Cornell University students pay an average of $37,000 a year (before housing, student fees, and other expenses) to attend one of America’s most prestigious universities.  When they arrive on-campus, it doesn’t take long to learn the college has one of the nastiest Internet Overcharging schemes around for students deemed to be using “too much Internet.”

For years, Cornell limited students to less than 20 gigabytes of Internet usage per month, only recently increasing the monthly allowance to 50GB this summer.  Cornell’s overlimit fee starts at $1.50 per gigabyte, billed in megabyte increments.  Now some students are pushing back, launching a petition drive to banish the usage limits that curtail usage and punish the 10 percent of students who exceed their allowance.

Christina Lara, originally from Fair Lawn, N.J., started the petition which has attracted nearly 300 signatures over the past few weeks.

“Cornell students, along with students across the world, rely on the Internet to pursue their academics, independent research, and leisure activity,” Lara writes. “We should not be subjected to charges for our Internet usage, particularly because our curriculums mandate we use the Internet. Despite this, Cornell University continues to adopt NUBB (Network Usage-Based Billing), which charges students for exceeding the 50 gigabyte per month ‘allowance.'”

Lara incurred bills as high as $90 a month in overlimit fees last year, thanks to regular use of Netflix and Skype for online video chats with friends and family back home.

Internet fees for on-campus housing are included in the mandatory student services fee.  Although Time Warner Cable has a presence on campus, most residence halls don’t appear to be able to obtain service from the potential competitor, which sells unlimited Internet access in the southern tier region of New York where Cornell is located.  Instead, Cornell students on campus rely on the university’s wireless and Ethernet broadband network, and DirecTV or the university’s own cable TV system for television.

Lara

The apparent lack of competition makes charging excess-use fees for Internet usage easy, critics of the fees charge.

“It’s much easier if you live off-campus or in one of the apartment complexes students favor,” says Neal, one of our readers in the Ithaca area who used to attend Cornell.  “The only complication is getting access to the University’s Intranet, which is much easier if you are using their network.”

Neal says Verizon delivers landline DSL to off-campus housing, but not on-campus.  Because the service maxes out at 7Mbps, most who have other options sign up for Time Warner Cable’s broadband service instead.

“It’s cheaper on a promotion and much faster, and it’s still unlimited,” Neal says. “Hasbrouck, Maplewood and Thurston Court were the only residential buildings that offered the chance for Time Warner Cable on-campus, and only if the wiring was already in place.”

Neal notes many apartment complexes off campus have contracts with Time Warner Cable, which means cable TV and basic broadband are included in your monthly rent.  Some Cornell students who live on or near campus try to make do with a slower, but generally free option — the Red Rover Wi-Fi network administered by the University.  Others reserve the highest usage activities for computers inside university academic buildings, where the limits come off.

Lara complains Ithaca, and the southern tier in general, is hardly an entertainment hotbed, making the Internet more important than ever for leisure activities.

Time Warner Cable provides the rest of Ithaca with unlimited Internet.

“If Cornell was situated in a major metropolitan area with a vast nightlife that could accommodate the interests of most, if not all, our undergraduates, then many Cornellians wouldn’t be so inclined to stay in their rooms and get on the Internet,” Lara says. “But that’s not the case. Cornell’s Greek life dominates the social scene, making ‘nightlife’ a dividing factor in the community.”

Tracy Mitrano, Cornell’s director of information-technology policy, told The Chronicle the vast majority of students will never hit the cap, and those that do cannot be charged more than $1,000 a month in overlimit fees, regardless of use.  Those that do exceed the limit typically find a monthly bill for “overuse” amounting to $30.

“The approach that Cornell uses offers transparency and choice,” said Mitrano. She noted that Cornell provides students with clear information regarding their network usage by alerting them by e-mail when they are about to hit the limit and by setting specific rates for overuse fees.

“The choice seems to be using the university network or moving off-campus to buy Verizon or Time Warner Cable broadband to avoid the usage cap,” counters Neal. “I am not sure their ‘choice’ argument flies if students don’t have the option of signing up for Road Runner in their rooms on their own, bypassing the Internet Overcharging altogether.”

