Jenkins

The Wall Street Journal attempted to attach its own conventional wisdom in an opinion piece about cloud-based streaming that suggests Canada “is just ahead of the U.S. in introducing usage-based pricing [and] has bloggers and politicians accusing Bell Canada of unconscionable ‘profiteering’ from usage caps. The company, they rage, is reaping huge fees for additional units of bandwidth that cost Bell Canada virtually nothing to provide.”

The author, Holman Jenkins, is a regular on the ultra-business friendly editorial page of the Journal, and has been raging against Net Neutrality and for higher Internet pricing for several years now.

Jenkins’ latest argument, just like his earlier ones on this subject, falls apart almost immediately:

This critique, which is common, could not more comprehensively miss the point. Another car on the roadway poses no additional cost on the road builder; it imposes a cost on other road users. Likewise, network operators don’t use overage penalties to collect their marginal costs but to shape user behavior so a shared resource won’t be overtaxed.

Jenkins needs to spend less time supporting his friends at companies like AT&T and Bell and more time exploring road construction costs.  If you are going to try and make an analogy about traffic, at least get your premise straight.

Before debunking his usage-based billing meme, let’s talk about road construction for a moment.  In fact, the kind of traffic volume on a roadway has everything to do with what kind of road is constructed.  In the appropriately named “Idiots’ Guide to Highway Maintenance,” C.J.Summers explores different types of road surfaces for different kinds of traffic.  Light duty roads in rural areas can get results with oil and stone.  Medium duty side streets and avenues are frequently paved with asphalt, and heavy duty interstates routinely use concrete.  Traffic studies are performed routinely to assist engineers in choosing the right material to get the job done.

Digital information doesn’t wear down cables or airwaves.  If broadband traffic occupies 5 or 95 percent of a digital pipeline, it makes no difference to the pipeline.  Jenkins is right when he says Internet Overcharging schemes are all about shaping user behavior, but for the wrong reasons.

Jenkins thinks Netflix and other high bandwidth applications face usage-based pricing to allow providers to keep their broadband pipes from getting overcongested:

Netflix is one of the companies most threatened by usage-based pricing, and it has quickly geared up a lobbying team in Washington. In a recent letter to shareholders, CEO Reed Hastings downplayed the challenge to Netflix’s video-streaming business. In the long run, he’s probably right—the market will settle on flat-rate pricing once the video-intensive user has become the average user.

In the meantime, however, Netflix shareholders had better look out.

In fact, providers are reaping the rewards of their popular broadband services, but almost uniformly are less interested in investing in them to match capacity.  It is as if the AT&Ts of this world assumed broadband users would consume    T H I S    M U C H   and that’s it — time to collect profits.  When upgrade investments don’t even keep up as a percentage of revenue earned over past years, the inevitable result will be a custom-made excuse to impose usage limits and consumption billing to manage the “data tsunami.”

Canadian providers did not slap usage caps on broadband users because Netflix arrived — they lowered them. Telling users they cannot consume the same amount of bandwidth they used a month earlier has nothing to do with managing traffic, it’s about protecting their video businesses by discouraging consumers from even contemplating using the competition.  Jenkins works for a company that understands that perfectly well.  News Corp., has a major interest in Hulu as well as satellite television services in Europe and Oceania.

The rest of Jenkins’ piece is as smug as it is wrong.  In attacking Net Neutrality supporters as “crazies” trying to defend their “hobby horse,” Jenkins claims public interest groups are pouting about usage-based billing, too:

All along, what the net neut crazies have lacked in intellectual consistency they’ve made up in fealty to the business interests of companies that fear their services would become unattractive if users had one eye on a bandwidth meter. That’s why opposition to “Internet censorship” morphed into opposition to anything that might price or allocate broadband capacity rationally. But such a stance is rapidly becoming untenable, whether the beneficiary is Google, with its advertising-based business model, or Netflix, Apple, Amazon and others who hope to capitalize on the entertainment-streaming opportunity.

All are betting heavily on the cloud. All need to start dealing realistically with the question of how the necessary bandwidth will be paid for.

Part of Jenkins’ theory calls back on his usual Google bashing — he perceives the company as a parasite stealing the resources bandwidth providers paid for, while forgetting the success of their businesses ultimately depends on content producers (who indeed pay billions for their own bandwidth) making the service interesting enough for consumers to buy.

