges facing digital technologies in the home, office, classroom and community.”

After tearing through some of the earlier “award-winning” reports and topics over the past three years, we find it more an exercise in wasted cheerleading money, particularly when some of the authors happen to work for PR astroturf operations and other industry-connected/funded “think-tanks” that take money for dubious research and public statements that amplify the paymaster’s agenda.

It’s not much of a stretch to figure out exactly what kind of submissions the cable company is looking for after reviewing the topic list.  It’s a safe bet nothing we’d have to say to Time Warner would get them to cut us a check for $20K.  In case there is any doubt, we’ve provided a helpful “between-the-lines” analysis of what they are really looking for, should you wish to put pen to paper:

(1) The end-user experience for broadband services
In an increasingly competitive marketplace, more attention is being paid to the consumer experience. For service providers, it is essential to make it simpler and easier for customers to enjoy the benefits of broadband any time, any place, on any device. Key questions include identifying service characteristics consumers consider in evaluating broadband performance, the role of accessibility in design and engineering, how best to encourage innovation in services and business models, the role of pricing and packaging of services, and how best to meet the needs of diverse communities.

(Between the lines: how can we justify Internet Overcharging customers with usage caps and usage billing and make it sound all-consumery and good-newsy?)

(3) Internet governance
Internet governance is still largely framed by the way the Internet existed when it first became a mass-market phenomenon in the late 1990s. But more users rely on advanced digital communications for a diverse set of uses today. Networks and devices are more varied and more powerful than expected, and the Internet now supports a vast range of business models and drives economic growth . In this environment, the role of government and other intermediaries in framing and addressing policy goals continues to change. Key questions include examining the need for new methods of collaboration in multi-stakeholder processes, examining the role of standard-setting, how to measure and assess the performance of the broadband Internet, developing metrics that are meaningful to a wide range of stakeholders (from industry and policymakers to consumers), how to develop new forms of governance that convene stakeholders to solve problems cooperatively, and how to develop guidelines that protect settled expectations as well as enable continuing entry and innovation.

(Between the lines: This whole “open platform” free-for-all network the Internet was originally envisioned to be is so yesterday.  How can we convert it into a corporate-controlled playground by convincing legislators our ‘investments’ in it should justify our ability to “coordinate” it ((a/k/a run, manage, and control)) as we see fit.)

(5) Video Convergence and Internet Video
Online video is growing rapidly, comprising an increasing proportion of Internet traffic even as workable business models continue to evolve. Internet video thus increasingly competes with more traditional video services, while at the same time placing extraordinary burdens on the broadband networks owned and operated by those competitors. This emerging development raises a host of issues for video competition and regulation as well as for broadband policy. Key questions include how to identify and respond to the challenges posed by Internet delivery of video, and identifying the marketplace, legal, and policy barriers that stand in the way of innovation in video service delivery.

(Between the lines: Since we can’t blame peer to peer traffic for the Internet ‘exaflood’ any longer, we’ve designated online video the new Frankenstein that threatens to run our broadband network into the ground.  How can we stop Internet video from cannibalizing our cable-TV service by limiting access (or charging a bountiful harvest of cash to those who dare to watch too much.) Bonus: Include tips on how we can obfuscate our tissue-paper-thin agenda to slap the caps on from being called out as an abuse of our market power.

Sen. Kay Bailey Hutchison (R-Texas)

Republicans in the Senate are falling in line behind their colleagues in the House in voting to repeal the Federal Communications Commission’s anemic Net Neutrality rules.

Virtually every Republican in the Senate is expected to vote in support of a resolution introduced by outgoing Sen. Kay Bailey Hutchison (R-Tex.) that would strip the FCC of its authority to impose the new rules, which would prohibit Internet Service Providers from interfering in the free flow of Internet content across their networks.  Nearly every Democrat in the Senate is expected to oppose the Republican-backed measure in a vote expected later today.

Republicans serving at the FCC and in Congress claim the federal agency has no congressional mandate to oversee the Internet.  The agency itself under Chairman Julius Genachowski has refused to fully enable its authority by reclassifying the Internet as a telecommunications service.  Because the agency’s role to oversee the conduct of the country’s service providers is at issue, it has left the FCC in a grey area, with its authority challenged both politically and in the courts.