Both Neal and Gregory A. Jackson, vice president of Educause, seem to be reaching consensus on whether or not universities should be charging students for Internet separately from room and board.  Jackson notes it is a discussion being held at an increasing number of universities.  Neal thinks having a wide open access policy to deliver competition could solve this problem in short order, and students should make the decision where to spend their broadband funds themselves.

“If Cornell’s IT bureaucracy faced unlimited-access competition from Verizon and Time Warner Cable, do you think they’d still have a 50GB usage cap, considering only a small percentage of their captive customers exceeded it,” Neal asks.  “Of course not.”

[Thanks to PreventCAPS for the story idea.]

Their prices are sky high.

Back in May 2010, Stop the Cap! launched a debate with a few Wireless Internet Service Providers (WISPs) that provide largely rural America with wireless access to the Internet over long range Wi-Fi networks.  The debate got started when Matthew Larsen, who runs the Wireless Cowboys blog, announced the arrival of an Internet Overcharging scheme at his WISP — Vistabeam, which serves residents in rural Wyoming and Nebraska.

WISPs are being increasingly challenged by the changing tastes of Internet customers, who are gravitating towards broadband multimedia content, saturating limited capacity networks and forcing regular infrastructure upgrades to keep up with increasing usage demands.  Unlike larger providers, many WISPs are independent, family-run businesses that lack easy access to capital and resources to rapidly respond to demand, especially when most have a rural customer base that numbers in the hundreds or thousands.

That’s one of the reasons why Stop the Cap! has not been as harsh on these providers when they implement usage limit schemes on their customers.  Because WISPs provide service where cable and phone companies usually don’t bother to serve, these wireless providers are the only option beyond satellite Internet, which we regularly label “fraudband” for claims of broadband speeds that are rarely delivered.  Still, we were not impressed last year with some of Larsen’s language about what his usage caps were intended to do (underlining ours):

I feel that these caps are more than generous, and should have a minimal effect on the majority of our customers.   With our backbone consumption per customer increasing, implementing caps of some kind became a necessity.    I am not looking at the caps as a new “profit center” – they are a deterrent as much as anything.    It will provide an incentive for customers to upgrade to a faster plan with a higher cap, or take their download habits to a competitor and chew up someone else’s bandwidth.

Ouch.

It’s been over a year, and Larsen is back with an editorial patting himself on the back for an Internet Overcharging success story well-implemented:

We have never raised prices on our services.    We still have a customer note on the wall that reads “Your bill was the only one I got this month that DIDN’T go up.   Thank you!”     I would have a hard time raising prices on this person because of their neighbors that are downloading 20x as much.   Usage Based Billing is a much fairer way to go, especially when the provider faces so much reinvestment cost to accommodate the heavier users.   After the first year of implementation, I am very glad that we took the time to implement it and intend to use the revenue to build a better network for all of our customers.

Larsen is also upset with those who believe in the concept of unlimited Internet:

Operating a broadband network is not free, and it is not a low-maintenance business.   I have a group of dedicated employees and subcontractors that have spent a lot of late nights and early mornings away from their families to build and maintain our network.   Anyone who thinks that unlimited broadband is a God given right should be forced to spend a few days in my lead tech’s shoes, getting a good look at what a broadband provider has to do to build a network and keep it running.

Larsen, like other WISPs are confronting the reality that Internet usage is on the upswing, and while we sympathize with the challenges faced by Vistabeam and other WISPs, his statements do not apply to every broadband network around.  And frankly, an increasing number of customers simply aren’t interested in Larsen’s challenges, especially if another provider can deliver service more cheaply and efficiently.  Vistabeam better hope nobody does, because their prices are simply not competitive if just about any other provider manages to work their way into his territory.

Vistabeam prices start at $29.95 a month for 384kbps/128kbps service with a monthly usage limit of 10GB.  Exceed that and you will pay an additional $1 per gigabyte.  Customers who need more speed pay dearly for it.  A tier providing 4/2Mbps service will run you $99.95 a month with a 60GB monthly usage allowance.

As of late, Larsen has been railing against the U.S. Department of Agriculture over recent broadband stimulus awards designed to improve coverage of broadband Internet in the same rural regions of the country Vistabeam serves.  He’s upset the USDA has awarded a $10.2 million infrastructure loan to the Hemingford Cooperative Telephone Company, which provides service in western Nebraska under the name Mobius Communications.

