The unstated reality of Internet traffic growth usually leaves out what impact streaming pornographic videos can have on network traffic, and for consumers, their broadband usage allowance. We are about to find out with last week’s arrival of Pornhub Premium (noted by DSL Reports), a new on-demand Internet streaming service its owners believe will quickly become the “Netflix of porn.”

Pornhub Premium ($9.99/mo) “offers an all new ad-free experience to its users, complete with faster playback and higher quality streaming on the millions of videos currently on Pornhub as well as the largest collection of exclusive full length HD adult titles available in crisp 1080p resolution.” Customers get a free seven-day trial before the charges begin. They can use it to test what kind of impact HD phim sex video will have on their usage allowance. It could prove considerable for frequent return visitors.

“Simply put, Pornhub Premium, is setting the new standard. Users will benefit from enhanced access to all of the content they already enjoy on Pornhub.com – with improved streaming quality – as well as over 100,000 full-length premium exclusive scenes at the touch of a finger or click of the mouse,” said Corey Price, vice president, Pornhub. “We’re looking to take the crown as the ‘Netflix of porn,’ and with the colossal amount of content we’ll be providing – and adding tons more daily – we’re confident our fan base will totally embrace this product and reinforce our position as the top provider of on-demand adult video.”

Pornhub Premium’s ad campaign has sparked an international incident. Cheese producers in Italy are not pleased.

Or not.

The publicity campaign introducing the adult entertainment service has already caused one international incident. The Parmigiano-Reggiano Cheese Consortium is weighing legal action against Pornhub after referring to their aged family friendly Parmigiano-Reggiano cheese in the same sentence as “that vulgar website.”

The European Union and Italian authorities both protect the image of the consortium’s dairy products, so there could be trouble. The cheese group wants Pornhub to immediately stop capitalizing on the fame of Parmigiano-Reggiano to pitch “vile” porn videos.

The dispute threatens to become far worse than the Spaghetti Scandal of 1957, when Italian authorities were on fire after the BBC aired a hoax story suggesting spaghetti was harvested from trees. Adding to the outrage – many in northern Europe believed the report was true.

Then there are the other objections, of course.

“Pornhub Premium is unlimited filth and degradation, a new low,” came an anonymous comment from a Florida resident who claimed he was a pastor.

Nolte: Time to cut the cord and starve left-wing media.

The only solution to stop the “largest swindle big business ever played on the American people” is to cut cable television’s cord and stop paying for channels you do not want or need.

That advice comes from the conservative Breitbart News Service, among the first to make cable television bundling a political issue:

Meanwhile, for around $100 a month pay TV is not only pummeling you with about 20 minutes of ads an hour, but forcing you to pay for a ton of networks you hate. Moreover, many of these networks get a chunk of your cable bill. Even if you don’t watch left-wing CNN and MSNBC, if they are on your package, chances are a part of your bill is going directly to both.

If you want to put CNN, MSNBC, MTV, and all these other low-rated, left-wing networks out of business, not watching them makes absolutely no difference.

You have to cut the cord.

Nearly half of CNN’s revenue comes from this immoral revenue stream. CNN is taking your money to attack you all day every day.

And that is the great con the gigantic left-wing multinationals have pulled off for decades. Something like 100 million homes keep hundreds of networks profitable by forcing those customers into overpriced cable packages. Maybe 15 cable networks could survive solely on ad revenue generated by actual eyeballs. The rest would go poof, and good riddance.

Author John Nolte, editor-at-large for the news service, blames big cable bills on the “Hollywood rich” who he writes just keep getting richer. He thinks a better solution is to sign up with Netflix or Amazon and say goodbye to cable television.

Breitbart News, Nolte writes, “has been way ahead of the curve” predicting the demise of the one-size-fits-all cable television bundle that customers can hardly afford “while Obama’s economy falters and an influx of illegal aliens keep wages depressed.” Nothing stops the rate increases until consumers cancel the service, Nolte believes.

Reader reaction to the piece quickly identifies one shortcoming for conservatives: the loss of Fox News Channel. But many comments expressed the view Fox News has gone “Republican In Name Only” and isn’t worth paying for either. Many conservatives taking anti-corporate political views prefer alternative media like Breitbart News Service and Glenn Beck’s TheBlaze, which ironically has tried to land cable carriage agreements for years with only limited success.