But there is nothing rational about Jenkins’ support for Internet Overcharging.  North Americans already pay some of the highest prices in the world for the slowest service.  While providers attempt to lick the last drop of profits out of increasingly outdated networks (hello DSL!), their future strategy is less about expanding those networks and more about constraining the use of them.

Jenkins is ignorant of the fact several of Net Neutrality’s strongest proponents, Public Knowledge being a classic example, have not historically opposed usage-based pricing, much to my personal consternation.  As we’ve argued (and I submit proved), Net Neutrality and Internet Overcharging go hand in hand for revenue hungry providers.  If they cannot discriminate, throttle, or block traffic they consider to be costly to their networks, they can simply cap demand on the customer side with usage limits or confiscatory pricing designed to discourage use.  That is precisely what Canadians are fighting against.

It’s all made possible by a broken free market.  Instead of hearty competition, most North Americans endure a duopoly — a phone company and a cable company.  Both, particularly in Canada, have vested interests in video entertainment, television and cable networks, and other entertainment properties.  As long as these interests exist, companies will always resist challenges to their core business models, such as cable TV cord cutting.  It’s as simple as that.

The “realistic” way bandwidth will be paid for escapes Jenkins because his quest for condescension takes precedence over actual facts.  Content producers already pay enormous sums to bandwidth providers like Akamai, Amazon, and other cloud-based distribution centers.  Consumers pay handsomely for their broadband connections, part of which covers the costs of delivering that content to their homes and businesses.  AT&T and other providers don’t deserve to get paid twice for the same content.  Indeed, they should be investing some of their enormous profits in building a new generation of fiber-based broadband pipelines to keep their customers happy.  Because no matter how much data you cram down a glass fiber, the ‘data friction’ will never cause those cables to go down in flames, unlike Jenkins’ lapsed-from-reality arguments.

High gain Wi-Fi antennas like this one allowed one Ontario couple to leave Canada's cable companies behind and sign up for Time Warner service in the United States.

Last week, Stop the Cap! compared prices from two Internet Service Providers — Rogers Communications on the western side of the Niagara River — in Ontario, and Time Warner Cable on the eastern side in Niagara Falls, N.Y.

The price disparity is no secret to one Canadian family who read our piece and let us know they import their broadband service, thanks to long distance Wi-Fi, from the United States.

The couple, Neil and Michelle (we’ve been asked not their reveal their real names) and their three boys have lived along the Niagara River, which divides the United States and Canada, for over a decade.  Jim has been fascinated with low power, long distance communications since his days in amateur radio.

“I’ve always been trying to see what stations I can pick up, especially low power ones,” Neil tells us.

That curiosity came with Neil to his interest in broadband wireless communications.  Living along the river, Neil was fascinated to see Wi-Fi signals make their way across the river from the United States’ side.

“Thanks to a clear shot across the river, and a lot of businesses located adjacent to the Robert Moses Parkway, it’s easy to pickup Wi-Fi signals from businesses on the American side,” says Neil.

Neil discovered many networks wide open for public use and began to consider the implications of “importing” his broadband service from the United States to escape Rogers’ high prices.

“For Canadians, the idea of escaping the country’s communications providers is not that unusual,” Neil says.  “Some already have ‘gray market’ satellite dish accounts with America’s DISH or DirecTV, and some even use American prepaid cell phones, which are much cheaper than our own services and get good local reception across Niagara Falls down to Fort Erie.”

“So I began wondering what would happen if we could install a decent Wi-Fi system high enough on the house to get a good signal from a partner on the other side of the river,” Neil pondered.  “We started by putting a test signal up and driving through some Niagara Falls neighborhoods on the American side and found some good prospects.”

A long-shot advertisement on a well-known “for-sale/trade” website paid off, when an American family responded, intrigued by the experiment.

“The fact we were willing to pay their cable bill as compensation didn’t hurt either,” Neil suggests.  “The chances appeared very good for success, because we can see some of their trees from our roof.”

Niagara Falls, Ontario (left) and Niagara Falls, N.Y. (right), divided by the Niagara River.

Neil guessed right because today, with the help of two raised directional, roof-mounted high-gain Wi-Fi antennas that can literally “see” one another, the Ontario family enjoys its cable-TV and broadband service from Time Warner Cable.

“The signal is rock solid and the only time we get some speed problems is if someone in one of the bed and breakfast places nearby ends up on our channel,” Neil says.  “We can even watch television with the help of a Slingbox we installed on the American side which works perfectly fine on a Wireless N connection.”