Larsen speaks highly of the fact Vistabeam delivers service in the absence of government funding or stimulus. But average consumers are not likely to care when they compare prices and consider the fact Mobius doesn’t appear to limit customers’ usage.

Mobius DSL Prices:

• 500kbps – $35.00
• 1.5Mbps – $40.00
• 3Mbps – $50.00
• 5Mbps – $60.00 (Currently available in Alliance and Chadron.)

Mobius charges effectively half the price Vistabeam charges, and offers faster tiers of service in some areas, without fear of overlimit fees.  It’s also important to recognize the “award” was actually a “loan,” which must be repaid.  Larsen seems less upset with the fact there are broadband stimulus programs than with the reality industry lobbying has effectively cut out many Wireless ISPs from standing any chance of winning one.

I get especially frustrated by loan awards like this one because I have operated two ISPs that have had to compete directly with Mobius and did not have access to any federal grant or loan programs.   The USDA Broadband and Loan programs are essentially only available to [regional phone companies].   When I made inquiries into the programs several years ago, I found that they would only loan to a single recipient in a region so that they were not funding competing projects.

Phillip Dampier

For Stop the Cap!, our constituents are consumers interested in obtaining the best possible broadband service at the best price.  Larsen’s views, understandable from the perspective of a business owner, would leave a number of consumers paying effectively double the price for usage-limited broadband. That would, however, satisfy a business argument that self-funded private providers should not face competition from other providers that can extend faster, unlimited DSL, cable, or fiber service with low interest loans.

Wouldn’t a better solution be to form a coalition to force open the same beneficial loan programs to Wireless ISPs who can more readily and affordably build up their networks and ease the Internet Overcharging that too often comes along for the ride?  We’re not accusing Larsen of gouging his customers for fun and profit, but we would like to see WISPs like Vistabeam develop win-win strategies that deliver success for their innovative efforts and lower priced, faster service for their customers.

The alternative may be the eventual arrival of those rural phone companies, increasingly equipped to deliver faster and cheaper service to Vistabeam’s current customers, eventually spelling disaster to that company’s business plan.  It has happened before.  Anyone remember the “wireless cable” industry that delivered a few dozen cable channels over microwave signals?  That’s a service whose time came and went, largely replaced with satellite television and rural telephone cable TV, better equipped to provide the kind of service consumers actually wanted, but wireless cable was ill-equipped to provide.

Customers who flee Bell Canada’s products and services for lower prices and less abusive Internet Overcharging are being encouraged to visit what Bell internally calls its “customer winback” website.  It’s Bell Canada’s place to extend special pricing and promotional offers to those considering a return to the telephone company.  But Stop the Cap! found the offers less than compelling and some of the company’s claims a real stretch:

There are many reasons to switch to Bell.

Switch to Bell for the most reliable home phone service¹. We’ve made many enhancements and are so confident you’ll enjoy our services, they come with a complete 30-day satisfaction guarantee, or your money back².  Switching is easy.  You can keep your existing home phone number³ and we’ll take care of the details with your current service provider.

With Bell Home phone you’ll enjoy:

• The most reliable service
• No reconnection fees

Plus, take advantage of savings on more great Bell services for your home.

Bell Internet – Perfect for sharing

• The largest fibre optic network in Canada
• Upload speeds up to 3x faster than cable⁴
• Free Wireless Home Network

Bell Satellite TV- Over 100 HD channels

• Stunning HD picture quality – 10x better than regular cable
• Canada’s best HD PVR⁵ – set and manage recordings from anywhere
• On Demand movies in 1080p HD – the highest quality of any provider

With Bell Install, you get a complete and customized installation at no charge⁶. Sit back, relax and we’ll set everything up for you.

Join the thousands of customers switching to Bell every week and start saving.

With six footnotes to the fine print in as many paragraphs, warning bells begin to ring almost immediately.  Those footnotes can cost customers some real money:

1. Applies to traditional copper-based (excluding fibre-based) wireline telephony; compared to cable telephony and based on continued service during extended power outages at customer’s home.

