“…every kitten grows up to be a cat. They seem so harmless, at first, small, quiet, lapping up their saucer of milk. But once their claws get long enough, they draw blood, sometimes from the hand that feeds them. For those of us climbing to the top of the food chain, there can be no mercy. There is but one rule: Hunt or be hunted.” — Francis Underwood

Addicts of Netflix’s hit series House of Cards may need to grab a card of a different kind to cover overlimit fees charged by your Internet Service Provider for blowing past your usage allowance.

As online video streaming moves into the realm of 4K — the next generation of high-definition video — watching television shows and movies online could get very expensive because of the massive file sizes involved. It’s all just in time for ISP’s increasing enforcement of usage caps.

Gizmodo just did the math for those intending to spend a weekend watching the entire second season of the made-for-Netflix series in high-definition:

Streaming in 1080p on Netflix takes up 4.7GB/hour. So a regular one-hour episode of something debiting less than 5GB from your allotment is no big deal. However, with 4K, you’ve got quadruple the pixel count, so you’re burning through 18.8GB/hour. Even if you’re streaming with the new h.265 codec—which cuts the bit rate by about half, but still hasn’t found its way into many consumer products—you’re still looking at 7GB/hour.

But you’re not watching just one episode, are you? Of course not! You’re binging on House of Cards, watching the whole series if not in one weekend then certainly in one month. That’s 639 minutes of top-quality TV, which in 4K tallies up to 75GB if you’re using the latest and greatest codec, and nearly 200GB if not. That means, best case scenario, a quarter of your cap—a third, if you’re a U-Verse customer with a 250GB cap—spent on one television show. Throw in a normal month’s internet usage, and you’re toast.

Sure you can send 900+ emails, download hundreds of songs, upload hundreds of pictures, and play online games 24 hours a day, but you can’t also watch one standard and one HD movie a day at the same time without blowing well past your AT&T DSL limit.

What is worse is that h.265 is still more theoretical than actually available to most consumers, so customers will either have to settle with degraded video or prepare to eat close to 19GB an hour at the highest resolution. No wonder Netflix has introduced video degradation settings to save you from your ISP’s arbitrary cap. Of course, your video quality will suffer, especially on a big screen television.

Comcast customers (and presumably Time Warner Cable customers also eventually subjected to Comcast’s cap) will still have a generous 100GB left over to watch, browse, and send that avalanche of e-mails usage cappers love to boast about. If you live in the reality-based community and have a family active online, that 100GB isn’t going to go too far. Video game addicts regularly face downloading huge updates, many ranging from 8-12GB apiece. Call of Duty: Ghosts? That’s 39.5GB. Madden NFL 25? Another 12.51GB, says Gizmodo. Using a file backup cloud storage service can also eat your allowance for breakfast.

Gizmodo also mentions Sony’s Unlimited Video service has 70 titles (and growing) available in 4K. A Sony representative admits a single two-hour movie will burn up 40GB. Watch a few of those and you are well on your way to blowing your allowance Vegas-style.

AT&T cooked up the arbitrary de facto standard overlimit fee now adopted by many American ISPs, and granular it isn’t. Exceed your allowance by even 1 kilobyte and you will be charged an extra $10 for 50 extra gigabytes. Because AT&T, Comcast, Suddenlink, and others are not already paid enough for broadband service and their modem rental.

Online video is the online application most likely to put you over your limit. Most ISPs don’t like to talk about that, however. They prefer to explain caps in terms of activities no online user is likely to ever exceed, including sending thousands of e-mails, viewing hundreds of thousands of web pages, transferring boatloads of songs and images, and watching YouTube videos at low resolution.

If you don’t watch online video, your cable or phone company thanks you for paying for cable television instead. If you haven’t used a peer-to-peer network in years, chances are you won’t exceed any limits either. But as Internet usage continues to evolve, anything that appears to be a competitive threat delivered over your ISP’s broadband pipe can be effectively controlled with the elimination of flat rate Internet service and imposing overlimit fees that deter usage.

More than two dozen NorthwesTel customers in Canada’s north are contemplating a class-action lawsuit against their Internet provider after being charged hundreds, if not thousands of dollars in overlimit charges for phantom traffic nobody can seem to identify.

Kyle Jennex of Whitehorse has always checked his usage, particularly because NorthwesTel charges very high prices for access and has a low usage cap. Running over a plan limit can prove costly at $5 per gigabyte. In November, Jennex discovered NorthwesTel’s usage meter was registering between 5-7GB of mysterious upload traffic every night even after the computer was physically disconnected from his Internet connection.