It didn’t take long for consumers to start flooding the Federal Communications Commission with thousands of complaints about poor Internet service, usage caps, and speed throttles.

The complaints arrived as the FCC began formally enforcing Net Neutrality by reclassifying broadband as a telecommunications service, subject to oversight by the federal agency.

Consumers used the occasion to deluge the commission about the sorry state of Internet access in the United States, whether it constituted a Net Neutrality violation or not.

National Journal obtained a sample of 50 complaints through a Freedom of Information Act request and it was clear data caps were at or near the top of the complaints list and consumers wasted no time slamming cable and phone companies over the practice.

“Our data should not be capped at 350[GB]!!!!” one consumer pleaded, likely a Suddenlink or Mediacom customer, which both have 350GB caps on certain speed tiers. “Please, please make data caps illegal!!”

No more Netflix and Hulu watching for this family: “I have to tell my kids to stop using YouTube and other services and stuff they need for school so we don’t go over the cap,” another consumer wrote, explaining that their Internet-enabled home security camera uses up a significant amount of their monthly data. “By Comcast having this data cap, I don’t have a open Internet … I also think this data cap is very inaccurate, it goes up without anybody being home, and sometimes by a lot.”

Comcast also received heat for poor performing broadband service, with one customer forced to use Wi-Fi at a local McDonalds to take an online exam because Internet service at home was so poor.

“The Comcast modem is such crap that we can’t even access the Internet,” the consumer wrote. “I’m livid.”

AT&T was roasted for speed throttling its “unlimited data” wireless plan — a practice that already resulted in a $100 million fine from the FCC for misleading consumers. AT&T is appealing.

In all, the FCC reports it received about 2,000 complaints from consumers in June, the first month Net Neutrality rules took effect. The agency has just 30 days to respond to the complaints, most lodged using this online form. The FCC may be able to answer many with a form letter because poor service and usage caps are not strict violations of Net Neutrality, unless the FCC determines the practices “unreasonably interfere” with Internet access. AT&T’s speed throttling comes a lot closer to meeting that test, because many throttled customers report their wireless data service is rendered effectively unusable once throttled.

But the broad-ranging complaints may still prove useful, suggesting to the FCC stronger rules and oversight are required for a broadband market many consider barely competitive and often customer abusive.

Seeking comment, National Journal reported the National Cable and Telecommunications Association and the U.S. Telecom Association, which both represent major Internet providers and have sued to overturn the regulations, declined to comment on the complaints.

With video streaming now accounting for at least 64 percent of all Internet traffic, it should have come as no surprise to Australia’s ISPs that as data caps are eased and popular online video services like Netflix arrive, traffic spikes would occur on their networks as well.

It surprised them anyway.

Telecom analyst Paul Budde told the WAToday newspaper “video streaming requires our ISPs to have robust infrastructure, and to use it in more sophisticated ways, and that largely caught Australia off guard. I think it’s fair to say everybody underestimated the effect of Netflix.”

Not everybody.

Australia’s National Broadband Network (NBN) was originally envisioned by the then Labor government as a fiber-to-the-home network capable of enormous capacity and gigabit speed. Prime Minister Kevin Rudd proposed buying out the country’s existing copper phone wire infrastructure from telecom giant Telstra to scrap it. Instead of DSL and a limited number of cable broadband providers, the national fiber to the home network would provide service to the majority of Australians, with exceptionally rural residents served by wireless and/or satellite.

Conservative critics slammed the NBN as a fiscal “white elephant” that would duplicate or overrun private investment and saddle taxpayers with the construction costs. In the run up to the federal election of 2013, critics proposed to scale back the NBN as a provider of last resort that would only offer service where others did not. Others suggested a scaled-down network would be more fiscally responsible. After the votes were counted, a Coalition government was formed, run by the conservative Liberal and National parties. Within weeks, they downsized the NBN and replaced most of its governing board.

Netflix’s launch increased traffic passing through Australia’s ISPs by 50 percent, from 30 to 50Gbps in just one week, and growing.

Plans for a national fiber to the home network similar to Verizon FiOS were dropped, replaced with fiber to the neighborhood technology somewhat comparable to AT&T U-verse or Bell Fibe. Instead of gigabit fiber, Australians would rely on a motley mix of technologies including wireless broadband, DSL, VDSL, cable, and in areas where the work had begun under the earlier government, a limited amount of fiber.