In other words, Bell phone service is more reliable because it works when the power goes out, unless it’s from Bell’s Fibe TV.  When power drops, your Bell Fibe phone line goes with it.  But if your phone lines are rotten, nothing will save you from a phone service outage, whether you are a wireline or “fibre-based” customer.  By the way, although Fibe is fibre part of the way, it ultimately arrives for most customers on the same copper wire phone line technology you’ve had for decades.

2. Credit offered on service fees for TV, Internet, Home phone (excluding Mobility), and applicable installation, activation or equipment fees; does not apply to usage fees (such as long distance, additional Internet usage capacity, On Demand TV programming). Client must call within 30 days of activation. Conditions apply, see bell.ca/satisfaction.

Among the other terms and conditions not immediately disclosed:

• No refunds will be issued to customers modifying or upgrading any existing Eligible Services;
• Prior to issuing a refund for equipment purchased directly from Bell, the equipment must be returned to Bell in the same condition as when it was purchased, with all original packing materials, manuals, accessories and associated equipment, along with proof of purchase;
• You may claim no more than one (1) refund under the Bell Satisfaction Guarantee in any 12 month period;
• You must be fully compliant with the terms and conditions applicable to your Eligible Services, and
• All accounts for Bell services must be in good standing.

3. Within same local calling area

A no-brainer.

4. Current as of May 1, 2011. Comparison between Bell Fibe Internet 25 (upload up to 7 Mbps) and Rogers Ultimate Internet (upload up to 2 Mbps).

Bell apparently doesn’t think Quebec’s Videotron is worth mentioning.  They upgraded to 3Mbps upload speeds for their highest tiers last February.  Like AT&T’s U-verse, “fiber to the neighborhood” networks simply cannot deliver the fastest download Internet experience that fiber to the home or cable DOCSIS 3 providers can deliver, although the upload speed for Fibe (when you actually achieve 7Mbps) is a nice change from the neutered speeds cable companies provide for “the up side.”  But Bell counts your upload traffic against the usage allowance.

5. Based on a combination of 30-second skip function, 9-day programming guide, expandable recording capacity and remote PVR feature. Additional equipment required.

Additional equipment costs additional money.

6. Conditions apply; see bell.ca/fullinstall for Bell Internet and bell.ca/installationincluded for Bell TV. For Home Phone, available to customers with Home Phone Choice or Complete, or with Unlimited Canada/US long distance plan, or the Bell Bundle; one-time activation fee (up to $55/line) applies, credited on the account before taxes, and additional charges may apply for installation of a new phone jack.

A complete and customized installation “at no charge,” except for that pesky $55 “activation fee” eventually credited on the account (but you still pay GST/PST on the ‘rebated’ amount).  Some of our readers have complained to us that they’ve had to call Bell, sometimes repeatedly, to get that activation fee credited back.  Bell sometimes forgets.

Unfortunately, for too many in suburban and rural Canada, it’s Bell telephone infrastructure or nothing — no cable provider exists to offer a competitive alternative.  They are the company that charges more for less.

Considering Bell is Canada’s number one advocate for Internet Overcharging, you can do better with almost any other provider.  Let Bell know they can “win you back” when they deliver scheme-free service at a fair and reasonable price.  Until then, tell them they can swing alone.

Phillip "Try the Gouda" Dampier

Welcome to the Broadband Usage Whine & Cheese Festival

Midcontinent Communications earlier this month announced a big boost in broadband speeds for more than 250,000 customers in the Dakotas and Minnesota, bringing up to 100/15Mbps service to customers who wanted or needed that speed.

MidcoNet Xstream Wideband, made possible with a DOCSIS 3 upgrade, delivers 1/1Mbps ($30.95), 30/5Mbps ($44.95), 50/10Mbps ($64.95), or 100/15Mbps ($104.95) service.  Those are mighty fast speeds for an upper midwestern cable company, especially in states where 1-3Mbps DSL is much more common.

The cable provider was excited to introduce the speed upgrades earlier this month, telling customers:

At up to 100 Mbps, MidcoNet Xstream^® Wideband is fast. But today’s online experience is about more than speed. It’s about the power and capacity to run every streaming, blogging, downloading, surfing, gaming, chatting, working, playing, connected device in the house. All at the same time. MidcoNet Xstream Wideband delivers…it’s everyone in your entire family online at once, doing the most intense online activities, no problem.

