A Wall Street Journal article this morning calls the imminent introduction of Net Neutrality policy “a boon for consumers […] to use their computers or cellphones to enjoy videos, music and other legal services that hog bandwidth.”

The article refers to the widely expected announcement today by FCC Chairman Julius Genachowski that Net Neutrality should be adopted as the fifth principle governing Internet service in the United States.

But Journal reporter Amy Schatz’s judgment about who wins and who loses in the Net Neutrality debate is framed by the flawed broadband provider arguments she adopts as reality:

The proposed rules could change how operators manage their networks and profit from them, and the everyday online experience of individual users. Treating Web traffic equally means carriers couldn’t block or slow access to legal services or sites that are a drain on their networks or offered by rivals.

The rules will escalate a fight over how much control the government should have over Internet commerce. The Obama administration is taking the side of Google, Amazon.com Inc. and an array of smaller businesses that want to profit from offering consumers streaming video, graphics-rich games, movie and music downloads and other services.

Setting aside the inappropriate use of the word “hog” to define broadband usage, which comes straight out of the broadband industry’s public relations strategy, Schatz ignores the fact some of the biggest drains on these networks will soon come from the industry’s own efforts to dominate online video — TV Everywhere.

In fact, the excuses for imposing Internet Overcharging schemes in 2009 do not reference much beyond online video growth as a justification to impose speed throttles and price increases on consumers.

Schatz adopts industry positions as fact in a number of places throughout her piece, which belongs on the Editorial page of the Journal:

If the FCC does force U.S. wireless carriers to open their networks to data-heavy applications like streaming video, it could push them beyond the limited capacity they have. Already, in areas like New York and San Francisco, a high concentration of iPhones has caused many AT&T customers to complain about degrading service.

In fact, many wireless carriers already provide their own wireless video to customers, and don’t seem to be engaging in a lot of hand-wringing over that.  Should Net Neutrality force open the wireless platform, the quality of the service, not the provider’s self interest will govern the success and failure of individual applications.  AT&T, which has earned massive revenue from its exclusive iPhone arrangement with Apple, can and should continue to invest some of that revenue into expanding their network to meet the demand.  If they cannot, it is an open question why they would allow any online video or other data-heavy applications on their networks until those networks can handle the traffic.

In such a scenario, wireless carriers may have to rethink how much they charge for data plans or even cap how much bandwidth individuals get, said Julie Ask, a wireless analyst at Jupiter Research.

This ignores the fact providers have already rethought about how much they charge for data plans.  Some providers are now compelling subscribers to choose data plans as part of their two year service agreements, while the industry is replete with 5GB usage caps on wireless data services today.  Someone should ask Ask what she thinks is forthcoming that hasn’t already happened.

The FCC’s proposal will take into account the bandwidth limitations faced by wireless carriers, according to people familiar with the plan, and would ask how such rules should apply to current networks.

…which takes the wind out of the sails of the argument Net Neutrality would be ruinous to wireless providers.

The proposals come as the FCC faces a federal appeals court case over its authority to regulate Web traffic. Comcast is fighting an FCC decision last year to ding it for violating the agency’s “net neutrality” principles when it slowed traffic for some subscribers who were downloading big files. Comcast said it didn’t violate any rules because the FCC had never formally adopted any, but it did change how it manages its network.

In reality, Comcast’s speed throttle targeted files small and large, all because they were delivered over a specific network Comcast didn’t like: peer to peer.  That’s a protocol that relies on a group of people obtaining files by sharing pieces already downloaded with one another until the file is complete for everyone.  That involves uploading and downloading file pieces, often over a lengthy period.  Comcast’s network was built with the assumption most customers would download far more than they upload, and peer-to-peer challenged that model with its file sharing methodology.  The surge in upload traffic challenged their network at times, so Comcast decided to throttle the maximum speeds consumers could use while engaged in peer-to-peer file sharing.

Republicans are likely to oppose the FCC’s new proposal — both at the FCC and in Congress — arguing that the FCC is trying to fix problems that don’t exist and that the agency should take a more hands-off approach to the fast-changing industry.

“With only a few isolated instances of complaints alleging net neutrality-like abuses ever having been filed, it is a mistake,” said Randolph May, president of Free State Foundation, a free-market oriented think tank.

