Phillip "Is this 'innovation' or more 'alienation' from Big Cable" Dampier

While Federal Communications Commission chairman Julius Genachowski pals around with his cable industry friends at this week’s Cable Show in Boston, observers could not miss the irony of the current FCC chairman nodding in repeated agreement with former FCC chairman Michael Powell, whose bread is now buttered by the industry he used to regulate.

The revolving door remains well-greased at the FCC, with Mr. Powell assuming the role of chief lobbyist for the cable industry’s National Cable and Telecommunications Association (and as convention host) and former commissioner Meredith Attwell-Baker enjoying her new office and high priced position at Comcast Corporation, just months after voting to approve its multi-billion dollar merger with NBC-Universal.

Genachowski’s announcement that he favors “usage-based pricing” as healthy and beneficial for broadband and high-tech industries reflects the view of a man who doesn’t worry about his monthly broadband bill. As long as he works for taxpayers, we’re covering most of those expenses for him.

Former FCC chairman Powell said cable providers want to be able to experiment with pricing broadband by usage. That represents the first step towards monetizing broadband usage, an alarming development for consumers and a welcome one for Wall Street who understands the increased earnings that will bring.

Unfortunately, the unspoken truth is the majority of consumers who endure these “experiments” are unwilling participants. The plan is to transform today’s broadband Internet ecosystem into one checked by usage gauges, rationing, bill shock, and reduced innovation.  The director of the FCC’s National Broadband Plan, Blair Levin, recently warned the United States is on the verge of throwing away its leadership in online innovation, distracted trying to cope with a regime of usage limits that will force every developer and content producer to focus primarily on living within the usage allowances providers allow their customers.

“I’d rather be the country that developed fantastic applications that everyone in the world wants to use than the country that only invented data compression technology [to reduce usage],” Levin said.

Genachowski’s performance in Boston displayed a public servant primarily concerned about the business models of the companies he is supposed to oversee.

Genachowski: Abdicating his responsibility to protect the public in favor of the interests of the cable industry.

“Business model innovation is very important,” Genachowski said. “There was a point of view a couple years ago that there was only one permissible pricing model for broadband. I didn’t agree.”

We are still trying to determine what Genachowski is talking about. In fact, providers offer numerous pricing models for broadband service in the United States, almost uniformly around speed-based tiers, which offer customers both a choice in pricing and includes a worry-free usage cap defined by the maximum speed the connection supports.

Broadband providers experimenting with Internet Overcharging schemes like usage caps, speed throttles, and usage-billing only layer an additional profit incentive or cost control measure on top of existing pricing models.  A usage cap limits a customer to a completely arbitrary level of usage a provider determines is sufficient. But such caps can also be used to control over-the-top streaming video by limiting its consumption — an important matter for companies witnessing a decline in cable television customers.  Speed throttles are a punishing reminder to customers who “use too much” they need to ration their usage to avoid being reduced to mind-numbing dial-up speeds until the next billing cycle begins. Usage billing discourages consumers from ever trying new and innovative services that could potentially chew up their allowance and deliver bill shock when overlimit fees appear on the bill.

The industry continues to justify these experiments with wild claims of congestion, which do not prevent companies like Comcast, Time Warner Cable, and Cox from sponsoring their own online video streaming services which even they admit burn through bandwidth. Others claim customers should pay for what they use, which is exactly what they do today when they write a check to cover their growing monthly bill. Broadband pricing is not falling in the United States, it is rising — even in places where companies claim these pricing schemes are designed to save customers money. The only money saved is that not spent on network improvements companies can now delay by artificially reducing demand.

It’s having your cake and eating it too, and this is one expensive cake.

Comcast is selling broadband service for $40-50 that one research report found only costs them $8 a month to provide. That’s quite a markup, but it never seems to be enough. Now Comcast claims it is ditching its usage cap (it is not), raising usage allowances (by 50GB — four years after introducing a cap the company said it would regularly revisit), and testing a new Internet overlimit usage fee it literally stole from AT&T’s bean counters (a whopping $10 for an anti-granular 50GB).

