Ever wonder why cell phone companies are upset about new regulations that would warn customers when they are about to face mobile usage overlimit or roaming fees?  Rogers Communications explains why in their latest quarterly results:

Nadir Mohamed, CEO:

There was, however, a sequential slowing in the wireless data revenue growth rate, and that’s primarily attributable to new outbound data roaming plans that we put in place. With these new plans, we put in place automated customer notification mechanisms that had a net effect of slowing usage versus stimulating it to the degree that we expected it to. We’re in the process of modifying how these plans and notifications work, which I expect will have a more stimulative effect and help restore the trajectory we had for wireless data growth.

In simpler terms, Rogers began notifying their customers through text messaging when they were about to start data roaming — the most expensive data usage around, incurred when you leave Rogers’ service area and roam on another provider’s network.  With Canadians visiting the United States and elsewhere, using a cell phone while traveling can get expensive fast.  Rogers created new roaming data plans for customers likely to need the service while abroad.  But their roaming data plans come at steep prices:

Unintended consequences: When subscribers know they are about to pay more, they stop using.

U.S. Data Passes

Day Pass: $5 for 2MB
Day Pass: $10 for 10MB
Day Pass: $20 for 40MB
Week Pass: $25 for 15MB
Week Pass: $50 for 60MB
Week Pass: $100 for 250MB

The warnings that customers were about to incur even higher a-la-carte roaming fees or start to consume their day or weekly data pass had the unintended, but highly predictable effect of getting people to think carefully about using data while roaming.

Bruce

While good for consumers, that is bad for Rogers’ bottom line, so the company’s formerly frank warnings to customers are “being modified” to help the company “stimulate” revenue and restore the predicted revenue growth from the high-priced roaming plans.

“We tried to create real transparency about when people and how people could get on data packages as they went overseas,” admits Robert Bruce, president of Rogers Communications Division. “We put in a fair number of reminders to let people know that they were on à la carte pricing, and we think that these dissuaded significantly customers from using it and possibly created some confusion along the way.”

Rogers Cable customers are also finding some of the company’s newest innovations a challenge to their monthly broadband usage allowances, among the lowest in Canada:

• Rogers Remote TV Manager: Enables cable subscribers to search programming and manage PVR recordings anytime on any device;
• Rogers Live TV. This service lets cable customers stream live TV channels on their tablets and watch shows anywhere they are in the home;
• Rogers On Demand TV app on Microsoft’s Xbox 360 LIVE platform, bringing Rogers On Demand TV to the gaming console;
• A refresh of the digital cable user interface, improving ease of use for the Whole Home PVR and a better program guide and search function.

In the long term, Rogers is moving towards an IP-based delivery system for its video programming, allowing the company to deliver video across different platforms more efficiently.  As Rogers converts the rest of its cable systems to digital cable, it is opening up new broadband capacity — a critical part of the company’s revenues.

Rogers admits it uses data caps to drive revenue.  By moving customers into higher usage, more expensive tiers, Rogers is able to drive revenue upwards as well.

“As customers continue every quarter, in and out, to consume more and more and spend more and more time on the Internet, we think it’s both a great opportunity for us and a welcome addition to the product offering from a customer perspective,” Bruce said.

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

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

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

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

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

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

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

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

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

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

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

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

The cable bill in your future?

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

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

Jeff wonders whether customer goodwill matters anymore at telecommunications companies.

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

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

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

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

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

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

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

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

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

“Caveat emptor,” says our reader Jeff.

Lowering the bar on "unlimited use" customers.

Customers grandfathered on AT&T’s “unlimited use” data plan are starting to wonder whether AT&T’s definition of “unlimited” is worth the effort.

Stop the Cap! reader Earl shares news the wireless carrier has lowered the bar (and wireless speeds) on customers who consume just 2GB on an “unlimited” wireless plan the company charges $30 a month to keep.  That’s $15/GB before AT&T considers you a usage abuser.  Now customers are discovering for the same $30, they can buy a usage-limited plan that offers 3GB a month, one gigabyte more than the “unlimited plan” allows before AT&T considers you among the top 5% of its “heavy users” subject to a punishing speed throttle.

[From CNET’s ‘Ask Maggie’ column:]

Dear Maggie,
I am currently using an iPhone 3GS and am grandfathered into the unlimited data plan. I normally use between 3GB and 4GB of data a month without issue. I have now been notified after 2GB of data that my data consumption is in the top 5 percent of customers and my data will be throttled. I have noticed that this seems to be a common cutoff for other customers as well.