But now there is a problem.  Customers spending upwards of $105 a month for the fastest Internet speeds are actually using them to leverage the Internet’s most bandwidth-intensive services, and evidently Midco isn’t too happy about that.  Todd Spangler, a columnist for cable industry trade magazine Multichannel News, was given a usage chart by Midco, and used it to lecture readers about the need for usage caps: “One thing is clear: Broadband service providers will all need to do something to contain the rapidly rising flood of Internet data.”  The implication left with readers is that limiting broadband usage is the only way to stem the tide.

Midco's not-so-useful chart looks mighty scary, showing usage growth on their 100Gbps backbone network, but leaves an enormous amount of information out of the equation. (Source: Midcontinent Communications via Multichannel News)

Spangler quotes Midco’s vice president of technology Jon Pederson: “Like most network providers we have evaluated this possibility, but have no immediate plans to implement bandwidth-usage caps,” he said.

So Midco is more than happy to pocket up to $105 a month from their customers, so long as they don’t actually use the broadband service they are paying top dollar to receive.  It’s an ironic case of a provider desiring to improve service, but then getting upset when customers actually use it.

We say ironic because, from all outward appearances, Midco is well-aware of the transformational usage of broadband service in the United States these days:

If you have ever once said “my Internet is too slow,” then you need MidcoNet Xstream Wideband. With it, you can do all the cool things you’ve heard people are doing online. Explore all the great stuff your online world has to offer. Play the most intense games. Try things you could never do before, from entertainment to finance, video chat or video streaming. Like we said, MidcoNet Xstream Wideband is all about speed, capacity, choice and control.

What this means for you is that you’ll be able to do things like:

• Download and start enjoying entire HD movies in seconds, not minutes.
• Stream video and music without a hitch while you simultaneously perform other intense online tasks.
• Choose from three different pipelines, from 3.0 to 1.0, for the capacity and price your family needs.
• Monitor your bandwidth use to determine if you need more capacity or can do what you want with less.
• Upload files or signals, such as webcam footage, faster than ever before possible for a better online experience.
• Watch ESPN3.com. Your Favorite Sports. Live. Online.

Just don’t do any of these things too much.  Indeed, when providers start toying with usage caps, it’s clear they want you to use your service the same way you did in 2004 — reading your e-mail and browsing web pages.  Real Audio stream anyone?

Let’s ponder the facts Mr. Spangler didn’t entertain in his piece.

Midco upgraded their network to DOCSIS 3 technology to deliver faster speeds and provide more broadband capacity to customers who are using the Internet much differently than a decade ago, when cable modems first became common.  Some providers and their trade press friends seem to think it’s perfectly reasonable to collect the proceeds of premium-priced broadband service while claiming shock over the reality that someone prepared to spend $100 a month for that product will use it far more than the average user.

Part of the price premium charged for faster service is supposed to cover whatever broadband usage growth comes as a result.  That’s why Comcast’s 250GB usage cap never made any sense.  Why would someone pay the company a premium for 50Mbps service that has precisely the same limit someone paying for standard service has to endure?

Cringely

Midcontinent Communications is a private company so we do not have access to their financial reports, but among larger providers the trend is quite clear: revenues from premium speed accounts are being pocketed without a corresponding increase in investment to upgrade their networks to meet demand.  Inevitably that brings the kind of complaining about usage that leads to calls for usage caps or speed throttles to control the growth.

We’re uncertain if Midco is making the case for usage caps, or simply Mr. Spangler.  We’ll explain that in a moment.  But if we are to fully grasp Midco’s broadband challenges, we need much more than a single usage growth chart.  A “shocking” usage graph is no more impressive than those showing an exponential increase in hard drive capacity over the same period.  The only difference is consumers are paying about the same for hard drives today and getting a lot more capacity, while broadband users are paying much more and now being told to use less.  Here is what we’d like to see to assemble a true picture of Midco’s usage “dilemma:”

1. How much average revenue per customer does Midco collect from broadband customers.  Traditional evidence shows ARPU for broadband is growing at a rapid rate, as consumers upgrade to faster speeds at higher prices.  We’d like to compare numbers over the last five years;
2. How much does Midco spend on capital improvements to their network, and plot that spending over the last 10 years to see whether it has increased, remained level, or decreased.  The latter is most common for cable operators, as the percentage spent in relation to revenue is dropping fast;
3. How many subscribers have adopted broadband service over the period their usage chart illustrates, and at what rate of growth?
4. What does Midco pay for upstream connectivity and has that amount gone up, down, or stayed the same over the past few years.  Traditionally, those costs are plummeting.
5. If the expenses for broadband upgrades and connectivity have decreased, what has Midco done with the savings and why are they not prepared to spend that money now to improve their network?