In my life, all of the trials and experiments I have participated in have been voluntary. But the cable industry (outside of Time Warner Cable, for the moment) has a garlic-to-a-vampire reaction to the concept of “opting out,” and customers are told they will participate and they’ll like it.  Pay for what you use! (-at our inflated prices, with a usage limit that was not there yesterday, and an overlimit fee for transgressors that is here today. Does not, under any circumstances, apply to our cable television service.)

No wonder Americans despise cable companies.

Michael Powell, former FCC chairman, is now the host and chief lobbyist for the National Cable & Telecommunications Association's Cable Show in Boston. (Photo courtesy: NCTA)

For some reason, Chairman Genachowski cannot absorb the pocket-picking-potential usage billing offers an industry that is insatiable for enormous profits and faces little competition.

Should consumers be allowed to pay for broadband in different ways?  Sure. Must they be compelled into usage pricing schemes they want no part of? No, but that’s too far into the tall grass for the guy overseeing the FCC and the market players to demand.

Of course, we’ve been here and done this all before.

America’s dinosaur phone companies have been grappling with the mysterious concept of ‘flat-rate envy’ for more than 100 years, and they made billions from delivering it. While the propaganda department at the NCTA conflates broadband usage with water, gas, and electricity, they always avoid comparing broadband with its closest technological relative: the telephone. It gets hard to argue broadband is a precious, limited resource when your local phone company is pelting you with offers for unlimited local and long distance calling plans. Thankfully, a nuclear power plant or “clean coal” isn’t required to generate a high-powered dial tone and telephone call tsunamis are rarely a problem for companies that upgraded networks long ago to keep up with demand. Long distance rates went down and have now become as rare as a rotary dial phone.

In the 20th century, landline telephone companies grappled with how to price their service to consumers.  Businesses paid “tariff” rates which typically amount to 7-10 cents per minute for phone calls. But residential customers, particularly those outside of the largest cities, were offered the opportunity to choose flat-rate local calling service. Customers were also offered measured rate services that either charged a flat rate per call or offered one or two tiers of calling allowances, above which consumers paid for each additional local call.

Consumers given the choice overwhelmingly picked flat-rate service, even in cases where their calling patterns proved they would save money with a measured rate plan.

"All you can eat" pricing is increasingly common with phone service, the closest cousin to broadband.

The concept baffled the economic intelligentsia who wondered why consumers would purposefully pay more for a service than they had to. A series of studies were commissioned to explore the psychology of flat-rate pricing, and the results were consistent: customers wanted the peace of mind a predictable price for service would deliver, and did not want to think twice about using a service out of fear it would increase their monthly bill.

In most cases, flat rate service has delivered a gold mine of profits for companies that offer it. It makes billing simple and delivers consistent financial results. But there occasionally comes a time when the economics of flat-rate service increasingly does not make sense to the company or its shareholders. That typically happens when the costs to provide the service are increasing and the ability to raise flat rates to a new price point is constrained. Neither has been true in any respect for the cable broadband business, where costs to provide the service continue to decline on a per-customer basis and rates have continued to increase for consumers. The other warning sign is when economic projections show an even greater amount of revenue and profits can be earned by measuring and monetizing a service experiencing high growth in usage. Why leave money on the table, Wall Street asks.

That leaves us with companies that used to make plenty of profit charging $50 a month for flat rate broadband, now under pressure to still charge $50, but impose usage limits that reduce costs and set the stage for rapacious profit-taking when customers blow through their usage caps. It also delivers a useful fringe benefit by keeping high bandwidth content companies from entering the marketplace, as consumers fret about their impact on monthly usage allowances. Nothing eats a usage allowance like online video. Limit it and companies can also limit cable-TV cord-cutting.