It’s difficult to fathom exactly how much more “hands-off” the agency can get with respect to broadband, an unregulated service in the United States.  That “hands-off” policy was responsible for the establishment of de facto monopoly/duopoly broadband service in most American cities, wireless broadband that charges nearly the same price for the same usage capped service, and is tinkering with Internet Overcharging to leverage that market status into higher pricing for all consumers.

May’s argument is akin to calling the fire department only after a fire has consumed half of your home, not when the smoke detector first goes off.

As a result, both the cable companies and phone companies had incentives to create conditions on the Internet — either through pricing or slowing or speeding up certain sites — to favor their own content.

This sentence, buried towards the end of the piece, exemplifies exactly why Net Neutrality is so important.  Let’s put this fire out before it burns out of control.

Phillip “Doesn’t Derive a Paycheck From Writing This” Dampier

I see it took all of five minutes for George Ou and his friends at Digital Society to be swayed by the tunnel vision myopia of last week’s latest effort to justify Internet Overcharging schemes.

Until recently, I’ve always rationalized my distain for smaller usage caps by ignoring the fact that I’m being subsidized by the majority of broadband consumers.  However, a new study from Robert Shapiro and Kevin Hassett at Georgetown University is forcing me to reexamine my personal bias against usage caps.

There’s a shock, especially after telling your readers caps “were needed.”

As I predicted, our astroturfing and industry friends would have a field day over this narrowly focused report that demands readers consider their data, their defined problem, and their single proposed solution.  The real world is, of course, slightly more complicated.

I used to debate some of my economist friends on why I thought metered pricing or more restrictive usage caps were a bad idea, but I couldn’t honestly say that my opinion was entirely objective.  My dislike for usage caps stems from the fact that I am a heavy broadband user and an uncapped broadband service is very beneficial to me since everyone else pays a little more so that I can pay a lot less on my broadband service.  But beyond self interest, I can’t make a good argument why the majority of broadband users who don’t need to transfer a lot of data should subsidize my Internet requirements.

Your opinion is still not entirely objective, George.  Your employer has industry connections.

Our readers, many of whom are hardly the usage piggies the industry would define anyone who opposes these overcharging schemes, all agree whether it’s 5GB or 150GB per month, they do not want to watch an Internet “gas gauge” or lose their option of flat rate broadband pricing that has worked successfully for this industry for more than a decade.  George and his friends assume this is an “us vs. them” argument — big broadband users want little broadband users to subsidize their service.

That’s assuming facts not in evidence.

What is in evidence are studies and surveys which show that consumers overwhelmingly do not want meters, caps, usage tiers, or other such restrictions on their service.  They recognize that a provider who claims to want to “fairly charge” people for service always means “everyone pays more, some much more than others.”  To set the table for this “fairness,” they’ve hired Washington PR firms to pretend to advocate for consumers and hide their industry connections.  Nothing suspicious about that, right?

Although George can’t make a good argument opposing usage caps, that doesn’t mean there aren’t any.  Among the many reasons to oppose caps:

• Innovation: Jobs and economic growth come from the online economy.  New services created today by U.S. companies, popular here and abroad, would be stifled from punitive usage caps and consumption billing.  Even the broadband industry, now in a clamor to provide their own online video services, sees value from the high bandwidth applications that would have never existed in a capped broadband universe, and they are the ones complaining the loudest about congested networks.
• Consumer Wishes: Consumers overwhelmingly enjoy their flat rate broadband service, and are willing to pay today’s pricing to keep it.  The loyalty for broadband is much greater than for providers’ other product lines – television and telephone.  That says something important — don’t ruin a good thing.
• The Fantasy of Savings: As already happened across several Time Warner Cable communities subjected to “experimentation,” the original proposals for lower consumption tier pricing offered zero savings to consumers who could already acquire flat rate “lite” service for the same or even lower prices.  Even when tiers and usage allowances were adjusted after being called out on this point, consumer outrage continued once consumers realized they’d pay three times more for the same broadband service they had before the experiment, with absolutely no improvement in service.  Comcast and other smaller providers already have usage caps and limits.  Pricing did not decline.  Many combine a usage allowance -and- lower speed for “economy” tiers, negating the argument that lower pricing would be achieved with fast speeds -and- a usage allowance.
• Justifying Caps Based on Flawed Analysis: The report’s authors only assume customer adoption at standard service pricing, completely ignoring the already-available “economy” tier services now available at slower speeds.
• Speed Based Tiers vs. Consumption Based Tiers: Consumers advocate for speed-based tiering, already familiar to them and widely accepted.  New premium speed tiers of service can and do already generate significant revenue for those who offer them, providing the resources for network expansion providers claim they need.
• Current Profits & Self Interested Motives: Broadband continues to be a massively profitable business for providers, earning billions in profits every year.  Now, even as some of those providers reduce investments in their own networks, they claim a need to throw away the existing flat rate business model.  Instead, they want paltry usage allowances and overlimit penalties that would reduce demand on their networks.  That conveniently also reduces online video traffic, of particular concern to cable television companies.
• Competition & Pricing: A monopoly or duopoly exists for most Americans, limiting competition and the opportunity for price savings.  Assuming that providers would reduce pricing for capped service has not been the result in Canada, where this kind of business model already exists.  Indeed, prices increased for broadband, usage allowances have actually dropped among some major providers like Bell, and speed throttles have been introduced both in the retail and wholesale markets.

