Broadband Reports has obtained a leaked memo stating AT&T plans on eliminating its flat rate broadband plans for DSL and U-verse customers effective May 2nd.

On that date, AT&T will limit its DSL customers to 150GB per month and its U-verse customers to 250GB per month in what will be the largest Internet Overcharging operation in the nation.  Customers who violate the usage limits will face a three-strikes-you’re-overcharged penalty system.  After three violations of the usage limit, customers will pay an additional $10 for each block of 50GB they consume.  Although that represents just $0.20 per gigabyte, less than some others have imposed, it is not pro-rated.  Whether a customer uses one or fifty “extra” gigabytes, they will face the same $10 fee on their bill.

Customers will begin receiving notification of the change in the company’s terms of service March 18.

AT&T claims only 2 percent of their DSL customers will be exposed to the Internet Overcharging scheme.

“Using a notification structure similar to our new wireless data plans, we’ll proactively notify customers when they exceed 65%, 90% and 100% of the monthly usage allowance,” AT&T’s Seth Bloom told Broadband Reports. The company also says they’ll provide users with a number of different usage tools, including a usage monitor that tracks historical usage over time, and a number of different usage tools aimed at identifying and managing high bandwidth consumption services.

“Using a notification structure similar to our new wireless data plans, we’ll proactively notify customers when they exceed 65%, 90% and 100% of the monthly usage allowance,” AT&T tells us. The company also says they’ll provide users with a number of different usage tools, including a usage monitor that tracks historical usage over time, and a number of different usage tools aimed at identifying and managing high bandwidth consumption services.

However, AT&T’s accuracy in measuring broadband usage is open for debate.  The company is facing a class action lawsuit over its wireless usage billing.  According to the suit, AT&T consistently inflates usage measured on customer bills.  No third party verification or oversight of usage meters is mandated — customers simply have to trust AT&T.

AT&T ran trials in Beaumont, Tex., and Reno, Nev., from 2008 with a range of usage limits.  Customer reaction to the trials was hostile, and the test ended in early 2010.  In December, FCC Chairman Julius Genachowski told providers the agency was not opposed to usage limits and consumption billing schemes, leading some to predict the green light was given to companies willing to test whether customers will tolerate Internet Overcharging.

AT&T claimed this weekend its new pricing was going to benefit customers.  So long as customers keep paying their bills, AT&T will not “reduce the speeds, terminate service or limit available data like some others in the industry,” Bloom said.

But the usage limits come at the same time Americans are increasing their consumption of online video and other high bandwidth services.  Usage limits which may appear to be reasonable at first glance become punishing when they do not change over time and customers increasingly risk exceeding them.  Once established, several companies have repeatedly lowered them to further monetize broadband service usage.  AT&T has delivered some of the lowest usage limits in the wireless industry, so it has faced customer criticism in the past.

Customers tied to existing term contracts may likely avoid the usage caps temporarily.  Others will not stick around long enough to find out.

“I will be canceling my U-verse service on Monday and go back to Time Warner Cable,” writes Stop the Cap! reader Jeffrey.  “I will never do business with a provider that imposes overlimit fees on usage that literally costs them next to nothing to provide.  It’s like charging extra for every deep breath.”

Some of our other readers are headed back to Comcast, which has a 250GB usage cap, or exploring DSL provided over AT&T lines by third party companies, which likely will not impose usage limits, at least for now.

“Charging 20 cents per gigabyte isn’t too bad, but you just know AT&T will lower the caps or jack those rates up,” our reader Ian writes. “It is very important to send AT&T a message right now we are prepared to quit doing business with them over this issue, or else we will be nickle and dimed to death by them tomorrow.”

Our reader Jared asks whether new legislation has been introduced to curb unjustified Internet Overcharging.  In 2009, then Rep. Eric Massa (D-N.Y.) introduced a bill to ban Internet Overcharging unless companies could prove it was justified.  At the moment, there is no new legislation, but when providers attempt to overreach and impose pricing the vast majority of broadband customers oppose, that could change.