Fabian Herweg and Konrad Mierendorff at the Department of Economics at the University of Zurich found the economics of flat rate pricing still work well for providers and customers, who clearly prefer unlimited-use pricing:

We developed a model of firm pricing and consumer choice, where consumers are loss averse and uncertain about their own future demand. We showed that loss-averse consumers are biased in favor of flat-rate contracts: a loss-averse consumer may prefer a flat-rate contract to a measured tariff before learning his preferences even though the expected consumption would be cheaper with the measured tariff than with the flat rate. Moreover, the optimal pricing strategy of a monopolistic supplier when consumers are loss averse is analyzed. The optimal two-part tariff is a flat-rate contract if marginal costs are low and if consumers value sufficiently the insurance provided by the flat-rate contract. A flat-rate contract insures a loss-averse consumer against fluctuations in his billing amounts and this insurance is particularly valuable when loss aversion is intense or demand is highly uncertain.

Applied to broadband, Herweg and Mierendorff’s conclusions fit almost perfectly:

1. Consumers often do not understand the measurement units of broadband usage and do not want to learn them (gigabytes, megabytes, etc.)
2. Consumers cannot predict a consistent level of usage demand, leading to disturbing wild fluctuations in billing under usage-based pricing;
3. The peace of mind, or “insurance” factor, gives consumers an expected stable bill for service, which they prefer over unstable usage fees, even if lower than flat rate;
4. Flat rate works in an industry with stable or declining marginal costs. Incremental technology upgrades and falling broadband delivery costs offer the cable industry exceptional profits even at flat-rate prices.

Time Warner Cable (for now) is proposing usage-based pricing as an option, while leaving flat rate broadband a choice on the service menu. But will it last?

Time Warner Cable (so far) is the only cable operator in the country that has announced a usage-based pricing experiment that it claims is completely optional, and will not impact on the broadband rates of current flat rate customers. If this remains the case, the cable operator will have taken the first step to successfully duplicate the pricing model of traditional phone company calling plans, offering price-sensitive light users a measured usage plan and risk-averse customers a flat-rate plan. The unfortunate pressure and temptation to eliminate the flat rate pricing plan remains, however. Company CEO Glenn Britt routinely talks of favoring usage-based pricing and Wall Street continues to pressure the company to exclusively adopt those metered plans to increase profits.

Other cable operators compel customers to adopt both speed and usage-based plans, which often require a customer to either ration usage to avoid an overlimit fee or compel an expensive service upgrade for a more generous allowance.  The result is customers are stuck with plans they do not want that deliver little or no savings and often cost much more.

Why wouldn’t a company sell you a plan you want? Either because they cannot afford to or because they can make a lot more selling you something else. Guess which is true here?

Broadband threatens to not be an American success story if current industry plans to further monetize usage come to fruition. The United States is already falling behind in global broadband rankings. In fact, the countries that lived under congestion and capacity-induced usage limits in the last decade are rapidly moving to discard them altogether, even as providers in this country seek to adopt them. That is an ominous sign that destroys this country’s lead role in online innovation. How will consumers react to tele-medicine, education, and entertainment services of the future that will eat away at your usage allowance?

Even worse, with no evidence of a broadband capacity problem in the United States, Mr. Genachowski’s apparent ignorance of the anti-competitive duopoly’s influence on pricing power is frankly disturbing. Why innovate prices down in a market where most Americans have just one or two choices for service? Economic theory tells us that in the absence of regulatory oversight or additional competition, prices have nowhere to go but up.

To believe otherwise is to consider your local cable operator the guardian angel of your wallet, and just about every American with a cable bill knows that is about as real as the tooth fairy.

Foreshadowing Bill Shock?

T-Mobile is suspicious about the value of forthcoming family shared data plans likely to be introduced by its larger competitors AT&T and Verizon Wireless later this year.