While Midco expresses concern about the costs of connectivity and ponders usage caps, there was plenty of money available for their recent purchase of U.S. Cable, a state-of-the-art fiber system serving 33,000 customers — a significant addition for a cable company that serves around 250,000 customers.

A journey through Midco’s own website seems to tell a very different story from the one Mr. Spangler is promoting.  The aforementioned Mr. Pederson is all over the website with YouTube videos which cast doubt on all of Spangler’s arguments.  Midco has plentiful bandwidth, Mr. Pederson declares — both to neighborhoods and to the Internet backbone.  Their network upgrades were designed precisely to handle today’s realistic use of the Internet.  They are marketing content add-ons that include bandwidth-heavy multimedia.  Why would a provider sell customers on using their broadband service for high-bandwidth applications and then ponder limiting their use?  Mr. Pederson seems well-aware of the implications of an increasingly connected world, and higher usage comes along with that.

That’s why we’d prefer to attack Mr. Spangler’s “evidence” used to favor usage caps instead of simply vilifying Midco — they have so far rejected usage limits for their customers, and should be applauded for that.

Robert X. Cringely approached Midco’s usage chart from a different angle on his blog, delivering facts our readers already know: Americans are overpaying for their broadband service, and the threat of usage caps simply disguises a big fat rate hike.  He found Midco’s chart the same place we did — on Multichannel News’ website.  He dismisses its relevance in the usage cap debate.  Cringley’s article explores the costs of broadband connectivity, which we have repeatedly documented are dropping, and he has several charts to illustrate that fact.

You’ll notice for example that backbone costs in Tokyo, where broadband connections typically run at 100 megabits-per-second, are about four times higher than they are in New York or London. Yet broadband connections in Tokyo cost halfwhat they do in New York, and that’s for a connection at least four times a fast!

So Softbank BB in Tokyo pays four times as much per megabit for backbone capacity and offers four times the speed for half the price of Verizon in New York. Yet Softbank BB is profitable.

No matter what your ISP says, their backbone costs are inconsequential and to argue otherwise is probably a lie.

Cue up Time Warner Cable CEO Glenn Britt, who said precisely as much Thursday morning when he admitted bandwidth costs are not terribly relevant to broadband pricing.

We knew that, but it’s great to hear him say it.

Cringely’s excellent analysis puts a price tag on what ISP’s want to cap for their own benefit — their maximum cost to deliver the service:

That 250 gigabytes-per-month works out to about one megabit-per-second, which costs $8 in New York. So your American ISP, who has been spending $0.40 per month to buy the bandwidth they’ve been selling to you for $30, wants to cap their maximum backbone cost per-subscriber at $8.

[…] IP Transit costs will continue to drop. That $8 price will most likely continue to fall at the historical annual rate of 22 percent. So what’s presented as an ISP insurance policy is really a guaranteed profit increase of 22 percent that will be compounded over time because consumption will continue to rise and customers will be for the first time charged for that increased consumption.

This isn’t about capping ISP losses, but are about increasing ISP profits. The caps are a built-in revenue bump that will kick-in 2-3 years from now, circumventing any existing regulatory structure for setting rates. The regulators just haven’t realized it yet. By the time they do it may be too late.

Unfortunately, even if they knew, we have legislators in Washington who are well-paid in campaign money to look the other way unless consumers launch a revolution against duopoly broadband pricing.

Cringely believes usage caps will be the form of your provider’s next rate increase for broadband, but he need not wait that long.  As the aforementioned CEO of Time Warner Cable has already admitted, the pricing power of broadband is such that the cable and phone companies are already increasing rates — repeatedly — for a service many still want to cap.  Why?  Because they can.

Consumers who have educated themselves with actual facts instead of succumbing to ISP “re-education” efforts designed to sell usage limits under the guise of “fairness” are well-equipped to answer Mr. Spangler’s question about whether bandwidth caps are necessary.