At the moment, Stop the Cap! recommends AT&T customers begin to explore alternative providers and prepare to terminate their service with AT&T unless they scrap their Internet Overcharging scheme.  AT&T earns billions in profits from their broadband division and spends millions on lobbying.  With this amount of largesse, AT&T does not need this pricing scheme to remain profitable.

Although more than 30 million Americans have experienced getting bill shocked with a cell phone bill loaded with overlimit fees and penalties, a wireless industry group says 19 out of 20 of these customers are economically better off getting those high bills, and any plan to notify customers in advance when their usage limits are reached would “harm innovation, limit consumer choice, and impair the potential for competitive differentiation.”

These incredible conclusions come in a filing from the Wireless Communications Association International, an industry group funded by AT&T, Sprint, Clearwire, and Time Warner Cable.

The WCAI just released a new white paper claiming Americans facing Internet Overcharging from usage-capped wireless data plans are actually saving money when carriers impose overlimit fees.  Their reasoning for this new math?  You might overpay for a usage plan that delivers a higher usage allowance than you need.

"And to think they actually believed us when we said Internet Overcharging saved people money!"

The wireless industry is heavily lobbying the Federal Communications Commission to stop the agency from imposing new rules to deal with the bill shock problem.  The FCC favors an advance warning system, which would force providers to notify customers by e-mail or text message when they near their usage allowance.  Letting customers know when they are about to pay enormous penalty usage rates before they are reflected on a future bill could save Americans millions annually.

The WCAI-funded study says consumers don’t need the agency’s help, going as far as to claim the majority of Americans are already well aware they are exceeding their plan limits, and are better off paying short-term penalties.

“The FCC is weighing new regulations that it says will eliminate so-called ‘bill shock,’ but this analysis makes plain that consumers don’t need regulators’ help,” WCAI President Fred Campbell said. “If you give them the right information, they know how to pick the best deal.”

But critics charge providers fighting this provision want to hide the most basic information of all — when consumers are on the verge of running up huge bills.

“The FCC’s effort on bill shock is long overdue in a wireless environment where today’s heavy user is tomorrow’s average user, and where the wireless Web is more and more important to commerce and to society,” Free Press Policy Counsel M. Chris Riley said. “It is vital that consumers are empowered with the information and the tools needed to make decisions about their own wireless usage so they can avoid outrageous charges.”

The WCAI white paper suggests that if providers are forced to issue advance warnings, companies may have to raise rates to compensate.  The paper’s author suggests consumers would find that worse than just paying the bills with overlimit fees:

The Nielsen Study indicates that many consumers incurring overages do so willfully and repeatedly. Their behavior suggests it is unlikely that usage notifications or usage controls would change their behavior because they are either indifferent to the overage charges or have determined that the occasional overage charge is more economical for them than choosing a more expensive plan. Notwithstanding that these overage-incurring consumers may not want or need additional notifications or controls, the adoption of the FCC‘s regulatory proposals would impose on all consumers the financial burden of ―protecting this one small group.

The WCAI dismisses the huge number of complaints that arrive at the FCC each year over this issue as simply “opinions” from consumers, not nearly as credible as their own analysis of actual customer bills.

The paper even argues with the definition of ” bill shock,” suggesting that the nearly 7 percent of wireless customers who blow past their voice allowances only face an average penalty of around $18.  That is “surprising or inconvenient; but it is unlikely to be shocking.”

Bill Shock

The WCAI study admits the dollar amounts for data-usage bill shock can be considerably higher, sometimes $100 or more.  The charges occur more frequently, too — impacting nearly 18 percent of customers.  But the group dismisses it as a rare occurrence anyway and that carriers will issue credits for astronomical surprise bills.  Besides, the paper concludes, when it was written most consumers were enrolled in increasingly-rare “unlimited use” plans.  Since the raw data was collected largely before AT&T abandoned its flat rate data pricing in 2010, statistics regarding bill shock for AT&T’s new limited use plans were not available.  The white paper inaccurately dismisses that major rate change, claiming it “had no impact on the data analyzed.”  That leaves readers believing the rate changes made no difference.