Despite complaining to NorthwesTel, the company billed him for nearly $1000 in overlimit fees, claiming he exceeded his allowance by nearly 200GB.

“I depend on the Internet for our lifestyle,” Jennex told Yukon News. “We like our music and our movies and our TV, so I download a lot of stuff. I also believe that if I’m paying for 150 gigabytes, I’m going to use that up. So because of that I monitor our usage carefully so I can spread it out throughout the month and to make sure we don’t go over.”

NorthwesTel has never suspected their meter of being responsible for the phantom usage measurements. To Curtis Shaw, NorthwesTel’s vice president of marketing, excess usage is entirely the customer’s responsibility. The company told Jennex his high usage was likely caused by torrent/peer-to-peer network traffic or a neighbor who had hacked into his password-protected Wi-Fi network. But neither explanation can account for usage that continued to rack up with nothing connected to his Internet modem.

Shaw recommends NorthwesTel customers shut down their computers when not in use, particularly overnight, to avoid excess charges. He also advises customers to change their passwords, regularly check usage, and install and update anti-virus software on their computers.

Bill Shock

Shaw also says users can sign up for e-mail that notifies customers when they approach their limit, “really to protect people from receiving a surprise bill.” He adds the company does monitor customer usage and has called customers in the past when their accounts show an unusual amount of activity.

But NorthwesTel didn’t bother to call a customer in Whitehorse who reports he was billed an extra $990 for the extra 198GB of usage he claims he never used. Nor did the company call the woman in the Northwest Territories bill shocked with $3,000 in overlimit fees in a single month.

The company says there have been repeated cases of neighbors “sharing” Wi-Fi connections which can quickly run up usage. But Jennex, who says he well understands the danger of unprotected Wi-Fi, believes he has taken the necessary precautions and has been overbilled anyway.

“The way they’re talking, it’s like every second neighbor is hacking into your wireless,” Jennex said. “I have passwords that are completely random that would take some pretty sophisticated equipment to hack into. We even tried disconnecting all our devices from the router and it still kept happening. The only way I could get them to stop was to physically unplug my modem.”

The company cannot or will not trace Jennex’s mysterious web traffic to identify the source, confident their meter is accurate. Besides, the company says, customers often underestimate the amount of traffic they consume using file sharing programs or watching video online. The company claims it worked hard on its usage meter and it received industry approval for its high degree of accuracy. But providers need not submit their meters for independent verification or subject them to periodic audits to verify meter accuracy.

NorthwesTel does not have a good record on meter accuracy. In 2010 the company was forced to admit it had overbilled hundreds of customers over a “meter glitch” when usage monitors were not reset. As a result, customers found enormous overlimit fees attached to their bills. In one example, a customer was charged a $2,500 overlimit fee on top of his usual bill of $88.

A glitch may indeed be part of the problem as one Yukon customer successfully confronted NorthwesTel for erroneous overlimit fees for consumption of data that was impossible to accrue at the speed of his Internet connection.

Angry customers complain that with so little competition, NorthwesTel has every incentive to play fast and loose with its meter, either because customers will cut their usage, upgrade to a higher cost tier with a bigger allowance, or pay the overlimit fees.

Customers who believe they were unjustly billed overlimit fees should take their case first to the Office of the President. Failing that, they should appeal to the Commissioner for Complaints for Telecommunications Services, an independent agency that has a good track record of winning relief.

Some customers fear the expensive overlimit fees so much, they are following NorthwesTel’s advice and keeping their computers switched off when not being used, but that isn’t a good enough answer for Jennex, who plans to continue the fight.

“There’s no need to rip us off because we live so far North,” he told CBC North.

The median bandwidth use slowdown (Image: BTIG Research)

Despite perpetual cries of Internet brownouts, usage blowouts, and data tsunamis that threaten to overwhelm the Internet, new data shows broadband usage has leveled off in North America, undercutting providers’ favorite excuse for usage limits and consumption billing.

Sandvine today released its latest broadband usage study, issued twice yearly. The results show a clear and dramatic decline in usage growth in North America, with median usage up just 5% compared to the same time last year. That is a marked departure from the 190% and 77% growth measured in two earlier periods. In fact, as Richard Greenfield from BTIG Research noted, mean bandwidth use was down 13% year-over-year, after the second straight six month period of sequential decline.

Companies like Cisco earn millions annually pitching network management tools to providers implementing usage caps and consumption billing. For years, the company has warned of Internet usage floods that threaten to make the Internet useless (unless providers take Cisco’s advice and buy their products and services).