More recently, building our colocation server for Digital Society has made me realize that usage caps not only has the potential to lower prices, but it can also facilitate higher bandwidth performance.  Case in point, Digital Society pays $50 per month for colocation service with a 100 Mbps Internet circuit, and at least $20 of that is for rack space and electricity.  How is it possible that we can get 100 Mbps of bandwidth for ~$30 when 100 Mbps of dedicated Internet bandwidth in colocation facilities normally costs $1000?  The answer lies in usage caps, which cap us to 1000 GBs of file transfer per month which means we can only average 3 Mbps.

One thousand gigabytes for $30 a month.  If providers were providing that kind of allowance, many consumers would consider this a non-issue.  But of course they are not.  Frontier Communications charges more than that for DSL service with a 5GB per month allowance in their Acceptable Use Policy (not currently enforced.)  Time Warner Cable advocated 40GB per month for $40-50 a month.  Comcast charges around $40-45 a month for up to 250GB.  Not one of these providers lowered their prices in return for this cap.  They simply sought to limit customer usage, with overlimit fees and penalties to be determined later.

Of course, web hosting is also an intensively competitive business.  There are hundreds of choices for web hosting.  There are also different levels of service, from shared web hosting to dedicated servers.  That is where the disparity of pricing is most evident, not in the “usage cap” (which is routinely more of a footnote and designed to keep Bit Torrent and high bandwidth file transfer services off their network). There is an enormous difference in pricing between a shared server environment with a 1000GB usage cap and a dedicated rack mount server located in a local facility with 24 hour security, monitoring, and redundancy/backup services, even with the same usage cap. For those seeking reliable and scalable hosting solutions, Voxfor’s offerings, including lifetime VPS plans and customizable management services, provide exceptional value and flexibility without the recurring costs.

So the irony of a regulation intended to “protect” the little guy from “unfair usage caps” would actually force our small organization onto the permanent slow lane.

Actually, the Massa bill has no impact on web hosting usage caps whatsoever.  George’s provider friends would be his biggest risk — the ones that would “sell” insurance to his organization is he wanted assurance that his traffic would not be throttled by consumer ISPs.  I’d be happy to recommend other hosting providers for George if he felt trapped on a “slow lane.”  That’s because there is actual competition in web hosting providers.  If the one or two broadband providers serving most Americans had their way, it would be consumers stuck on a permanent slow lane with throttled service, not organizations like his.

So, who is in agreement with George on this question?  None of his readers, as his latest article carries no reader responses.  But fellow industry-connected astroturfers and providers themselves share their love:

• “This is the story that ISP’s have failed to tell effectively — that consumption-based billing may, in fact, be fairer for consumers.” — Michael Willner, CEO Insight Communications
• “Ars Technica reports on an interesting theory being floated by former Clinton economic advisor Robert J. Shapiro and Federal Reserve economist Kevin A. Hassett” — Brad, astroturfer Internet Innovation Alliance
• “The only way … is to introduce some form of equitable pay-as-you-use pricing.  And I could not agree more.” — Ulf Wolf, Digital Communities Blogs (sponsored by AT&T, Qwest, etc.)