Sen. Jim DeMint (R-S.C.) claims Net Neutrality rules are completely unnecessary because providers have already promised they will not tamper with traffic and, in his words, “This is a another big government solution in search of a problem.”

Hutchison said enforcement of Net Neutrality would stall broadband Internet development.

“It will increase costs and freeze many of the innovations that have already occurred under our open Internet system,” she said in a statement.

Democrats like Sen. Maria Cantwell from Washington State think otherwise.

Cantwell pointed to Comcast’s secretive effort in 2007 to throttle the speeds of peer-to-peer file sharing traffic.  Comcast initially denied it was interfering with torrent traffic, until eventually admitting it was.  The FCC sought to fine Comcast for the practice, but the cable giant sued the FCC and won in federal court.  The judge in the case ruled the FCC didn’t appear to have the authority to regulate Internet traffic or impose the associated fine.

Cantwell believes sensible Net Neutrality policies will prevent further instances of provider interference.

“These providers think if [they] can control the pipe [they] can also control the flow,” Cantwell said. “Why allow telcos to run wild on the Internet charging consumers anything they want based on the fact that they have control of the switch?”

Reporters questioned Senate Commerce Chairman Jay Rockefeller about Net Neutrality, noting the measure opposing FCC involvement won support from several House Democrats.

Rockefeller pointed to the universal support for the anti-Net Neutrality measure on the Republican side as evidence this has become a partisan political issue.  Rockefeller hopes his Democratic colleagues in the Senate will see it the same way.

“There’s still 53 of us [Democrats], and if we stay together we’ll win,” Rockefeller said. “I think we’re going to prevail.”

Should the measure pass, President Barack Obama indicated he will veto it.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/C-SPAN Net Neutrality 11-9-11.flv[/flv]

C-SPAN talks with National Journal reporter Josh Smith about Net Neutrality’s prospects and the background issues surrounding Net Neutrality.  (3 minutes)

After nearly a half-million Canadians expressed outrage about Bell’s Internet Overcharging practices, the company is responding.  This week, Bell sent a letter to their wholesale customers announcing it plans to end the practice of speed throttling peer-to-peer file traffic (at least for them):

Effective November 2011, new links implemented by Bell to augment our DSL network may not be subject to Technical Internet Traffic Management Practices (ITMP).  ITMPs were introduced in March, 2008 to address congestion on the network due to the increased use of Peer-to-Peer file sharing applications during peak periods. While congestion still exists, the impact of Peer-to-Peer file sharing applications on congestion has reduced. Furthermore, as we continue to groom and build out our network, customers may be migrated to network facilities where Technical Internet Traffic Management Practices (ITMPs) will not be applied.

Peer-to-peer traffic, once all the rage for swapping music, movies, and software (legally or otherwise), has been declining as a percentage of Internet traffic and legal online entertainment services (Netflix, et al.) have become available.  Copyright crackdowns and usage caps manage to further restrict customers from leaving P2P software running continuously as it can rapidly eat into usage allowances.

With increased capacity of Bell’s networks and decreased interest in file swapping software among customers, the practice of throttling such traffic (along with the unintended collateral damage to online gaming), means such network management practices have outlived their usefulness.

Providers these days are far more likely to blame online video for congested networks.  But once providers attach a speed throttle to an application, it can be difficult to remove.  Even as Bell announced it would no longer throttle their wholesale clients, retail customers will still suffer with reduced speeds during “peak usage times” — 4:30pm-2am local time.

Michael Geist, who covers Canadian broadband issues, wonders if Bell’s throttles are actually in violation of the Canadian Radio-television and Telecommunications Commission’s traffic management guidelines:

While Bell says its congestion has been reduced, its retail throttling practices have remained unchanged, throttling P2P applications from 4:30 pm to 2:00 am.  Given the decline in congestion, a CRTC complaint might ask whether the current throttling policy “results in discrimination or preference as little as reasonably possible” and ask for explanation why its data cap policies “would not reasonably address the need and effectively achieve the same purpose as the ITMP.”  In fact, the same can now be said for many other ISPs who deploy broad based throttling practices (Rogers, Cogeco), which may not be reasonable under the CRTC policy.