Andrew Sherrard, senior vice president of marketing for T-Mobile announced the company would not jump on the family data bandwagon, preferring to leave the current model of individual data plans for each device in place:

Some of our competitors are backing away from simple, unlimited data and moving to family shared data plans. But would this approach actually deliver a better value to consumers?  Do families really want to keep track of each others’ data consumption? We don’t think so. Just imagine mom’s email is suddenly unavailable because her teenage son watched an HD movie on his phone, consuming the family’s data allotment.

T-Mobile believes that consumers today do not want a ‘one size fits all’ approach to shared family data plans, nor would they benefit from that model.  So, what is the right way to price data for customers who want affordable, unlimited access to what, unfortunately, is a limited resource?

Here’s how we see it:

Data plans should be flexible and affordable. At T-Mobile, customers have the option of only paying for the amount of data each member of the family believes they will need. Customers can choose affordable no-annual-contract data for tablets and other data-only products they share – paying every month or buying in daily or weekly installments.

Data should be worry-free. With our unlimited data plans, there is no surprise data cap or bill shock. Customers simply pay each month for the amount of high-speed data they select and (in contrast to our competitors) T-Mobile customers can continue to use mobile data on their device at reduced speeds after they reach their limit without incurring overage charges.

Customers who pay more, should get more. T-Mobile smartphone customers with 5GB or 10GB data plans also get our Smartphone Mobile Hotspot feature included. This means, with a capable T-Mobile smartphone (most are), customers can power up to five Wi-Fi enabled devices with fast, 4G data. So rather than needing to account for each device on a shared family data plan, customers can use their existing data plan to power multiple devices, while still saving hundreds of dollars annually.

T-Mobile has adopted a traditional usage cap model that provides a set usage allowance but imposes no overlimit fees. Subscribers who exceed their allowance have their wireless data speeds reduced to levels resembling dial-up for the remainder of their billing cycle.

Verizon Wireless’ recent announcement it would kick customers grandfathered on unlimited use wireless plans to tiered data plans with overlimit fees has created controversy and has angered some Verizon Wireless customers. T-Mobile’s marketing strategy could draw some disaffected customers from larger carriers.

T-Mobile ultimately believes a shared data plan can create havoc on families trying to control their shared allotment of data for each month. Without careful coordination, consumers may find substantial overlimit fees on their wireless phone bills when they exceed their allowance.

Comcast has changed its explanation why the company’s XFINITY TV service, streamed over Xbox 360 has been made exempt from the company’s 250GB usage cap.

Last week, the company claimed the service traveled over the company’s “private IP” network, exempting it from usage restrictions.  That created a small furor among public interest groups and Net Neutrality supporters because of the apparent discrimination against streamed video content not partnered with the country’s biggest cable operator.

Stop the Cap! argued what we’ve always argued — usage caps and speed throttles are simply an end run around Net Neutrality — getting one-up on your competition without appearing to openly discriminate.

Now Comcast hopes to make its own end run around the topic by changing the language in its FAQ:

Before:

After:

Although the words have changed, the story stays the same.

The key principle to remember:

Data = Data

Comcast suggests its Xbox XFINITY TV service turns your game console into a set top box, receiving the same type of video stream its conventional cable boxes receive.  The cable company is attempting to conflate traditional video one would watch from an on-demand movie channel as equivalent to XFINITY TV over the Xbox.  Since the video is stored on Comcast’s own IP network, the company originally argued, it creates less of a strain on Comcast’s cable system.

AT&T's U-verse is an example of an IP-based distribution network.

But the cable industry’s inevitable march to IP-based delivery of all of their content may also bring a convenient excuse to proclaim that data does not always equal data.  They have the phone companies to thank for it.

Take AT&T’s U-verse or Bell’s Fibe.  Both use a more advanced form of DSL to deliver a single digital data pipeline to their respective customers.  Although both companies try to make these “advanced networks” sound sexy, in fact they are both just dumb data pipes, divided into segments to support different services.  The largest segment of that pipe is reserved for video cable TV channels, which take up the most bandwidth. A smaller slice is reserved for broadband, and a much smaller segment is set aside for telephone service.