PC Magazine reported even Robert Shapiro, one of the report’s authors, is not advocating for usage caps:

“We’re not talking about a bandwidth cap,” Shapiro said during a call with reporters. “We were looking simply at the different pricing models and their impact on the projections of broadband uptake based on these income sensitivities.”

The report does not specify how ISPs should implement pricing, Shapiro said. “The most important thing to me as an economist is the flexibility – that is, Internet Providers can better determine than I can the particular model that works best.”

That’s not the message astroturfers are taking forward, as they try and sell this as “pro-consumer.”

Astroturfers like Scott Cleland got all excited yesterday about another misinformed piece about broadband usage caps from George Ou, a technology blogger who previously gained infamy from his strident opposition to Net Neutrality and his ridicule of the “scare-mongers” who predicted throttled speeds, multi-tiered broadband service, penalties and blocks for using Voice Over IP services, and providers trying to control what you see on the net.

George Ou

Back in 2006, he wrote a three-pager on ZDNet lambasting Save The Internet, MoveOn, and other Net Neutrality proponents who didn’t agree with Ou’s position that this was simply a technology issue.  He accused the groups of hysteria at a fever pitch over their concerns Net Neutrality opposition was much more about politics, profit, and protection of the providers’ business models.

With positions like that, Ou need not ever worry about job security because his rhetorical stars are in perfect alignment with big telecommunications companies.  I’m sure as long as he joins the broadband tug of war on the side of AT&T and other big providers, some policy institute, astroturf group, or other industry-friendly job would always be there for him to take.

Oh wait.  He has.  But more on that later.

These days, Ou has been pondering broadband usage caps, our bread and butter issue on Stop the Cap!

You do not get a cookie if you guessed he’s all for them, because that would be too easy.

Ou decided that the recent comparison between broadband usage caps in Japan and the United States by Chiehyu Li and James Losey of the New America Foundation, was… problematic.  That usually means we are about to get a technological-jargon-cannon barrage in an effort to suggest those folks at the New America Foundation ‘just don’t understand how the Internet works.’

You decide:

Li and Losey point out that while Japanese ISPs caps the upstream; they are generous with unlimited downstream while American ISPs are beginning to cap both the upstream and downstream.  But this is a flawed analysis because capping the upstream effectively cuts to total downstream peer-to-peer (P2P) traffic to the same levels.  And because P2P is one of the most heavily used application on the Internet accounting for the vast majority of Japanese Internet traffic, cutting upstream usage greatly reduce all P2P traffic and all Internet usage which was necessary because their Internet backbones were severely congested.  I’ve argued that it is far more efficient to manage the network but until then the caps are needed.

Another problem with Li and Losey’s analysis is that it only looks at the usage cap without an analysis of the duty cycle and its ramifications.  When we compare the usable duty cycle between ISPs in Japan compared to ISPs in the U.S. derived from Li and Losey’s data, we see a completely different picture.  By splitting the U.S. ISP usage caps (some of these caps are only in proposal phase) into an upstream and downstream cap proportional to the upstream/downstream connection speeds, I was able to generate Figure 1 below.  What it actually shows is that U.S. broadband providers have usage caps that allow users to use their Internet connection far more frequently than users in Japan.  So while a user in Japan is capped to 40 minutes a day of upstream Internet usage, which indirectly caps download speed because it severely trims the number and generosity of P2P seeders.  AT&T’s proposed DSL usage caps (similar to other DSL providers) allow for 1111 minutes of usage per day on the upstream and 97 minutes on the downstream per day.  So broadband consumers who are dissatisfied with their tiny Time Warner usage caps can simply switch to their DSL provider.

I guess that wraps that up.  Or not.

Ou wants us to assume quite a bit in his own analysis.  His contention that the “vast majority” of Japanese Internet traffic is peer-to-peer is “proven” by linking to an earlier article… written by him… saying just that.  But let’s grant Ou the premise that peer-to-peer is at the epicenter of bandwidth congestion in Japan.  Ou defends Japanese providers for specifically targeting the upstream traffic, pointing out stingy torrent users that don’t give as much as they get will automatically be speed limited during downloads (Bit Torrent’s way of equal sharing).  But he never extends the upstream cap argument to the United States, where he implies a similar traffic overload is occurring.  Instead, he merely acknowledges that domestic providers are experimenting with caps that limit both uploading and downloading, impacting every broadband user, not just those “problem” peer to peer users.