But the group’s logic completely derails when it concludes there are “consumer benefits to overages.”  Namely, providers “simplified” rate plans to reduce choice which was causing “customer confusion.”  The paper concludes “there is substantial evidence that consumers make deliberate choices to incur overages rather than upgrading to a more expensive monthly rate plan, and that they overwhelmingly benefit from such choices.”

The white paper ignores several important factors:

1. The diminishing number of unlimited access plans which give consumers a way to avoid overlimit fees, especially for data;
2. Carriers themselves arbitrarily set the arbitrary rules for the playing field – calling plan allowances, data allowances, limits, overlimit fees and penalties, and roaming rates;
3. The study ignores the record number of consumers complaining about surprising bills and the true economic impact providing simple text message or e-mailed notifications would have, and doesn’t give any reason why a consumer can’t simply shut off services once limits are reached, to prevent excess charges.

The white paper notes that 736,000 Americans annually are getting surprisingly high bills.  Assuming they are an average of $20 higher than anticipated, that represents nearly $15 million dollars in extra revenue for carriers — ample reason to hire dollar-a-holler groups to produce nonsensical reports that conclude a system to notify consumers they are about to be one of those 736,000 customers is actually bad for them and their wallets.

The FCC’s Consumer Task Force recommends these strategies to avoid bill shock:

•    Understand your calling pattern for making voice calls, and ask your carrier for a plan that would be best for your kind of use.
•    If you are an infrequent phone user, consider a pre-paid plan. Because you “pre-pay” for all your minutes, these plans make it impossible to go over your set limit.
•    Understand what your roaming charges are and where you will incur them.
•    Understand your options for data and text plans.
•    If you are going to use your mobile phone outside the U.S. for voice, email, and other services, make certain to find out beforehand what charges may apply. (Visit Wireless World Travel for more information about using a wireless phone in other countries.)
•    Ask how your carrier can help you avoid bill shock – with phone or text alerts, by letting you monitor your account online, or by giving you other information.
•    If you have tried to resolve a billing issue with your carrier and can not reach an acceptable resolution, complain to the FCC. You can call our Consumer Center, toll-free, at 1-888-CALL FCC (1-888-225-5322), or file a complaint here.

To learn more, read the FCC’s White Paper on Bill Shock.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/FCC Bill Shock.flv[/flv]

The Federal Communications Commission discusses the problem of “bill shock.”  (1 minute)

Shaw Communications held the first in a series of nearly three dozen upcoming “town hall meetings” on the issue of usage-based billing, starting with a gathering in Vancouver last evening.

Readers of Broadband Reports are reflecting on Shaw’s management of the meeting, particularly the lack of adversarial tone they anticipated going in. Several in attendance report company executives strenuously avoided arguments with customers and steered well clear of pro-UBB propaganda, which makes considerable sense when gauging the audience, which was likely almost entirely opposed to Internet Overcharging.

“They said they made a lot of mistakes concerning UBB,” one Broadband Reports reader shared. “It was almost a mea culpa.”

Company officials also admitted their usage caps will expose an increasing number of customer to overlimit fees if they go unadjusted — they respect the fact everyone will be defined as a “heavy user” under today’s usage limits in a few years.

“It was probably a bit of PR damage-control, and in that regard they did a good job,” the reader shared.

Another reader in attendance suspect the company misjudged the resulting backlash over UBB.

“It really felt like Shaw got blindsided by the righteous anger over UBB, and they’re truly surprised at how poorly they’ve judged the zeitgeist of their customers,” a reader wrote.

The cozy business relationship of Canadian telecommunications companies, who have maintained comfortable, barely-competitive markets for years might also be an issue of concern, writes one reader.

“They seem to be scared of the idea the cozy business-as-usual approach they’ve been taking [could go] away with the possibility of foreign ownership rules being relaxed or various other game-changing rulings being made. They sure sounded like they’re interested in making concessions [for] customer satisfaction, if only to stave off increased competition from outside Canada.”

Our Take

Stop the Cap! views such public meetings with some suspicion, if only because we have attended a few like these in the past and seen them used as intelligence-gathering operations for a marketing department charged with implementing the pricing schemes on customers.

