Free Press’ campaign against AT&T’s Net Neutrality violation (click image for further information)

When AT&T customers take delivery of their new iPhone 5 or install Apple’s latest iOS 6 software update, the popular video conferencing app FaceTime will become available to the company’s mobile broadband customers for the first time, if they agree to switch their service to one of AT&T’s new, often more-costly “Mobile Share” plans.

Until now, FaceTime has been limited to Wi-Fi use only, but objections from wireless carriers and some technical limitations kept the popular app from working over 3G or 4G wireless networks.

AT&T’s decision to block the FaceTime app unless a customer changes their current mobile plan has sparked a notification from three public interest groups that they intend to file a formal Net Neutrality complaint against AT&T.

“AT&T’s decision to block FaceTime unless a customer pays for voice and text minutes she doesn’t need is a clear violation of the FCC’s Open Internet rules,” said Free Press policy director Matt Wood. “It’s particularly outrageous that AT&T is requiring this for iPad users, given that this device isn’t even capable of making voice calls. AT&T’s actions are incredibly harmful to all of its customers, including the deaf, immigrant families and others with relatives overseas, who depend on mobile video apps to communicate with friends and family.”

Free Press is joined in the forthcoming complaint by Public Knowledge and the New America Foundation’s Open Technology Institute.

“AT&T’s decision to block mobile FaceTime on many data plans is a direct contradiction of the Commission’s Open Internet rules for mobile providers,” said Sarah Morris, policy counsel for the New America Foundation’s Open Technology Institute. “For those rules to actually protect consumers and allow them to choose the services they use, the Commission must act quickly in reviewing complaints before it.”

AT&T earlier responded claiming they still allow the app to work over Wi-Fi (yours or theirs), so it cannot be a Net Neutrality violation. The company has spent an increasing amount of energy trying to convince regulators that wireless networks, including Wi-Fi, are largely equivalent. So long as a customer can access an app on one of them, there is no violation according to AT&T.

The company also claimed that since FaceTime comes pre-installed on phones, it is exempted from Net Neutrality regulations.

Whether the FCC will believe arguments that access over Wi-Fi is suitable enough to escape scrutiny for blocking an app on AT&T’s own 3G and 4G networks is open to debate.

The Obama Administration’s FCC has taken a lukewarm approach on Net Neutrality, adopting a compromise that is being attacked in court by MetroPCS and Verizon Wireless and considered insufficient protection by most consumer groups.

Divided Loyalties? -- Mayor John Marks

A growing scandal involving AT&T and the mayor of the state capital of Florida has further exposed the link between AT&T’s pay-for-play public policy agenda and the politicians willing to act as puppets for the phone company’s interests.

Tallahassee Mayor John Marks strongly promoted an Atlanta nonprofit group to participate in a $1.6 million dollar federal broadband grant to expand Internet access to the urban poor and train disadvantaged citizens to navigate the online world, without disclosing he was a paid adviser to the group.

What the rest of the city never knew is that the Alliance for Digital Equality (ADE) is little more than an AT&T astroturf effort — a front group almost entirely funded by AT&T that actually did almost nothing to bring Internet access to anyone.

The Alliance for Digital Equality, a group supposedly focused on erasing the digital divide, spends an inordinate amount of time running radio ads under the alias of “Alliance for Equal Access” for competition in cable-TV… when that competition comes from AT&T U-verse. Listen to two radio commercials run in Georgia and Tennessee, both AT&T service areas, promoting legislation that was introduced at the behest of AT&T and promoted by ADE. (2 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

In fact, an investigation by a Tallahassee newspaper reviewing the group’s federal tax returns found four of every five dollars spent by ADE went to board members, consultants, lawyers, and media companies for the purpose of promoting AT&T’s agenda against Net Neutrality and for the company’s various business interests:

Marks also didn’t mention when he brought ADE to the City Commission in September 2010 that AT&T has been paying him since the early 1990s as a lawyer and consultant.

Tax returns for ADE show it got $7.36 million from AT&T from 2007 through 2009. Among its expenses, it spent $2.7 million on consulting and legal fees, $1.2 million on travel, $1.1 million on media and communications and $931,509 in pay to officers and board of advisers members.