“Demand for Internet services continues to build,” said Roland Klemann from Cisco’s Internet Business Solutions Group. “The increasing popularity of smartphones, tablets, and video services is creating a ‘data tsunami’ that threatens to overwhelm service providers’ networks.”

Providers typically use “fairness” propaganda when introducing “usage based pricing,” blaming exponential increases in broadband usage and costly upgrades “light users” are forced to underwrite. A leveling off in broadband usage undercuts that argument.

A Cisco White Paper intended for the eyes of Internet Service Providers further strips the façade off the false-“fairness” argument, exposing the fact usage pricing has little to do with traffic growth, pricing fairness, or the cost of upgrades:

In 2011, broadband services became mainstream in developed countries, with fixed-broadband penetration exceeding 60 percent of households and mobile broadband penetration reaching more than 40 percent of the population in two-thirds of Organisation for Economic Co-operation and Development (OECD) countries.

Meanwhile, traditional voice and messaging revenues have strongly declined due to commoditization, and this trend is expected to continue. Therefore, operators are now relegated to connectivity products. The value that operators once derived from providing value-added services is migrating to players that deliver services, applications, and content over their network pipes.

As if this were not enough, Internet access prices are dropping, sales volumes are declining, and markets are shrinking. The culprit: flat rate “all-you-can-eat” pricing. Such a model lacks stability—sending service provider pricing into a downward spiral—because it ignores growth potential and shifts the competition’s focus from quality and service differentiation to price.

While Klemann was spouting warnings about the dire implications of a data tsunami, Cisco’s White Paper quietly told providers what they already know:

Maximum Profits

“[Wired] broadband operators should be able to sustain forecasted traffic growth over the next few years with no negative impact on margins, as the incremental capital expenses required to support it are under control.”

If usage limits and consumption billing are not required to manage data growth or cover the cost of equipment upgrades, why adopt this pricing? The potential to exploit more revenue from mature broadband markets that lack robust competition.

“In light of the forecasted Internet traffic growth mentioned earlier and competitiveness in the telecommunications market, Cisco believes that fixed-line operators should consider gradually introducing selected monthly traffic tiers to sustain [revenue], while a) signaling to customers that “traffic is not free,” and b) monetizing bandwidth hogs more sustainably.”

Cisco makes its recommendation despite knowing full well from its own research that customers hate usage-based pricing.

“The introduction of traffic tiers and caps—especially for fixed broadband services—is not welcomed by the majority of customers, as they have learned to ‘love’ flat rate all-you-can-eat pricing. Most customers consider usage-based pricing for broadband services ‘unfair,’ according to the 2011 Cisco IBSG Connected Life Market Watch study.”

Cisco teaches providers how to price broadband like trendy boutique bottled water and blame it on growing Internet usage.

But with competition lacking, Cisco’s advice is to move forward anyway, as long as providers initially introduce caps and consumption billing at prices that do not impact the majority of customers… at first. In uncompetitive markets, Cisco predicts customers will eventually pay more, boosting provider revenue. Cisco’s “illustrative example” of usage billing in practice set prices at $45 a month for up to 50GB of usage, $60 a month for 50-100GB, $75 for 100-150GB, and $150 a month for unlimited access — more than double what customers typically pay today for flat rate access.

Usage billing arrives right on time to effectively handle online video, which increasingly threatens revenue from cable television packages.

Sandvine’s new traffic measurement report notes the increasing prominence of online video services like Netflix, YouTube, Hulu, and Amazon Video.

“As with previous reports, Real-Time Entertainment (comprised of streaming video and audio) continues to be the largest traffic category on virtually every network we examined, and we expect its continued growth to lead to the emergence of longer form video on mobile networks globally in to 2014,” Sandvine’s report noted.

Sandvine found that over half of all North American Internet traffic during peak usage periods comes from two services: Netflix and YouTube. YouTube globally is the leading source of Internet traffic in the world, according to Sandvine.

An old excuse for usage caps on “data hogs” – peer-to-peer file-sharing, continues its rapid decline towards irrelevance, now accounting for less than 10 percent of total daily traffic in North America. A decade earlier, file swapping represented 60 percent of Internet traffic.

Cisco’s answer for the evolving world of popular online applications is a further shift in broadband pricing towards “value-based tiers” that monetize different online applications by charging broadband users extra when using them. Cisco is promoting an idea that well-enforced Net Neutrality rules would prohibit.

Citing the bottled water market, Cisco argues if some customers are willing to pay up to $6 for a liter of trendy Voss bottled water, flat rate “one price fits all” broadband is leaving a lot of money on the table. With the right marketing campaign and a barely competitive marketplace, providers can charge far higher prices to get access to the most popular Internet applications.