In hindsight, the penny wise-pound foolish approach to broadband upgrades has begun to haunt the conservatives, who have already broken several commitments regarding the promised performance of the downsized network and are likely to break several more, forcing more costly upgrades that would have been unnecessary if the government remained focused on an all-fiber network.

Communications Minister Malcolm Turnbull has admitted the new NBN will not be able to deliver 25Mbps service to all Australians by 2016. Only 43 percent of the country will get that speed, partly because of technical compromises engineers have been forced to make to accommodate the legacy copper network that isn’t going anywhere.

Think Broadband called the fiber to the neighborhood NBN “a farce” that has led to lowest common denominator broadband. A need to co-exist with ADSL2+ technology already offered to Australians has constrained any speed benefits available from offering faster DSL variants like VDSL2. Customers qualified for VDSL2 broadband speeds will be limited to a maximum of 12Mbps to avoid interfering with existing ADSL2+ services already deployed to other customers. Only multi-dwelling units escape this limitation because those buildings typically host their own DSLAM, which provides service to each customer inside the building. In those cases, customers are limited to a maximum of 25Mbps, not exactly broadband nirvana. The NBN is predicting it will take at least a year to take the bandwidth limits off VDSL2.

The need for further upgrades as a result of traffic growth breaks another firm commitment from the conservative government.

NBN executive chairman Ziggy Switkowski told reporters in 2013 that technology used in the NBN would not need to be upgraded for at least five years after construction.

“The NBN would not need to upgraded sooner than five years of construction of the first access technology,” Switkowski said. “It is economically more efficient to upgrade over time rather than build a future-proof technology in a field where fast-changing technology is the norm.”

Since Switkowski made that statement two years ago, other providers around the world have gravitated towards fiber optics, believing its capacity and upgradability makes it the best future-proof technology available to handle the kind of traffic growth also now being seen in Australia. At the start of 2015, 315,000 Australians were signed up for online video services. Today, more than two million subscribe, with Netflix adding more than a million customers in less than four months after it launched down under.

Many ISPs offer larger data caps or remove them altogether for “preferred partner” streaming services like Netflix. With usage caps in place, some customers would have used up an entire month’s allowance after just one night watching Netflix.

But the online viewing has created problems for several ISPs, especially during peak usage times. iiNet reports up to 25% of all its network traffic now comes from Netflix. As a result iiNet is accelerating network upgrades.

Customers still reliant on the NBN’s partial copper network are also reporting slowdowns, especially in the evening. The NBN will have to upgrade its backbone connection as well as the last mile connection it maintains with customers who often share access through a DSLAM. The more customers use their connections for Netflix, the greater the likelihood of congestion slowdowns until capacity upgrades are completed.

Hackett

Optus worries its customers have extended Internet peak time usage by almost 90 minutes each night as they watch online streaming instead of free-to-air TV. Telstra adds it also faces a strain from “well over half” of the traffic on its network now consisting of video content.

This may explain why Internet entrepreneur and NBN co-board director Simon Hackett wishes the fiber to the neighborhood technology would disappear and be replaced by true fiber to the home service.

“It sucks,” Hackett told an audience at the Rewind/Fast Forward event in Sydney in March, referring to the fiber to the neighborhood technology. His mission is to try and make the government’s priority for cheaper broadband infrastructure “as least worse as possible.”

“Fiber-to the-[neighborhood] is the least-exciting part of the current policy, no arguments,” he added. “If I could wave a wand, it’s the bit I’d erase.”

Another cost of the Coalition government’s slimmed-down Internet expansion is already clear.

According to Netflix’s own ISP speed index, which ranks providers on the quality of streaming Netflix on their networks, Australia lags well behind the top speeds of dozens of other developed nations, including Mexico and Argentina.

But even those anemic speeds come at a high cost to ISPs, charged a connectivity virtual circuit charge (CVC) by NBN costing $12.91 per 1Mbps. The fee is designed to help recoup network construction and upgrade costs. But the fee was set before the online video wave reached Australia. iiNet boss David Buckingham worries he will have to charge customers a “Netflix tax” of $19.18 a month for moderate Netflix viewing to recoup enough money to pay the CVC fees. If a viewer wants to watch a 4K video stream, Buckingham predicts ISPs will have to place a surcharge of $44.26 a month on occasional 4K viewing, if customers can even sustain such a video on NBN’s often anemic broadband connections.