AT&T and Bell’s pipes don’t know the difference between video, audio, or web content because they are all digital data delivered to customers on an IP-based network.  Yet both AT&T and Bell only slap usage caps on their broadband service, claiming it somehow eases congestion, even though video content always uses the most bandwidth. (They have not yet figured out a way to limit your television viewing to “maintain a good experience for all of their customers,” but we wouldn’t put it past them to try one day.)

What last mile congestion problem?

Comcast’s argument for usage limiting one type of data while exempting other data falls into the same logical black hole.  Comcast’s basic argument for usage caps has always been it protects a shared network experience for customers.  Since cable broadband resources are shared within a neighborhood, the company argues, it must impose limits on “heavy users” who might slow down service for others.

We've heard this all before. Former AT&T CEO Dan Somers: "AT&T didn’t spend $56 billion to get into the cable business to have the blood sucked out of (its) veins."

But in a world where DOCSIS 3 technology and a march to digital video distribution is well underway or near completion at many of the nation’s cable operators, the “last mile” bandwidth shortage problem of the early 2000s has largely disappeared.  In fact, Comcast itself recognized that, throwing the usage door wide open distributing bandwidth heavy XFINITY TV over the Xbox console cap-free.

As broadband advocates and industry insiders continue the debate about whether this constitutes a Net Neutrality violation or not, a greater truth should be considered.  Stop the Cap! believes providers have more than one way to exercise their control over broadband.

Naked discrimination against web content from the competition is a messy, ham-handed way to deal with pesky competitors.  Putting up a content wall around Netflix or Amazon is a concept easy to grasp (and get upset about), even by those who may not understand all of the issues.

Internet Overcharging schemes like usage caps and speed throttles can win providers the same level of control without the political backlash.  Careful modification of consumer behavior can draw customers to company-owned or partnered content without using a heavy hammer.

Simply slap a usage limit on customers, but exempt partnered content from the limit.  Now customers have a choice: use up their precious usage allowance with Netflix or watch some of the same content on the cable company’s own unlimited-use service.

Nobody is “blocking” Netflix, but the end result will likely be the same:

• Comcast wins all the advantages for itself and its “preferred partners”;
• Customers find themselves avoiding the competition to save their usage allowance;
• Competitors struggle selling to consumers squeezed by inflexible usage caps.

It is all a matter of control, and that is nothing new for large telecom companies.

Back in 1999, AT&T Broadband owned a substantial amount of what is today Comcast Cable.  Then-CEO Dan Somers made it clear AT&T’s investment would be protected.

“AT&T didn’t spend $56 billion to get into the cable business to have the blood sucked out of [its] veins,” Somers said, referring to streamed video.

Obviously Comcast agrees.

Not quite.

Virgin Mobile founder Richard Branson is trying to convince customers they should sign up with a phone company that only sells you the services you need, but if “unlimited data” is one of them, look somewhere else.

Starting Friday, Virgin Mobile will quietly begin to throttle “heavy users” who reach 2.5GB of usage on their “unlimited use” data plans.  For the remainder of the billing cycle, Virgin will reduce mobile broadband speeds to just 256kbps — comparable to a significantly congested 3G connection.

It’s a long fall from Virgin Mobile’s original unlimited data offer which the company briefly attempted in the summer of 2010.

Entirely reliant on Sprint’s mobile network (and now operates as the prepaid division of Sprint), Virgin Mobile couldn’t handle the demand and quickly threatened to slow down the connections of their heaviest users.