The answer was no, is no, and will always be no.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Midco D3 Upgrade Promo 7-11.flv[/flv]

Jon Pederson’s comments on Midcontinent’s own website promoting its new faster broadband speeds can’t be missed.  He counts the number of devices in his own home that connect to the Internet, explains how our use of the Internet has been transformed in the past several years, and declares Midco well-prepared to deliver customers the capacity they need.  Perhaps Mr. Spangler used the wrong company to promote his desire for Internet usage caps.  Pederson handily, albeit indirectly, obliterates Spangler’s own talking points, which makes us wonder why this company even pondered Internet Overcharging schemes like usage caps in the first place.  (10 minutes)

AT&T warns DSL customers they can watch 10 High Definition movies per month... and use their Internet connection for absolutely nothing else, unless they want to incur an overlimit fee of $10.

AT&T has released a phoney baloney video for their customers purporting to “explain” broadband usage and the company’s completely arbitrary usage limits on DSL and U-verse customers: “A single high-traffic user can utilize the same amount of data capacity as 19 typical households. Lopsided usage patterns can cause congestion at certain points in the network, which can slow Internet speeds and interfere with other customers’ access to and use of the network.”

Too bad these claims are not verified with actual facts.

Meaningless statistics

AT&T’s claim that less than two percent of their customers use 20 percent of available bandwidth is frankly meaningless to the company’s DSL and U-verse hybrid fiber-copper networks.  For years, phone companies made a marketing point that unlike cable broadband’s shared network, their DSL service was never shared with anyone else in a neighborhood.  Therefore, running it at a trickle or full speed ahead should have no impact on any other customer.  The only exception to this rule comes from phone companies that under-invest in their middle mile and backbone networks.  For AT&T, that means trying to serve too many customers on inadequate equipment ranging from a poorly planned network of D-SLAMs, which connect individual customers with a fatter pipeline back to the central office, or an inadequate network between the central office and AT&T’s regional backbones.  Fiber, such as that used by AT&T’s more modern U-verse system, completely solves any capacity issues.  Broadband traffic is only a tiny percentage of the bandwidth consumed by AT&T’s IPTV video service — the one that delivers U-verse TV to your home.  AT&T imposes no viewing limits on customers, of course.

Any actual capacity crunch would only show up during peak usage periods — when AT&T customers of all kinds pile on their broadband connection at the same time. AT&T’s usage cap regime does next to nothing to mitigate that kind of congestion.  Here’s why:

Since AT&T and other broadband companies routinely claim the average use per customer is well under 20GB per month, and only 2 percent of customers are currently deemed “heavy users” by AT&T, that tiny percentage of customers cannot create sufficient drag on AT&T’s DSL network even if they opened up their connections to full speed traffic.  In reality, the 98 percent of “average” users piling on the network during prime time would be the only thing capable of the kind of critical mass needed to create visible congestion.  What uses more capacity?  Two customers using their 7Mbps DSL lines to stream online videos concurrently or 98 customers all using their 7Mbps DSL lines at the same time for virtually any online activity?

The math simply doesn’t add up.

The Congestion Myth

AT&T targets their broadband customers with an unwarranted, arbitrary Internet Overcharging scheme they cannot effectively explain to customers.

As two week’s of hearings this month have demonstrated, Bell Canada’s similar arguments for its usage caps simply come without any evidence of actual congestion.  In fact, company officials modified their position to talk more about peak usage congestion, a problem that cannot be controlled with a usage cap well in excess of the average consumer’s usage.  In fact, only a speed throttle could control network congestion at the times it actually occurred.  AT&T also ignores when its customers are using its network.  Is a heavy user downloading files at 3 in the morning creating a problem for other users?  No.  Are the majority of their average-usage customers all jumping online after school or work creating a problem?  Perhaps, if you believed AT&T even had a congestion problem.

Industry maven Dave Burstein does not, and Burstein talked to two chief technology officers at AT&T who told him wired broadband congestion is a “minimal” problem for the phone company.