Some experts fear costs will continue to rise as the government eventually recognizes its budget-priced NBN is saddled with obsolete technology that will need expensive upgrades sooner than most think.

Instead of staying focused on fiber optics, technology the former Rudd government suggested would offer Australians gigabit speeds almost immediately and would have plenty of capacity for traffic, the conservative, constrained, “more affordable” NBN is leaving many customers with no better than 12Mbps with a future promise to deliver 50Mbps some day. There is little value for money from that.

Starting Sept. 1, Chicago residents will be paying 9% more for everything from Netflix to income tax filing as city officials impose a recently reinterpreted entertainment/use tax on almost every online subscription content provider, even those peddling adult entertainment.

The Chicago Tribune reports the city’s Finance Department has vastly broadened the reach of Chicago’s amusement and personal property lease transaction taxes to apply the 9% tax to virtually any content that a customer borrows, leases, or subscribes to that is not purchased outright. Buying a CD on Amazon.com would not be subject to the tax but a Spotify subscription allowing you to listen to that same CD as long as your subscription is maintained will be taxed. Buying a digital copy of a movie will not be taxed, but watching it through a subscription service like Apple TV, Amazon, or Netflix will be.

Although some are dubbing it the “Netflix Tax,” it will also apply to cloud storage, paid television programming — including satellite, cable, telephone, and online-delivered content, financial and investment services, and almost anything else accessed online with a paid subscription. Even paying to host a website (or having someone manage it for you) will be subject to the tax.

The expanded tax is part of Mayor Rahm Emanuel’s strategy to deal with Chicago’s huge budget shortfall with fees, fines, and broadening taxes. The city predicts the expanded tax will capture up to $12 million a year from Chicago residents and businesses.

“In an environment in which technologies and emerging industries evolve quickly, the City periodically issues rulings that clarify the application of existing laws to these technologies and industries,” mayoral spokeswoman Elizabeth Langsdorf said in a statement issued Wednesday. “These two rulings are consistent with the City’s current tax laws and are not an expansion of the laws. These ensure that city taxation is uniformly and fairly applied and that businesses are given clear guidance on the applicability of the City’s tax laws to their operations, and they clarify that the amusement tax and personal property lease tax apply to digital services.”

Chicago residents have paid the amusement tax on movie tickets, local concerts and sports events since at least 1998. The city collects 5% on live theatrical, musical, and other live cultural performances held in an auditorium, theater, or other space whose maximum capacity (including balconies) is more than 750 persons. A 9% tax applies on all other events, but no tax is collected on religious, charitable, and not-for-profit organizations holding events for fund-raising purposes as long as they limit them to two events per year.

A Netflix spokeswoman confirmed that the company will pass the additional cost to subscribers but said no other details were available.

Critics of the tax contend it will be very easy to avoid through the use of payment services like PayPal, which allow customers to specify an out-of-state address — any out-of-state address, valid or not — in the payment details box, allowing residents to avoid the tax. Others are adding the addresses of out-of-state relatives to their credit cards and will use those addresses when placing orders for online content.

“Since they are not mailing you anything, it doesn’t really matter what address you use, as long as it is outside of the city of Chicago,” one anonymous commenter noted.

Wynne

That is exactly what Michael Wynne, a partner and attorney in the Chicago office of the law firm Reed Smith, predicted would happen, noting Chicago is already replete with high taxes and fees and adding more of them would encourage tax dodging. He assumed businesses will also actively avoid the tax, either by moving their offices out of the Chicago city limits or more likely renting a post office box in the suburbs and using it as a billing address.

“Let’s say I sign up for streaming business data in the city but I have offices throughout the country,” Wynne told the newspaper. “I will definitely make sure my billing goes through a different office.”

Wynne believes many Chicago residents may not understand the 9% tax will apply to a lot more than just Netflix. He called the expansion staggering in its breadth in his analysis, excerpted below.