The carrier’s decision to set a specific limit for its speed throttle was originally intended to take effect last October, but was delayed until March 23, 2012.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/New Virgin Mobile Ad.flv[/flv]

Virgin Mobile’s delayed implementation of its speed throttle coincides with this imaging “refresh” of the “New Virgin Mobile” starring a timeless Richard Branson. (1 minute)

Virgin Mobile explains its reasons:

This change comes about because of the enormous data usage driven by our new more sophisticated smartphones, and the more extensive uses customers are finding for these devices.  We want to be able to serve our Beyond Talk customers who use these unlimited plans for their data-centric daily activity, primarily for regular access to email, the Internet, and social networking sites. Our goal is to ensure our products perform at the best possible level and that we have the best possible experience for all subscribers.  These control options are similar to those other carriers have in place ? and that Virgin Mobile maintains for its Broadband2Go product as well.

These plans are still unlimited.  There is no cap or limit on how much you can consume in any given month.  In order to ensure optimal network performance and a good customer experience for all subscribers, we are moving forward in establishing some parameters.

Most Beyond Talk customers will not experience a change in the performance of their Virgin Mobile service or notice any difference.  If you use this service for typical email, internet surfing and downloading, your throughput speeds should not be noticeably impacted.  For Beyond Talk subscribers who are using more than 2.5GB during a monthly plan cycle, limits to throughput speeds for the remainder of their monthly plan cycle will enable us to preserve overall network performance and customer experience.

The company’s redefinition of the word “unlimited” in nothing new in the world of mobile data.  T-Mobile, AT&T, and Cricket all throttle their customers when they exceed a certain level of usage, yet some still market “unlimited use” plans that many customers don’t realize are limited in usefulness when arbitrary allowances are exceeded.

Concerns for “optimal network performance” and “a good experience for all” disappear when you pull your wallet out. Virgin Mobile will reset your usage allowance to zero if you agree to pay for a new month of service the moment they’ve throttled your service.  That will get you another 2.5GB of usage, whether it preserves overall network performance or not.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Richard Branson Message.flv[/flv]

Watch Virgin Group’s Richard Branson explain why Virgin Mobile wants to change the image consumers have about their mobile phone company.  A fine print disclosure that “unlimited” mobile data really isn’t may not change things for the better.  (2 minutes)

California AT&T customer Matt Spaccarelli can’t understand why his wireless phone company is selling him an “unlimited data plan” for his iPhone that is subject to being throttled to dial-up speeds after as little as 13 minutes of Netflix viewing per day over the course of a month.

Spaccarelli argued his case with several AT&T representatives, who recommended he “upgrade” his account to a tiered plan that would guarantee him at least 3GB of an unthrottled experience for the same price he was paying for an ostensibly “unlimited use” plan.

“That to me says ‘if you pay more, then you get what we promised you in the first place,’ and that is not cool,” Spaccarelli told the Associated Press.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/AP ATT Backpedals on Throttling 3-1-12.mp4[/flv]

The Associated Press talks with Matt Spaccarelli, who successfully sued AT&T over his throttled Internet connection.  (3 minutes)

The Simi Valley man did what few AT&T customers have dared — he took the company to small claims court, and won a judgment of $850.

A Ventura County judge took a dim view of AT&T’s claim that customers can enjoy an “unlimited usage” experience, as long as they understand AT&T never promised what speeds customers would receive along the way.

AT&T lost, according to the judge, because of the legal concept of “justifiable reliance,” which means because AT&T advertises itself as the “fastest wireless network,” a normal consumer with an average understanding of mobile broadband should not expect to have their speeds on an advertised “unlimited use” plan reduced to something akin to an AOL dial-up account.

After AT&T’s representative read the company’s carefully-constructed legalese in its contract and terms of usage in court, even the judge was confused, relates Spaccarelli.

“What does this mean?” Spaccarelli remembers the judge asking.

AT&T's Control Measure for "Heavy Users"

Spaccarelli said he tried it AT&T’s way — switching to a 3GB tiered usage plan to stop the throttling on his “unlimited” plan.