Since the rise of Canada’s exchange rate against America’s declining dollar, the savings are dramatic. A comparable cable-TV plan with Rogers runs $80 a month for standard service, equipment fees, and HD service charges.  Add another $50 for broadband service with the modem rental fee and Neil would pay Rogers $130 a month before taxes for the two services.

“And we would be limited to just 60GB of usage per month before the $2/GB overlimit fee started making the bill even higher,” Neil says.

Time Warner Cable currently charges Neil’s adopted family $87 a month for television and broadband on a promotion.

Today, Neil’s conscience (and savings) led him to decide “borrowing” another family’s account wasn’t fair, so now he pays for -two- accounts with Time Warner, one for the New York family, the other belonging to him.

“Time Warner thinks of us as apartment renters and bills a post office box,” Neil says.  “The other family doesn’t care about cable-TV anymore so we’re just paying for their broadband account.”

The neighbors are certainly amused.

“When they come over, they call us ‘the American Embassy in Niagara Falls’ because of all the ads for Time Warner they see across the cable channels we get and because American cable systems ignore virtually all Canadian TV networks.”

Why go through all this?

“Now that we’re paying for two accounts, it’s a matter of principle,” Neil says. “I will not do business with a company that slaps usage limits on broadband, and now I don’t have to.”

In fact, now that the family’s sons are getting close to teen years, their Internet use is growing.

“We almost don’t care about the cable-TV anymore ourselves — we’re watching shows online, on-demand in this household,” Neil says.  “For my kids, they are growing up with the concept of television being always on-demand and it works around their schedule, not the other way around.”

Besides, Americans have access to Hulu, and Canada does not.

“Hulu is very important, and Netflix was even before it was sold in Canada,” Neil says.  “Now we can watch what we want, as much as we want, and pay a fair price for unlimited broadband.”

Neil can’t complain about Time Warner Cable, except for the fact it provides him with a U.S. IP address, which locks him out of a lot of Canadian online video-on-demand services from the CBC and other networks’ websites.

“They do a much better job than Rogers ever did with consistent broadband speeds and fewer outages, and we can live without replays of 18 to Life and Little Mosque on the Prairie,” Neil says. “I’m just glad you folks at Stop the Cap! convinced Time Warner to abandon the kind of pricing that is ruining the hell out of Canada’s broadband.”

Netflix today released statistics showing Frontier Communications was America’s worst ranked wired Internet Service Provider, ranking at the bottom for quality and speed when using Netflix’s streamed content.

Only Clearwire, a heavily-throttled wireless provider scored worse than Frontier Communications.  This says nothing good about Frontier considering they are a wired provider.

Charter Cable scored highest — a surprise from a company that scores near the bottom in Consumer Reports broadband rankings:

Charter is in the lead for US streams with an impressive 2667 kilobits per second average over the period. Rogers leads in Canada with a whopping 3020 kbps average.

Canada’s higher speed performance comes even as providers claim they need to implement Internet Overcharging schemes to handle congestion on their networks — congestion not apparent from Netflix’s online video performance. Perhaps Canadians have been already grown accustomed to avoiding too much online video.

Netflix promises to release their streaming performance statistics on a monthly basis. Track your ISP from the charts below:

Netflix USA Speed Rankings

Netflix Rankings for Canada

(Our reader Paul sent us a news tip about this story.  You can send yours using the Contact Form linked above.)

Shaw sets the bar lower.

Shaw Cable, western Canada’s largest cable company, has quietly lowered usage caps on virtually all of their broadband plans, while “forgetting” to change the date on their Terms of Service:

• Lite was 13GB, now increased to 15GB ($2/GB overages)
• High Speed was 75GB, now decreased to 60GB ($2/GB overages)
• Xtreme was 125GB, now decreased to 100GB ($1/GB overages)
• Warp was 250GB, now decreased to 175GB ($1/GB overages)
• Nitro was 500GB, now decreased to 350GB ($1/GB overages)

Shaw’s terms of service page documents changes implemented by the cable company and includes the revision date, changed whenever the terms change.  Not this time.  Blogger “Thewunderbar” documented Shaw left the revision date on the document unchanged, suggesting the cable company hadn’t made any adjustments to their service since July, 2010.  After publishing his piece, Shaw quietly updated their website to reflect the correct date.