ADE spent nothing on projects to provide Internet access to underserved areas from 2007-09. It wasn’t created to do so. The group’s mission, as reported to the IRS, was to advocate “technology inflows to underserved communities by interacting with elected officials, policymakers at all levels of government and private sectors.”

In those interactions, ADE presented the same message as AT&T in opposition to greater price regulation of the Internet.

View the 2007, 2008, and 2009 tax returns for the Alliance for Digital Equality yourself.

Some of ADE’s officers and board members are familiar to Stop the Cap! readers as loyal AT&T advocates.  Even worse, many of them routinely play the “race card” whenever AT&T’s agenda is threatened.  Take Shirley Franklin.  She is the former mayor of Atlanta, but these days her biggest constituent is AT&T.  Last August, Franklin helped lead an attack against Free Press, a consumer advocacy group, that she said “target[ed] women, African-Americans and other minorities” after the group complained about the ties between several civil and minority rights organizations and AT&T.

ADE unsurprisingly is also all-for the merger of AT&T and T-Mobile

Julius Hollis, chairman and founder of the Alliance for Digital Equality, was even more strident.

“I am extremely disappointed in the Free Press, not only in its policies and tactics that they are attempting deploy in their strategy paper, but equally disturbing are its attempts to portray the African-American and Latino consumers as expendable in their efforts to promote Net Neutrality,” Hollis said last year. “In my opinion, this is going back to the tactics that were used in the Jim Crow era by segregationists. It’s no better than what was used in the Willie Horton playbook by Lee Atwater who, upon his deathbed, asked for forgiveness for using such political behavior tactics.”

Stop the Cap! exposed ADE ourselves as a “dollar-a-holler” advocate in August 2010 when we learned the majority of the group’s funds came from AT&T.

Anne Landman, managing editor of the Center for Media and Democracy, told the Tallahassee Democrat the purpose of groups almost entirely sponsored by a single corporate interest is to obfuscate the messenger. “It’s a nontransparent way of operating,” she said. “People don’t know who’s behind these efforts. So it’s fake, and it’s phony, and it gives people wrong information. It’s designed to purposely fool people.”

The newspaper spent months trying to track down financial reports, tax filings, and other documentation about the group, and ran into repeated resistance.  At one point, written requests sent to the group’s headquarters in Atlanta were returned unopened and marked “refused.”

ADE’s corporate influence is bad enough, but when the group uses race, gender, and economic cards to attack real public interest groups, it raises eyebrows, particularly when the group doing the attacking is financed by a corporate entity.  The Black Agenda Report, a website that can hardly be accused of racism, called out Franklin and the organization she represents.

The newspaper’s investigation also found all of ADE’s employees were actually independent contractors.  Non-profit group experts claim the entire structure of ADE is unusual because it funnels all of its money through contractors.

Tallahassee Mayor John Marks is apparently one of them, having received $86,000 as a member of ADE’s board of advisers in addition to AT&T paying him directly as a lawyer and consultant.

With the recent revelations, Tallahassee’s broadband grant is now in ruins and will be returned, unspent.  Marks is reportedly under investigation by the FBI for potential corruption.  And another AT&T astroturf effort has been exposed and has blown up in the company’s face.

[flv]http://www.phillipdampier.com/video/WCTV Tallahassee Mayor Under Fire Over ATT-ADE Ethics Scandal 3-29-11 – 9-15-11.flv[/flv]

Stop the Cap! has compiled almost a year of coverage of the burgeoning scandal in the Tallahassee mayor’s office, courtesy of WCTV-TV, which has doggedly pursued the scandal with assistance from its news partner Tallahassee Reports.  (10 minutes)

The Federal Communications Commission today raised the hurdle for AT&T when it told the wireless company it would consider its proposed acquisition of wireless spectrum from Qualcomm in concert with its application to acquire T-Mobile USA.

The FCC wrote both AT&T and Qualcomm regarding the ongoing review of both transactions:

“The Commission’s ongoing review has confirmed that the proposed transactions raise a number of related issues, including, but not limited to, questions regarding AT&T’s aggregation of spectrum throughout the nation, particularly in overlapping areas. As a result, we have concluded that the best way to determine whether either or both of the proposed transactions serve the public interest is to consider them in a coordinated manner at this time.”