My question to you is–Does this make the unlimited data plan basically useless as the new 3GB plan will at least give me 1 extra gigabyte of data for the same price? Also, why don’t they just cancel the unlimited plan instead of forcing people to switch through throttling?

Dear Brian,
I think you’ve nailed this issue right on the head. AT&T’s throttling program seems to target customers, who are just over the 2GB threshold. And its new higher priced data plans that offer 3GB of data for $30 looks like an attempt to get customers to switch from their unlimited data plans to the 3GB plan for the same price.

Whether you can live with the slower data rates is up to you.

It’s increasingly apparent AT&T is engineering data plans to discourage customers from retaining their grandfathered unlimited-use plan.  By luring customers to ‘never-throttled’-tiered data plans, AT&T can expose customers to lucrative overlimit fees charged when plan allowances are exceeded.

AT&T has announced an across-the-board rate increase for smartphone and tablet data plans, raising prices $5 Sunday for most plans while including incrementally larger usage allowances:

• Lite Usage: 200MB for $15 is now 300MB for $20;
• Average Usage: 2GB for $25 is now 3GB for $30;
• Higher Usage: 4GB for $45 is now 5GB for $50.
• Regular Tablet Plan:  2GB for $25 is now 3GB for $30.
• A new, higher use tablet plan will offer 5GB for $50.
• Overlimit fees are now $20 for 300MB of additional usage on the lite usage plan, $10/GB on all other plans.

AT&T originally charged $29.99 for unlimited-use data plans.  The company claimed in the summer of 2010 its new limited-use plans would save most customers money, but except for very light users, that is no longer true.

AT&T's throttles are engaged.

AT&T says the new usage allowances reflect customer resistance to paying overlimit fees when they exceed AT&T’s existing caps.  But the company has also previously said the vast majority of its customers never exceed the old allowances. According to AT&T, 65 percent of its customers use less than 200MB per month and 98 percent of its smartphone customers use less than 2GB of data per month. That effectively means every customer will now face a $5 rate hike for increased usage allowances most will not currently use.

Existing customers can hang on to their old data plans indefinitely, but those who bounce between carriers will be forced to choose from a more limited, and expensive, menu of options.

Considering that AT&T’s most significant rival Verizon Wireless currently charges $30 for just 2GB per month, AT&T officials are still able to claim their new prices represent a “great value.”

Customers grandfathered under AT&T’s old unlimited-use plans are also discovering they are anything but unlimited.  So-called “heavy users” who exceed 2GB of use per month are first warned by AT&T they are in the “top 5%” of usage-hungry users, after which their wireless connection is throttled to as little as 15kbps for the remainder of the billing cycle.

Usage caps low enough to set your hair on fire.

Bell customers across Ontario and Quebec are noticing the limbo dance is back in vogue as Bell Canada lowers the bar on usage caps for its Fibe fiber to the neighborhood service and boosts the maximum overlimit fee to $80.

Late last week, Bell’s website published the new, lower usage caps for broadband customers:

• Fibe 10 — 75GB 60GB (per month) (Quebec)
• Fibe 12 — 50GB 40GB
• Fibe 16 — 75GB 65GB (Ontario) 90GB 80GB (Quebec)
• Fibe 25 — 125GB 100GB (Ontario) 100GB 90GB (Quebec)

Users who exceed the new usage allowances face an overlimit fee of $1/GB — maximum $80 a month (up $20 effective Jan. 1, 2012).

New customers enjoy aggressively discounted introductory offers, but with usage allowances in decline, customers are being conditioned to use less or pay more.  It is the classic one-two punch of Internet Overcharging:

1. Gradually reduce usage allowances exposing customers to overlimit fees;
2. Increase the maximum penalty rate for exceeding the limit.

“I am watching my bill to see if they attempt to impose the new limits on existing customers,” shares Stop the Cap! reader François who lives in Toronto. “You pay Bell more for less and even as a new customer you might first pay less and also get less.  The ‘pay more’ comes after the first year.”

Want to use more?  You will have to buy Bell’s Usage Insurance in advance:

• $5/month for an extra 40GB
• $10/month for an extra 80GB
• $15/month for an extra 120GB