Cable and phone companies in Canada have established a unique, unchecked duopoly.  They are systematically increasing prices while decreasing the amount of service provided to Canadian consumers.  Shaw’s decrease in usage limits comes with no corresponding price cut for Internet service.

At a time when Netflix streaming is attempting to make inroads into Canadian homes, broadband providers who also have interests in pay television (cable, phone or satellite) are working overtime to make sure no consumer believes they can safely cancel their cable-TV service and watch everything online.

Over the past four years, Canadian ISPs have embarked on a wide range of Internet Overcharging schemes:

• The elimination of flat rate, unlimited broadband service;
• The introduction of low usage allowances designed to trip up an increasing number of consumers leading to,
• The introduction of stinging overlimit fees for customers exceeding usage limits, at prices marked up from 500-5000 percent above wholesale;
• The introduction of speed throttles which artificially slow your broadband experience to speeds sometimes just above dial-up;
• The ongoing limbo dance of usage caps that decrease in size over time, exposing more consumers to overlimit fees, making them think twice about everything they do online.

Nobody has successfully monetized the broadband experience like Canadian ISPs have.  Even as their costs to deliver the service continue to rocket downwards, companies keep on increasing prices, exposing Canadian consumers to unwarranted bill shock from unjustified overlimit fees.  What does it cost Shaw per gigabyte?  An estimated 1-3 cents.  What do they charge you?  Up to $2.

It’s nothing short of a rip-off, and Stop the Cap! urges Canadian consumers to contact their member of Parliament and demand immediate action to ban these innovation-killing, job-retarding, unjustified overcharging schemes.

Wood

Roku CEO Anthony Wood told a cable trade publication he is not worried that providers will kill the market for his online video set-top box with Internet Overcharging schemes.

Wood told Multichannel News the broadband industry faces enough competition to prevent one or both traditional providers from implementing usage caps and metered pricing for broadband service.

“What we see from a practical point of view in the marketplace is that there’s enough competition from cable, telcos and wireless so that in every market there’s an unlimited option — and the price is competitive,” he said.  “Unlimited sells — it’s just a good marketing strategy.”

Wood may want to inform broadband providers of that, because several American phone and cable companies are experimenting with slapping usage limits on their customers, making his web-streaming set top box an expensive proposition.  For customers of Frontier Communications in Elk Grove, Calif., using too much Roku could mean broadband bills as high as $300 a month.

With some HD movies consuming 2-4 gigabytes per title, some companies experimenting with usage limits as low as 5GB per month would make online video the primary culprit for consumers blowing through their monthly usage allowance.  After one bill with overlimit fees arrives, the Roku box will be the first thing to go.

Netflix, a major investor in the Roku box, could see its plans to shift to online distribution of its massive DVD rental business stymied by large phone and cable providers, many of whom see Netflix and other online video services as competitors who use their broadband service to send movies to consumers.  Some cable and phone companies contend Roku, Netflix, and other online video streamers are freeloaders — using their networks “for free” and demanding additional compensation to keep carrying their content.

Wood discloses another reason why cable and phone companies could potentially adopt a hostile position towards his 100-employee operation — “cord cutting.”

Wood told Multichannel News about 12% of Roku customers say they have canceled cable or satellite TV after buying the set-top while another 12% said they reduced their service level.

The cable industry is trying to retain customers by putting an increasing amount of cable content online for subscribers who maintain their cable-TV package.  Roku gives subscribers one more reason to downgrade or cancel service, a problem that could be stopped with an Internet Overcharging scheme that makes using the product an expensive proposition.

Some Roku watchers believe Wood is making a mistake underestimating the telecom industry’s willingness to protect its turf.

Two years ago Roku VP Tim Twerdahl said the company was not worried about Comcast’s 250GB download cap.  But since then, other providers have proposed far lower caps.

Roku is best known for letting Netflix subscribers stream the video rental firm’s online titles direct to television sets.  But Roku also delivers access to Hulu, Amazon video, and a growing number of new “channels” delivering classic movies, music/music videos, news, and user-created programming.

The company offers three set-top models: HD ($60), which delivers up to 720p video; XD ($80), which adds support for up to 1080p and 802.11n Wi-Fi; and the XDS ($99), which offers dual-band 802.11n and component video and optical audio outputs.  The top model occasionally sells for as little as $79.99 when on sale from Amazon.com or direct from the manufacturer.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Introducing Roku.mp4[/flv]

A brief video introduction to Roku.  (1 minute)