While Shaw still seems to be holding onto the notion it can bring back a more palatable UBB scheme at the end of its “listening tour,” you can be certain other Canadian Internet providers are engaged in research and focus group testing with a less engaged audience, trying to find “fairness scenarios” that work in the court of public opinion.

As Shaw opens its next meeting in Calgary (and beyond), the best response people can give in these meetings is a clear, unified, and absolute message:

NO UBB.

NOT NOW.

NOT EVER.

UPGRADE YOUR NETWORKS!

The region of Canada that faces the end of flat rate broadband (namely, everywhere)

As soon as you enter into discussions about what represents a “fair amount” of usage, you have lost the argument.  Debating the numbers is their game, not yours.  Is 100GB enough, 250GB? 500? 1000?

What about tomorrow?

What is “reasonable” mean anyway?

“Reasonable” should not be how much Internet you are able to consume at Shaw’s everyday high prices.

Instead, Shaw’s absolutely massive profits demand that upgrades be maintained to accommodate users of their product. Shaw has plenty on hand to manage growth with upgraded facilities from Vancouver to the prairies and still have plenty of money left over.  Their revenue from broadband is soaring.  The costs to deliver it are dropping.

When you go to these meetings, explain politely, persuasively, and persistently that you are not prepared to accept the return of any UBB system, period. That inconvenient truth may be difficult for them to accept, but tell them you have every confidence a company as innovative as Shaw can find a way to keep customers and shareholders happy, and you’ll work with them to that end if they deliver the flat rate broadband experience that your neighbors to the south get.

If the USA and other countries around the world can manage it, so can Canada.

Although the English needs a little work, Korean broadband delivers a reality most Americans can only imagine.

South Korea has launched a nationwide broadband upgrade to rid themselves of 100Mbps service for $38 a month, claiming those speeds and prices are no longer sufficient for Korea’s new digital economy.

By the end of 2012, South Korea intends to connect every home in the country to the Internet at one gigabit per second and slash the monthly price to just $27 a month.

That’s more than 200 times faster than speeds enjoyed by most Americans, who pay an average of $46 a month — nearly double Korea’s planned price. Even more galling for Canadians — those speeds and prices are for completely unlimited access.

Stop the Cap! reader John in Victoria, B.C., thinks South Korea’s broadband improvements call out just how ludicrous Canada’s Internet Overcharging schemes really are.

“If the Canadian Radio-TV and Telecommunications Commission ultimately allows $2 per gigabyte in overlimit fees, we would have to pay $5,184,000 per month for the same thing,” John says. “If this comparison doesn’t make people want to chuck the CRTC, what will?”

For the government of South Korea, which is spearheading the Internet expansion effort, broadband has become a national priority for the fast-growing Korean economy.

[flv width=”640″ height=”447″]http://www.phillipdampier.com/video/Hello CJ TV.flv[/flv]

Korea’s CJ HelloVision cable system delivers TV programming, broadband, and phone service at speeds and prices that make North American providers look ridiculous.  Bonus: That sure looks like Sarah Palin making a cameo appearance in this animated video.  (1 minute)

South Korea historically trailed Japan’s economic post-World War II revival for decades, but no more. The country, which used to be poorer than the Communist People’s Republic of Korea to the north, has grown to the world’s 13th largest economic power, and has designs on being a world leader in the transition to the digital/information economy. They are already ahead of North America, with an advanced broadband platform that can sustain concepts like cloud computing that are just getting off the ground in Canada and the USA.

The KCC is spearheading Korea's broadband advancements

Only the most rural parts of Korea still rely on copper phone wires delivering DSL service, now considered archaic. Most of the country is now wired for fiber optics, making a transition from 100Mbps-1Gbps relatively simple. With new laser technology, existing fiber cables can transmit faster speeds, and when fiber is laid in the country, extra strands are buried for future use. The costs of burying 10 or 100 or 1,000 strands come mostly from labor, not the wiring.

Private electronics companies are strong proponents of the infrastructure upgrades, and service providers are on board to deliver the service. That is in marked contrast with providers in the United States and Canada who consider expensive upgrades an unnecessary proposition.