The Unamusing Amusement Tax: It Could Apply to Almost Anything

The Amusement Tax ruling will extend the tax to streaming services for music, movies, games, and the like, as well as satellite TV delivered to a customer located in Chicago. However, the ruling does not impose the Amusement Tax on the same content when it is permanently downloaded by a consumer. The Lease Transaction Tax ruling extends the tax to the online procurement of real estate listings, car prices, stock prices, economic statistics, and “similar information or data that has been compiled, entered and stored on the provider’s computer.” In addition, under the ruling, the Lease Transaction Tax will apply to the online procurement of “word processing, calculations, data processing, tax preparation” and “other applications available to a customer through access to a provider’s computer and its software.” In the ruling, the Department expressly notes that these “examples are sometimes referred to as cloud computing, cloud services, hosted environment, software as a service, platform as a service, or infrastructure as a service.”

The Amusement Tax is imposed on patrons of every amusement within the city. “Amusement” is broadly defined, and it includes “any entertainment or recreational activity offered for public participation or on a membership or other basis,” and “any paid television programming, whether transmitted by wire, cable, fiber optics, laser, microwave, radio, satellite or similar means.”

The Amusement Tax ruling specifically taxes charges paid for the privilege of the following amusements delivered to a patron in the city: (1) “watching electronically delivered television shows, movies, or videos”; (2) “listening to electronically delivered music”; and (3) “participating in games, on-line or otherwise.” As a consequence, streaming a movie, listening to streaming music, or playing a game on a smartphone or tablet will now trigger a 9% tax on the subscription charge for those services if those activities are done at a location in Chicago. Furthermore, the ruling addresses “bundled” transactions, by providing that “unless it is clearly proven that at least 50% of the price” is not for the amusement, the entire charge, except for any separately stated non-amusement charges, is subject to the Amusement Tax. That suggests great care must be paid to invoicing services when including any item that might be construed to be an amusement. The ruling does not differentiate between news, current events, sports, movies, music or other types of television programming. As a consequence, an establishment that charges patrons for access to television programming of any sort, plus other goods and services (e.g., a bar that imposes an admission charge for a pay-per-view event that includes food and beverages) may have to navigate the bundling rules.

The Computer Lease Tax Ruling = 9% on Everything You Borrow, Subscribe, Rent, Lease, or Pay-Per-View Online

Rep. Bob Goodlatte (R-Va.) introduced H.R. 235: the Permanent Internet Tax Freedom Act, which passed in the House of Representatives on June 9th and is heading to the Senate.

The ruling provides examples of when the tax applies, such as when performing legal research or similar on-line database searches, to obtain consumer credit reports, or “real estate listings and prices, car prices, stock prices, economic statistics, weather statistics, job listings, resumes, company profiles, consumer profiles, marketing data, and similar information or data that has been compiled, entered and stored on the provider’s computer.” In the ruling, the Department specifically identifies taxable leases of personal property to include “cloud computing, cloud services, hosted environment, software as a service, platform as a service, or infrastructure as a service.” This is quite an expansion for a concept evolved from taxing agreements for time-sharing on mainframe computers, and that has only been judicially tested once, involving legal research in the city on terminals provided by the legal search provider, in days that preceded the creation of the World Wide Web, and the expansion of fiber-optic networks that made possible the Internet networks relied on to deliver many of the services the ruling now targets. See, Meites v. City of Chicago, 184 Ill. App. 3d 887 (1989). The rulings represent a further evolution of the city’s approach under the Lease Transaction Tax to disregard contract terms and recharacterize transactions to fit its tax code definitions; it is doubtful that any consumer or provider of subscription Internet streaming services thinks they are contracting to lease tangible personal property.

Wynne says Chicago officials have expanded the scope of its tax ordinances to their absolute limit, if not further. He also fears Chicago could give other cities and states ideas for new taxes.

“If any state or local governments were wondering how to tax transactions occurring in the Cloud when legislative authority for such taxation is absent, the Department has just sketched a roadmap,” he wrote.

Wynne believes the time to stop these kinds of taxes is now, before they have a chance to spread, or worse, start being collected.

He writes there are strong arguments that Chicago’s creative reinterpretation of its 9% tax is illegal, running afoul of the Federal Telecommunications Act, the Internet Tax Freedom Act, and federal and Illinois constitutional limits on taxation. But while the rulings are likely to be challenged in court, Chicago officials still expect providers to start handing over the 9% tax proceeds beginning this fall. Those that don’t will run into Chicago’s tax penalty buzzsaw – 12% interest on delinquent taxes, a 25% penalty, and a lengthy bureaucratic process (bring your attorney) dealing with the city’s administrative hearings office.