AT&T Donates $9,000 to the United Way of Northwest Florida, which promptly returns the favor with a nice letter to the FCC supporting the telecom company's agenda.

At issue is whether AT&T is warehousing wireless spectrum it actually has little intention to use and whether or not AT&T is being honest when it suggests it needs to acquire T-Mobile USA to expand the number of frequencies open for its growing wireless network.

Critics of the merger claim AT&T has plenty of unused spectrum available to deliver service, particularly in the rural areas AT&T claims T-Mobile can help it serve.  T-Mobile is not well-known for its service in smaller communities and rural areas, preferring to rely on roaming agreements to achieve national coverage.  With its proposed acquisition of valuable spectrum in the 700MHz range from Qualcomm, excellent for penetrating buildings and delivering reliable service, the FCC may be wondering if the proposed merger with T-Mobile is necessary at all.

Gigi Sohn from Public Knowledge doesn’t think so.

“We are pleased that the Commission has decided to consider AT&T’s purchase of Qualcomm spectrum in the context of AT&T’s takeover of T-Mobile.  It doesn’t matter whether both transactions are in the same docket; the fact that the Bureau will consider them together in any manner is a strong statement,” Sohn said.

“This April, several public interest groups, Consumers Union, Free Press, the Media Access Project, Public Knowledge, and the New America Foundation, asked for the Commission to take that action because we said that both deals together would ‘further empower an already dominant wireless carrier to leverage its control over devices, backhaul, and consumers in ways that stifle competition,” Sohn added.  “We look forward to working with the Commission on these issues which are so vital to the economy of this country.”

Companies that have acquired wireless spectrum at government auctions have not always put those frequencies to use.  At least one firm warehoused spectrum as an investment tool, earning proceeds reselling it to other providers.  Others have simply squatted on their spectrum, sometimes to keep it away from would-be competitors.

Of course, considering AT&T is a master of dollar-a-holler astroturf operations and lobbying, it’s only a matter of time before a renewed blizzard of company-ghost-written letters start arriving at the Commission telling them AT&T needs both the Qualcomm spectrum -and- the merger with T-Mobile.

Groups like the NAACP, United Way of Northwest Florida, the National Puerto Rican Coalition, and the U.S. Cattlemen’s Association ought to know, right?

Thanks to Stop the Cap! reader Bones for alerting us.

Among the public interest groups that have historically steered clear of the fight against usage caps and usage based billing is Public Knowledge.

Stop the Cap! took them to task more than a year ago for defending the implementation of these unjustified hidden rate hikes and usage limits.  Since then, we welcome the fact the group has increasingly been trending towards the pro-consumer, anti-cap position, but they still have some road to travel.

Public Knowledge, joined by New America Foundation’s Open Technology Initiative, has sent a letter to the Federal Communications Commission expressing concern over AT&T’s implementation of usage caps and asking for an investigation:

[…] Public Knowledge and New America Foundation’s Open Technology Initiative urge the Bureau to exercise its statutory authority to fully investigate the nature, purpose, impact of those caps upon consumers. The need to fully understand the nature of broadband caps is made all the more urgent by the recent decision by AT&T to break with past industry practice and convert its data cap into a revenue source.

[…] Caps on broadband usage imposed by Internet Service Providers (ISPs) can undermine the very goals that the Commission has committed itself to championing. While broadband caps are not inherently problematic, they carry the omnipresent temptation to act in anticompetitive and monopolistic ways. Unless they are clearly and transparently justified to address legitimate network capacity concerns, caps can work directly against the promise of broadband access.

The groups call out AT&T for its usage cap and overlimit fee model, and ponder whether these are more about revenue enhancement than network management.  The answer to that question has been clear for more than two years now: it’s all about the money.