“Research from British regulator Ofcom shows that consumers are becoming ‘addicted’ to broadband services, and heavy broadband users are willing to pay more for improved broadband service options.”

Wharton School professors Jagmohan Raju and John Zhang concluded price is the single most important lever to drive profitability.

The political implications of blaming phantom Internet growth and manageable upgrade costs for the implementation of usage caps or usage-based billing is uncertain. Even the “data hog” meme providers have used for years to justify usage caps is now open to scrutiny. Sandvine found the top 1% of broadband users primarily impact upstream resources, where they account for 39.8% of total upload traffic. But the top 1% only account for 10.1% of downstream traffic. In fact, Apple is likely to provoke an even larger, albeit shorter-term impact on a provider’s network from software upgrades. When the company released iOS7, Apple Updates immediately became almost 20% of total network traffic, and continued to stay above 15% of total traffic into the evening peak hours, according to Sandvine.

Some other highlights:

• Average monthly mobile usage in Asia-Pacific now exceeds 1 gigabyte, driven by video, which accounts for 50% of peak downstream traffic. This is more than double the 443 megabyte monthly average in North America.
• In Europe, Netflix, less than two years since launch, now accounts for over 20% of downstream traffic on certain fixed networks in the British Isles. It took almost four years for Netflix to achieve 20% of data traffic in the United States.
• Instagram and Dropbox are now top-ranked applications in mobile networks in many regions across the globe. Instagram, due to the recent addition of video, is now in Latin America the 7th top ranked downstream application on the mobile network, making it a prime candidate for inclusion in tiered data plans which are popular in the region.
• Netflix (31.6%) holds its ground as the leading downstream application in North America and together with YouTube (18.6%) accounts for over 50% of downstream traffic on fixed networks.
• P2P Filesharing now accounts for less than 10% of total daily traffic in North America. Five years ago it accounted for over 31%.
• Video accounts for less than 6% of traffic in mobile networks in Africa, but is expected to grow faster than in any other region before it.

The German Internet is functionally broken.

Deutsche Telekom, the largest telecommunications company in Germany, has announced it will introduce a brazen Internet Overcharging scheme for customers signing up for its broadband DSL service, including a throttle that reduces speeds to just 384kbps after as little as 75GB of monthly broadband usage.

For now, only new Telekom Deutschland customers signing up after May 1 will be affected by the usage limits. Customers will be offered the option of upgrading their Call & Surf package to get a larger usage allowance, although many parts of Germany are still reliant on DSL and its variants that cannot deliver the advertised speeds that go with the larger allowances:

• Up to 16Mbps: 75GB per month
• Up to 50Mbps: 200GB per month
• Up to 100Mbps: 300GB per month
• Up to 200Mbps: 400GB per month

“We want to offer customers the best network in the future and we will continue to invest billions to make that happen,” said Michael Hagspihl, marketing director of Telekom Deutschland. “However we cannot continue to sustain higher usage demand while lowering our prices. Customers with very high data volumes will have to pay more in the future.”

Company officials argue German broadband usage demands are accelerating at an ever-increasing rate, putting strain on the company’s network resources.

But critics question if usage demands are the root of the problem, why is DT exempting itself and its “preferred partners” from the data cap, including certain services that offer very high bandwidth video?

The Net Neutrality activist group Netzpolitik.org says DT is “massively violating Net Neutrality while the federal government looks away dreaming that the free market will solve the problem somehow.”

The group points out DT has admitted the speed throttle only applies to content providers who have not partnered up with the German telecom giant.

DT is exempting all of its own in-house content providers, the private television service Entertain, and telephone services (when provided by DT). For everyone else: the speed throttle gets closer the more customers use services like Apple iTunes or Amazon’s Lovefilm service. But DT says those companies can also get special treatment for the right price.

DT’s preferred partner cooperating agreements let “high quality content producers” pay for a managed services contract that guarantees exemption from the speed throttle and prioritization of their traffic on DT’s network, even if it means slowing down non-preferred partner content.

A parody future offer from DT.

“You cannot thumb your nose at Net Neutrality principles any better if you tried,” said Rene Pedersen, an Internet activist in Köln. “DT will have their emasculated two-tier Internet and all of Germany will have to suffer the consequences. Their own arguments do not even make sense. If there is a capacity crisis, how can they exempt some video providers that now consume the most network resources?”

“Until a few years ago, providers – just like the post – were just deliverers of packages,” said Netzpolitik’s Andre Masters. “This principle is called Net Neutrality – the equal treatment of data packets on the Internet, regardless of sender, recipient, or content. Now providers want to have a direct influence on the content sent, because they want to earn more money.”