Upgrades and Cord-Cutting, Delayed

Two things usage caps can do is help your company delay necessary upgrades to meet customers’ broadband needs, whether they are “heavy users” or not.  AT&T has shown itself historically to be slow to invest, and cheap when it does.  AT&T’s wireless network is bottom-rated by consumers thanks to inadequate network capacity.  The company elected to upgrade on-the-cheap to an IPTV platform that still relies on copper phone lines to deliver service that simply cannot compete in quality and capacity with Verizon’s FiOS fiber to the home network.  But investors love the fact the company counts every penny, even if it means inconveniencing and overcharging customers for their services, usually offered in duopoly or monopoly markets.

AT&T’s usage caps on U-verse are even less credible than those imposed on their DSL service.  U-verse is a fiber to the neighborhood network with near limitless capacity for broadband and video.  In fact, the only “congestion” comes from the copper phone lines that limit how much bandwidth can be supplied to your individual home.  But no matter how much you use, you will not affect your neighbors because your copper phone line is shared with nobody else.  In fact, the biggest chunk of U-verse’s bandwidth is reserved for their video services, which makes arguments about excessive Internet usage on that pipeline un-credible.

What AT&T’s usage cap does assure is that you will not drop that video package from your U-verse service anytime soon.  That lucrative revenue from expensive video packages cannot be forfeit without a fight, and a nice deterrent in the form of an arbitrary usage cap does wonders to keep that cord cutting to a minimum.

Meters That Don’t Measure

One of the worst ongoing problems with Internet Overcharging schemes like AT&T’s is the broken usage meter.  Stop the Cap! has received hundreds of e-mails from AT&T DSL and U-verse customers who report AT&T’s usage meter is either unavailable, broken, or is wildly inaccurate.  With absolutely no independent oversight, and no consistently accurate usage measurement, charging anyone overlimit fees with a broken meter doing the counting is unconscionable.  Yet AT&T may well try.  The company has already been sued by one law firm for what it alleges is an unfair usage meter on the company’s wireless service — a meter that consistently overcounts usage in AT&T’s favor.

AT&T admits they cannot even accurately measure their own customers' usage.

Once getting over the broken meter, customers are directed to a pointless usage-estimator — the ones that tell you about how many tens of thousands of e-mails you can send and receive under AT&T’s cap regime.  In fact, these statistics are irrelevant for the vast majority of customers who never think of sending 10,000 e-mails or exchanging 2,000 pictures or songs.  That’s because customers do not use the Internet to exclusively do those things.  Even with the guestimator, they are left checking a broken usage meter to ponder whether or not they can watch one more show or download another file without incurring a $10 overlimit penalty (or more).  That “generous” limit AT&T touts suddenly doesn’t look so ample when the company gets to the wildly popular activity of streamed video.  AT&T’s own video warns you can only watch 10HD movies a month over your broadband connection — and absolutely nothing else.  No web browsing, e-mail, or photos or music.  Ten movies a month.  Still thinking of dropping your U-verse video subscription now?

Yet AT&T has the nerve to claim, “Our goal is to provide you with the best Internet service possible.”  Really?

Thankfully, not every member of the investor class is thrilled with nickle-and-diming broadband consumers for usage that costs the providing company next to nothing.

The Economist excoriated AT&T for its unwarranted usage limits on its blog earlier this year:

The use of caps allows providers to dish out bandwidth with one hand and take it away with the other. The companies have vastly increased the capacity of various copper, coaxial and fibre lines, but artificially separate out a portion—at least half and often much more—for video which a set-top box or a broadband modem spits out as an apparently distinct service. Cable firms simultaneously push out hundreds of digital channels, while telecoms firms rely on multiple digital streams from live broadcast or cable TV or on-demand pay-per-view. It is as though the water main were divided as it entered the home and a steady, modest stream was made available for showers and at the tap, while most of it was always at the ready for a coin-operated washing machine.

Increasing speed on the internet portion, which would allow consumers to give up on TV subscriptions, is balanced by capping volume. If a consumer does not monitor usage, his internet access can be withdrawn or, in AT&T’s case, overage fees of $10 charged for every additional 50 GB of usage. […] [That] $10 charge applies whether the limit was breached by 1 MB or a smidgen under 50 GB.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Usage.flv[/flv]

AT&T’s new video on broadband usage is based on facts not in evidence and only adds to consumer confusion about arbitrary Internet Overcharging schemes.  (4 minutes)