Caps.  The necessary evil?

Ou is okay with the equivalent of dealing with a pesky fly in the kitchen by setting the house on fire.  Doing that might solve the fly problem, but makes living there unpleasant at best in the future.

In fact, the impetus for dealing with the peer to peer “problem” in Japan turns out to be as much about copyright politics as bandwidth management.¹

I also have no idea why Ou would spend time developing a “duty cycle” formula in an effort to try and convince Americans that those generous looking caps in Japan are actually worse for you than the paltry ones tested in the United States.  His formula is dependent on the speed levels offered by Japanese vs. American providers to work.  But then Ou tries to debunk the speeds on offer in Japan as more fiction than reality, and throws his own “duty cycle” formula under the bus as a result:

Li and Losey also paint a dire picture that Japan has 10 or more times the connectivity speed as the US, but the most accurate real-world measurement of Internet throughput in Japan according to the Q1-2009 results from Akamai’s State of the Internet report indicates that Japanese broadband customers only average about 8 Mbps.

Ou then exposes he is completely clueless about the state of broadband in some of the communities that actually cope with usage caps, or were threatened with them.  Ou’s suggestion that unhappy Time Warner Cable customers could simply leave a capped Road Runner for DSL service from the phone company leaves residents in Rochester, New York cold.  For them, that means coping with an Acceptable Use Policy from Frontier that defines 5GB per month as appropriate for their DSL customers.  In Beaumont, Texas, the limbo dance of caps last left residents picking between a cap as low as 20GB with AT&T or a 40GB “standard plan” from Time Warner Cable, before Time Warner dropped the “experiment” for now.

Ou should have just suggested customers in western New York and the Golden Triangle just pick up and move to another city.  It would have been more realistic than his “if you don’t like them, switch” solution.  It also presumes there is a viable DSL service to switch to, as well as whether or not the service can provide a sufficiently speedy connection to take advantage of today’s broadband applications.

And here is where you can draw lines between the special interests, astroturfers, industry-connected folks and actual real, live, consumers.

Ou brings out the shiny keys, waving them in consumers’ faces telling them to look somewhere else for answers:

So the reality is that usage caps isn’t what Americans should be focusing on and the priority should be to encourage more next generation broadband deployment.

Internet Overcharging schemes that charge consumers up to 300% more for their broadband service, with no corresponding improvement in service, is not the problem for Ou, but it certainly was for Time Warner Cable customers in several cities chosen for their Overcharging experiment.  The need to encourage more broadband deployment is fine, but American broadband customers will be broke long before that ever happens without some other pro-consumer solutions.

Ou has a problem though.  He has a new employer.

A corporate restructuring at ZDNet in the spring of 2008 meant Ou was free to pursue other professional interests, and wouldn’t you know, he turned up as Policy Director of “pro-commerce” Digital Society.  That’s a “free market think tank” website whose domain name is administered by one Jon Henke in… you guessed it, suburban Washington, DC (Arlington, Virginia to be exact).

The sharks are in the water.

Jon Henke

Henke, Executive Director of Digital Society, and presumably Ou’s boss, has quite the agenda of his own, and it’s not consumer driven.  He has a long history of involvement in conservative politics, which brings new questions about how Henke would approach “encouraging next generation broadband deployment.”  Does he favor broadband stimulus money?  How about municipal broadband competition?

In addition to his work with Digital Society, Henke also runs something called the DC Signal Team.  What’s that?  Let’s see:

DC Signal is a strategic intelligence and communications firm specializing in new media consulting. Based in the Washington, DC area, we work with a range of clients — corporations, trade associations, campaigns, and individuals — to craft and execute an effective online strategy.  We provide timely intelligence and analysis, as well as communications that can reach and resonate with key opinion makers, policy experts, and elected officials.

Our expertise in new media communications sets DC Signal apart, allowing us to filter out the background noise on the Internet to deliver just the most relevant information, make creative, appropriate recommendations based on that information, and target communications directly to the most influential audiences.

I love the smell of plastic grass in the morning.