“For one month they switched me to a tiered plan and that month I used the smallest amount of data ever and got the highest bill,” he told KTTV in Los Angeles. “AT&T has not and cannot show that my usage has ever caused damage to their network or caused other people to slow down.”

The AT&T Usage Limbo Dance — Lowering the Bar on Customers With Continuously-Decreasing Usage Allowances

Spaccarelli explained in court his throttling experiences with AT&T have gotten worse over the last several months as part of what he calls AT&T’s “Upside Down Pyramid Scheme.”

“The problem with using the top 5% of data users [as a basis for throttling] is because [customers] are not able to use the services that we would normally use, data usage becomes less and less,” he says. That in turn makes AT&T’s “top 5% usage throttle” engage at perpetually lower and lower usage rates.  Heavy users that used to make the top 5% of data users last fall were consuming a dozen or more gigabytes per month.  Today, AT&T’s “top 5%” consume only 2GB of data.

“When this all started I was getting slowed down after around 10GB of usage, then 8GB and then 5GB,” he says. “[Now] AT&T will admit that 2GB is the average when most people get slowed down.”

“They don’t want my usage to affect other users, which I totally understand,” Spaccarelli says. “But it seems like as long as I pay more they don’t care that my usage might affect other people.”

Spaccarelli pays AT&T around $140 a month for a plan he says AT&T sold him as “unlimited everything.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KTTV Los Angeles ATT Lawsuit Interview 3-1-12.flv[/flv]

KTTV talked with Spaccarelli about why he decided to sue AT&T, what the experience was like, and why consumers should be concerned about usage-limiting Internet plans.  (5 minutes)

A judge was persuaded by Spaccarelli’s argument and awarded him $850 for the value of his effectively-lost “unlimited use” plan.  But Spaccarelli isn’t waiting by his mailbox — AT&T has indicated it intends to appeal the judge’s ruling and has not sent a check.  (Perhaps he could follow in the footsteps of George Kontos, an AT&T customer in Winston-Salem, N.C. who walked into a local AT&T retail store with a Forsyth County Sheriff’s deputy, to seize the store’s merchandise to satisfy Kontos’ $2,000 judgment.)

Lowering the bar on "unlimited use" customers.

That a customer successfully sued AT&T in small claims court is a potential nightmare for the company, which has worked for years to eliminate consumer protection clauses from its contracts.  AT&T already prohibits customers from pursuing class action lawsuits and typically mandates corporate-friendly arbitration in customer-company disputes.  But AT&T has not yet prohibited customers from suing them in small claims court, where damages are limited.

“I’m not a lawyer and I’ve never done something like this before,” Spaccarelli writes on his website. “I did my own research and took my own time to put together this case against AT&T.”

A case that he has begun documenting in an effort to help consumers pursue their own actions against AT&T.  He says filing a small claims case is simple.

“You give the clerk $85 and the court will give you a court date, that’s it,” Spaccarelli told AP.

Now AT&T has backpedaled on its original plan to throttle unlimited customers who use more than 2GB per month.  Instead, they have announced the throttle will kick in after 3GB of usage, the same amount offered by AT&T’s most popular $30 tiered plan.  That gives customers two choices: a speed throttle or overlimit fees for customers who exceed AT&T’s allowance.

AT&T has at least 17 million customers grandfathered on its now-discontinued “unlimited use” plan.  Any of them face the potential of throttling by AT&T, which could lead others to small claims court, with Spaccarelli’s help.  He told the New York Times he’s willing to travel anywhere in the country to appear as an “expert witness” in future court cases, as long as someone covers his travel expenses.

Spaccarelli says he’s not really interested in the $850, he just wants his unlimited use plan to really mean “unlimited use” again.

“I’d give back the money if they stopped slowing my speed down,” he says.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Spaccarelli Calls ATT 3-12.flv[/flv]

Spaccarelli calls AT&T customer service looking for his $850.  (2 minutes)