Technology publisher Heise Online says the new usage restricting tariff has “triggered a veritable sh**storm” among net users who consider a 75GB usage limit untenable, particularly for families with multiple Internet users.

Heise is also critical of claims DT has made in the press that suggests German Internet users must either accept the usage caps or understand the company will have to spend at least €80 billion ($108 billion) to build a national fiber network to manage growing traffic.

In contrast, Goldman Sachs last year estimated the cost of wiring every home in the United States with Google Fiber would cost $140 billion, a number now considered inflated. Verizon FiOS managed to get costs down for its own fiber network to a level that suggests Google would only need around $90 billion — $10 billion more than DT claims it needs.

“DT is being disingenuous when they suggest it will cost €80 billion to solve their capacity problem. For that amount every household in Germany would get their own fiber cable with 200Mbps speeds or more,” Heise writes in their editorial. “To avoid slowing users down with a speed throttle, only a small fraction of this amount is needed to extend the Internet backbone and peering agreements between providers. For years network traffic has grown exponentially and DT has kept up with demand. So why does DT suddenly need to reshuffle the cards now?”

DT has also received criticism for how it has depicted its heavy users — mostly as content thieves and software pirates using file swapping networks to steal copyrighted works. But instead of dealing with copyright violations, DT wants a sweeping usage cap system that punishes every customer that wants to use their broadband connection.

“Customers are not insatiable Gierschlünde who want everything for free,” writes Heise. “They already pay a lot of money to Telekom: 12.5 million DSL customers roughly translates into around a half billion euros in sales per month.”

Back to the future.

The German news magazine Spiegel writes DT’s usage limits strangle the Internet for millions of Germans, especially for competing video providers:

When throttled, customers will need more than 23 hours to watch a DVD-quality movie. At Blu-ray resolution, it will take about two weeks to watch just one film.

[…] The implications of the end of Net Neutrality in Germany represents a form of economic censorship, and German politicians are standing by to watch it happen.

The federal government sees the Internet as a political bargaining chip and not as the social, cultural and economic tool it represents. The government acts in the interests of certain lobbyists, not Germany’s digital future. This allows German telecommunications companies to focus on their economic self-interests without government policies that demand investment in digital infrastructure.

A number of German Internet users are expected to switch to a cable provider, where available, to escape DT’s impending speed caps.

According to the Frankfurter Rundschau, many German cable companies also reserve the right to limit speeds for customers. But in practice, most don’t impose limits until traffic exceeds 60GB daily, and the speed cap is lifted the next day. A cable industry official says its cap currently impacts about 0.1 percent of customers, almost all who use peer-to-peer file swapping networks. Exempt from measurements that bring customers closer to a speed cap: web browsing, video streaming, and video-on-demand.

For now, Germany’s cable operators facing the same traffic growth DT speaks about find no need to impose further limits, stating their networks are handling the traffic with network upgrades as a normal course of business.

“It calls out DT’s claims as fraudulent, because cable Internet users visit the same websites and do the same things DT’s customers do and there only seems to be an ‘urgent’ problem in need of a speed throttle solution on BT’s network,” says Pedersen. “What needs to be throttled are the financial expectations of DT management and shareholders. The Internet is not their personal vault waiting to be plundered.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/What if Net Neutrality.mp4[/flv]

What if Net Neutrality did not exist?  [Subtitled] (1 minute)

NullCrew’s gorilla

A portion of Time Warner Cable’s website was replaced by hacktivists who defaced the support section with a picture of a gorilla accompanied by a message exposing key passwords and a list of employees authorized to get access to make changes to the website.

Hackers from the NullCrew Collective took credit for the breach, upset that Time Warner Cable, in conjunction with the entertainment industry, is participating in the controversial anti-piracy “six strikes” program, which will give broadband customers up to six warnings when caught downloading copyrighted content. Customers found participating in peer-to-peer file transfers that involve certain software, movies and music may have their Internet access suspended until they agree to a conversation with the cable operator about illicit downloading.

The hacktivist group’s breach did not affect all of Time Warner’s website, but was enough to attract attention. The group also publicized that Time Warner’s web administrators never bothered to change certain default login information, including a core password still listed as: changeme. The attack also exposed one of the system’s SSL-key passwords.

“LOL FAIL, learn to change default passwords,” came an admonishment from the group.

NullCrew was founded in 2012 and has been credited with several high-profile computer attacks that target corporations and government agencies it deems corrupt.

[Thanks to Stop the Cap! reader Paul for sharing details.]