The two groups are to be commended for raising the issue with the FCC, but they are dead wrong about caps not being inherently problematic.  Usage caps have no place in the North American wired broadband market.  Even in Canada, providers like Bell have failed to make a case justifying their implementation.  What began as an argument about congestion has evolved into one about charging heavy users more to invest in upgrades that are simply not happening on a widespread basis.  The specific argument used is tailored to the audience: complaints about congestion to government officials, denials of congestion issues to shareholders coupled with promotion of usage pricing as a revenue enhancer.

If Bell can’t sell the Canadian government on its arguments for usage caps in a country that has a far lower population density and a much larger rural expanse to wire, AT&T certainly isn’t going to have a case in the United States, and they don’t.

The history of these schemes is clear:

1. Providers historically conflate their wireless broadband platforms with wired broadband when arguing for Internet Overcharging schemes.  When regulators agree to arguments that wireless capacity problems justify usage limits, extending those limits to wired broadband gets carried along for the ride.  Dollar-a-holler groups supporting the industry love to use charts showing wireless data growth, and claim a similar problem afflicts wired broadband, even though the costs to cope with congestion are very different on the two platforms.
2. Providers argue one thing while implementing another.  Most make the claim pricing changes allow them to introduce discounted “light user” plans.  But few save because true “pay only for what you use” usage-based billing is not on offer.  Instead, worry-free flat use plans are taken off the menu, replaced with tiered plans that force subscribers to guess their usage.  If they guess too little, a stiff overlimit fee applies.  If they guess too much, they overpay.  Heads AT&T wins, tails you lose.  That’s a clear warning providers are addressing revenue enhancement, not network enhancement.
3. Claims of network congestion backed up with raw data, average usage per user, and the costs to address it are all labeled proprietary business information and are not available for independent inspection.

There are a few other issues:

In the world of broadband data caps, the caps recently implemented by AT&T are particularly aggressive. Unlike competitors whose caps appear to be at least nominally linked to congestions during peak-use periods, AT&T seeks to convert caps into a profit center by charging additional fees to customers who exceed the cap. In addition to concerns raised by broadband caps generally, such a practice produces a perverse incentive for AT&T to avoid raising its cap even as its own capacity expands.

In North America, only a handful of providers use peak-usage pricing for wired broadband.  Cable One, America’s 10th largest cable operator is among the largest, and they serve fewer than one million customers.  Virtually all providers with usage caps count both upstream and downstream data traffic 24 hours a day against a fixed usage allowance.  The largest — Comcast — does not charge an excessive usage fee.  AT&T does.

Furthermore, it remains unclear why AT&T’s recently announced caps are, at best, equal to those imposed by Comcast over two years ago.  The caps for residential DSL customers are a full 100GB lower than those Comcast saw fit to offer in mid-2008. The lower caps for DSL customers is especially worrying because one of the traditional selling points of DSL networks is that their dedicated circuit design helps to mitigate the impacts of heavy users on the rest of the network. Together, these caps suggest either that AT&T’s current network compares poorly to that of a major competitor circa 2008 or that there are non-network management motivations behind their creation.

AT&T has managed to create the first Internet version of the Reese's Peanut Butter Cup, combining Comcast's 'tolerated' 250GB cap with AT&T's style of slapping overlimit fees on data plans from their wireless business.

As Stop the Cap! has always argued, usage caps are highly arbitrary.  Providers always believe their usage caps are the best and most fair around, whether it was Frontier’s 5GB usage limit or Comcast’s 250GB limit.

AT&T experimented with usage limits in Reno, Nevada and Beaumont, Texas and found customers loathed them.  Comcast’s customers tolerate the cable company’s 250GB usage cap because it is not strictly enforced — only the top few violators are issued warning letters.  AT&T has established America’s first Internet pricing version of the Reese’s Peanut Butter Cup: getting Comcast’s tolerated usage cap into AT&T’s wireless-side overlimit fee.  The bitter aftertaste arrives in the mail at the end of the month.

Why establish different usage caps for DSL and U-verse?  Marketing, of course.  This is about money, remember?

AT&T DSL delivers far less average revenue per customer than its triple-play U-verse service.  To give U-verse a higher value proposition, AT&T supplies a more generous usage allowance.  Message: upgrade from DSL for a better broadband experience.