“Providers in the USA and Canada defend their existing networks as ‘good enough for average residential use,’ something that would be laughed away here in Korea or in Japan,” Dr. Park Sung-Jin, a Korean broadband researcher who travels between Seoul and Los Angeles tells Stop the Cap! “Large providers like AT&T cannot afford to lose their propaganda arguments of broadband sufficiency because if they did, they would lose face and be forced to transform broadband in the USA at the expense of their enormous profits.”

“In Asia, we would never allow our providers to dictate the national broadband policies of the country, and our discussions are long past arguing over what speeds are correct,” Park says.  “Now we’re arguing about how to bring the cost down.”

Japan delivers 1Gbps broadband service for $70 a month, a price scoffed at by Choi Gwang-gi, the 28-year old Korean now in charge of the Korea’s expansive broadband plans.

“I can’t imagine anyone in Korea paying that much,” Choi told the New York Times. “No, no, that’s unthinkable.”

A pilot gigabit project initiated by the government is underway with 5,000 households in five South Korean cities. Each customer pays about 30,000 won a month, or less than $27.

“A lot of Koreans are early adopters,” Mr. Choi said, “and we thought we needed to be prepared for things like 3-D TV, Internet protocol TV, high-definition multimedia, gaming and videoconferencing, ultra-high-definition TV, cloud computing.”

[flv]http://www.phillipdampier.com/video/200Mbps Broadband.flv[/flv]

Hello Broadband delivers a silly advertisement for its soon to be obsolete 200Mbps broadband service.  (1 minute)

Meanwhile, according to Dr. Park, North American providers like Bell, Rogers, and Comcast are spending millions trying to convince lawmakers in both countries that such speeds are wholly unnecessary.

“The United States and Canada are the worst, with providers spending countless millions themselves and through their lackey trade associations and illicit ‘consumer groups’ working for them trying to convince lawmakers American broadband isn’t so bad after all, but it is,” Park says. “They routinely claim any country that is ahead of the U.S. or Canada is a ‘special case’ because of urban density or government subsidies, but that can’t explain away all of the disparity in speeds and accessibility, only money and monopoly profits can.”

Both Romania and Latvia now beat Canada and the USA in broadband speeds and pricing, and North America’s dominance in a digital economy could be at risk.

Closer to home Don Norman, co-founder of the Nielsen Norman Group in Fremont, Calif., told the Times Korea is on the right track.

“The gigabit Internet is essential for the future, absolutely essential, and all the technologists will tell you this,” said Norman. “We’re all going to be doing cloud computing, for example, and that won’t work if you’re not always connected. Games. Videoconferencing. Video on demand. All this will require huge bandwidth, huge speed.”

In Canada, such predictions have given companies like Bell an excuse to engage in a national Internet Overcharging scheme they claim will help pay for building these kinds of future networks. But other countries around the world now deliver speeds Canada only promises their citizens, without overcharging them to pay for it.

“Charging for broadband traffic would be like you or I charging for the wind — it has no real value except in the eyes of the people who stand to profit from it,” Park said.

Will people notice a difference between 100Mbps and 1Gbps? Koreans say they will, according to the New York Times.

One of the customers already connected to Mr. Choi’s pilot program is Moon Ki-soo, 42, an Internet consultant. He got a gigabit hookup about a year ago through CJ Hellovision, although because of the internal wiring of his apartment building his actual connection speed clocks in at 278 megabits a second.

But even that speed — about a quarter-gigabit — has him dazzled.

“It is so much more convenient to watch movies and drama shows now,” he told the newspaper.

[flv width=”368″ height=”228″]http://www.phillipdampier.com/video/Giga Internet.flv[/flv]

This Korean language promotional video for Giga Internet, the marketing brand for 1Gbps broadband, still dazzles the imagination for those who lack the ability to follow the words.  As you watch, consider how America’s typical DSL service provider leaves millions of Americans with a ‘covered wagon’ 3Mbps broadband solution.  (6 minutes)

[flv width=”480″ height=”340″]http://www.phillipdampier.com/video/SK Broadband.mp4[/flv]

A stylish ad for SK Broadband, declaring new high speeds will let users “See the Unseen.”  (1 minute)