Technically, there is no reason to enforce either usage allowance, as AT&T DSL offers a dedicated connection to the central office or D-SLAM, from where fiber traditionally carries the signal to AT&T’s enormous backbone connection.  U-verse delivers fiber to the neighborhood and a much fatter dedicated pipeline into individual subscriber homes to deliver its phone, Internet, and video services.

A usage cap on U-verse makes as much sense as putting a coin meter on the television or charging for every phone call, something AT&T abandoned with their flat rate local and long distance plans.

Before partly granting AT&T’s premise that usage limits are a prophylactic for congestion and then advocate they be administered with oversight, why not demand proof that such pricing and usage schemes are necessary in the first place.  With independent verification of the raw data, providers like AT&T will find that an insurmountable challenge, especially if they have to open their books.

[flv width=”640″ height=”368″]http://www.phillipdampier.com/video/Bell’s Arguments for UBB 2-2011.flv[/flv]

Canada’s experience with Usage-Based Billing has all of the hallmarks of the kind of consumer ripoff AT&T wants Americans to endure:

• A provider (Bell), whose spokesman argues for these pricing schemes to address congestion and “fairness,” even as that same spokesman admits there is no congestion problem;
• Would-be competitors being priced out of the marketplace because they lack the infrastructure, access, or fair pricing to compete;
• Big bankers and investors who applaud price gouging and are appalled at government checks and balances.

Watch Mirko Bibic try to rationalize why Bell’s Fibe TV (equivalent to AT&T U-verse) needs Internet Overcharging schemes for broadband, but suffers no capacity issues delivering video and phone calls over the exact same line.  Then watch the company try and spin this pricing as an issue of fairness, even as an investor applauds the company: “I love this policy because I am a shareholder.  That’s all I care about.  If you can suck every last cent out of users, I’m happy for you.”  Finally, watch a company buying wholesale access from Bell let the cat out of the bag — broadband usage costs pennies per gigabyte, not the several dollars many providers want to charge.  (11 minutes)

In a stretch even the most accomplished Yoga master would never attempt, an industry-funded dollar-a-holler group has told Congress that Internet Overcharging is a useful tool to combat online piracy.

On Tuesday, Daniel Castro, an analyst at the Information Technology and Innovation Foundation (ITIF), testified before the House Judiciary Committee on the issue of combating “rogue sites [that] operate in a low risk, high reward environment.”

In December 2009, ITIF proposed a number of policies to help reduce online copyright infringement, especially in countries that turn a blind eye to copyright enforcement. The purpose of these policies is to establish a robust enforcement mechanism to combat IP theft online. These recommendations include the following:

• Create a process by which the federal government, with the help of third parties, can identify websites around the world that are systemically engaged in piracy;
• Enlist ISPs to combat piracy by blocking websites that offer pirated content, allowing pricing structures and usage caps that discourage online piracy, and implementing notice and response systems;
• Enlist search engines to combat piracy by removing websites that link to infringing content from their search results;
• Require ad networks and financial service providers to stop doing business with websites providing access to pirated content;
• Create a process so that the private sector can consult with government regulators on proposed uses of anti-piracy technology;
• Fund anti-piracy technology research, such as content identification technology;
• Pursue international frameworks to protect intellectual property and impose significant pressure and penalties on countries that flout copyright law.

Castro’s idea of allowing providers to establish “pricing structures and usage caps” stands out like a sore thumb in the context of battling piracy because it is the only recommendation on the list that targets every broadband user with the same broad brush, punishing every customer whether they are engaged in piracy or not.

It would be like setting up roadblocks and searching every vehicle in a city to search for a shoplifter.  Every individual is found guilty before being proved innocent, and will be forced to pay higher prices regardless of the outcome.

The ITIF proposal runs contrary to years of efforts by Internet Service Providers to avoid being involved in the personal business of their customers.  In 2009, major ISPs wanted no part of enforcing a proposal from the record industry for a “three strikes, you’re out” plan.  Verizon, among others, made clear copyright enforcement was not their responsibility to police, although many ISPs are willing to forward copyright infringement notices to individual customers.

Castro’s testimony goes over the top when he blames his own suggested pricing antidote for “hurting law-abiding consumers who must […] pay higher prices for Internet access to compensate for the costs of piracy.”

Of course, no ISP has ever suggested they would use the extra revenue earned from Internet Overcharging to combat another industry’s piracy problem.

His sweeping indictment against consumers extends beyond nipping at their bank accounts on behalf of telecommunications companies who help fund the group he represents.  He also suggests those who oppose his piracy prescriptions are either in league with, or defenders of piracy — or other offenders ranging from criminal enterprises to kiddie porn peddlers.

Castro’s support for usage caps to control illicit online activities leaves collateral damage as far as the eye can see.  It also simply won’t work for many forms of piracy Castro complains about.  ISPs with usage caps go out of their way to note even the most draconian limits still allow thousands (if not hundreds of thousands) of songs to be downloaded — legal or otherwise.  Castro testified e-published books are now increasingly vulnerable to piracy, content compact and easy to obtain even with usage limits.  Combating websites dealing in counterfeit goods with usage limits isn’t even worth trying.

What Castro’s proposal will do is limit access to the growing amount of legitimate online video traffic.  While the author cites statistics that “one in four bits of traffic traveling on the Internet today is infringing content,” (taken from a report commissioned by NBC-Universal, who has a major interest in this battle) he ignores other facts.  Namely, more than three-quarters of all broadband traffic is legal and legitimate.  Nearly 20 percent of primetime broadband traffic is coming from companies like Netflix who are in the business of providing a legal alternative to video piracy.

Castro’s argument on usage caps simply falls apart: ISPs, who have never been particularly interested in being the enforcement divisions for Hollywood studios, should be given the right to limit broadband usage and raise prices to combat piracy even when most of that traffic heads for legitimate websites?

Public Enemy #1 for Content Theft circa 1981: The $1,400 VCR

Online piracy enforcement should not involve Internet Overcharging schemes, and arguments that it should only illustrate why so many consumers and public interest groups get nervous about industry-proposed enforcement mechanisms.  Too often, they ignore presumption of innocence before guilt, browbeat alleged offenders into settlements to avoid costly litigation — guilty or not, and turn over policing to an industry with a long track record of overreach to protect their business interests. The record speaks for itself:

• Demands to ban videotape recorders in the 1970s and early 1980s for “piracy reasons”;
• Tax cassettes and video tapes to cover alleged piracy losses in the 1980s;
• Tax blank digital media in the 1990s because of “rampant piracy”;
• Impose monthly “piracy recovery surcharges” on broadband users in the 2000s;

Now the industry wants to police the piracy problem on its own terms.  As before, the proposed solutions are worse than the problem.

Back to the future.  In 1981, ABC’s Nightline ran this report on the entertainment industry suing a VCR owner, retailers, and manufacturers for piracy over taping a television station with a videocassette recorder.  The concern in 1981 — technology was moving faster than copyright law could keep up.  Many of the yesterday’s players are part of today’s debate, including Universal, the company that purchased research indicting 20 percent of all Internet traffic as “illegal.” (Part 1 of 3 – 9 minutes – Courtesy WEWS-TV Cleveland, ABC News, and ‘videoholic1980s’)

Today’s piracy debate rehashes the same accusations of content theft, only the technology has changed.  One executive tells the Nightline audience he’s offended at being told the industry already earns enough.  The movie and television industry predicted calamity over the VCR more than 30 years ago, saying it would cost them billions in lost profits.  Hollywood eventually lost the argument against the VCR and their businesses turned out fine, earning billions in revenue selling videotapes of movies and television shows to consumers they were willing to sue just a few years earlier. (Part 2 of 3 – 9 minutes)

Before Washington is asked to join the panic-frenzy over online piracy, perhaps they should recall the same predictions of doom and gloom made by many of the same companies — predictions that were overstated.  Imagine if they had succeeded in banning the VCR?  Indeed, just as before, Hollywood stands to earn billions online when they make their content available for easy, legal viewing at a reasonable price.  Slapping usage limits on broadband consumers is the worst idea ever to promote legal viewing of digital content because it discourages customers from shopping for it.  (Part 3 of 3 – 4 minutes)