That’s right, folks.  DC Signal is a classic PR firm that uses targeted communications to reach the most appropriate audience for their campaigns.  Need to reach consumers and sell them on a pro-industry position?  Set up a “grassroots” group to do it.  Need to baffle the media, lawmakers and opinion leaders with industry BS?  Set up “authoritative” websites to deliver carefully filtered “relevant information.”  What better way to do that than with a blog like Digital Society?

But wait, there’s more.

Henke is also working for an innocuously named group called Arts+Labs, which starts its mission statement out innocently enough:

Arts+Labs is a collaboration between technology and creative communities that have embraced today’s rich Internet environment to deliver innovative and creative digital products and services to consumers. From the early development of motion picture technology, voice recordings and radio to today’s 3D computer graphics, streaming digital movies, “on-demand” entertainment,  online games, news and information, innovative technologies and creativity have always gone hand in hand to enrich our understanding and appreciation of arts, entertainment and culture.

Then things become more ominous.

At the same time, Arts+Labs is working to educate consumers about how net pollution – spam, malware, computer viruses and illegal file trafficking – threatens to transform the Internet from an essential catalyst to safely deliver this content to consumers, into a viral distribution mechanism that will choke off the Internet for consumers and future innovators and creators alike.

I can understand the threats from spam, malware, and computer viruses — what groups out there actually advocate for these? — but the “illegal file trafficking” thrown in at the end had me wondering.

I smell industry money, probably from providers who oppose Net Neutrality and want to throttle peer to peer applications, from Hollywood content producers who want to keep their content off The Pirate Bay, the music industry who is always paranoid about piracy, and of course equipment manufacturers who sell the hardware that does the bandwidth management.

So who “partners” with Arts+Labs?

• Viacom
• NBC Universal
• AT&T
• Broadcast Music, Inc. (BMI)
• Verizon
• Microsoft
• Songwriters Guild of America
• Cisco
• American Society of Composers, Authors and Publishers (ASCAP)

There you go.

Arts+Labs tries to be clever about its agenda, not so much with strident opposition to Net Neutrality, but instead promoting “consumer interests” by insisting that providers fully disclose the abuse about to be heaped on their customers.  In a press release in June, the group advocated its own national broadband strategy recommendations to the FCC:

A Safe Internet and Smart Management Will Boost Digital Society

It also said that a safe Internet must be a core part of a national broadband strategy and that the failure to protect online data and crack down on net pollution such as malware, spam, phishing and other Internet crime will erode the value of the Internet and discourage broadband adoption.

“To drive adoption and build a successful digital society that reaches every American, all of us must accept responsibility for minimizing online risks, protecting users’ privacy, and ensuring data security against malicious online activity and cybercrime,” A+L said.

It also urged the Commission to embrace “smart management tools and techniques.”

“Used effectively, smart management of our networks will stimulate broadband adoption by expanding the scope of activities available to consumers, by addressing network congestion, and by defending against hacking, phishing, identity theft and other forms of cybercrime,” the filing added.

But it said network operators must not abuse management tools to interfere with competitors or consumers rights and noted:  “In a digital society, network managers owe their customers transparency about their network management practices, including proactive disclosure of new policies or innovations that may affect users’ experiences.”

A+L Urges Collaborative Effort, Says Pragmatism Should Trump Ideology

It also urged the Commission to avoid unnecessary regulatory constraints that would interfere with the ability of content providers, network operators and other Internet-related businesses to experiment with new business models and to offer innovative new services and options to consumers.

Finally, A+L urged every Internet industry and every individual who uses the Internet to work together to achieve the nation’s broadband goals.

“Building an inclusive digital society and achieving our broadband goals will require all of us to think outside of silos, to choose pragmatic and effective policies over ideology, and to drive broadband adoption by encouraging the creation of exciting content, protecting intellectual property, and ensuring that the Internet is a safe place to be.  And, the guiding principle on every issue should be to find the solution that moves broadband forward,” A+L concluded.

Broadband throttles and Internet Overcharging aren’t anti-consumer — they are “new policies or innovations.”  As long as the provider discloses them, all is well.

The ideology reference in the press release is remarkable, considering the people who involve themselves in Arts+Media represent a veritable hackathon of the DC political elite, from Mike McCurry, former Clinton Administration press secretary, Mark McKinnon, who advised President George W. Bush, to the aforementioned Jon Henke, who was hired originally to do “new media” damage control for former Virginia senator George “Macaca” Allen and then went to work for the presidential campaign of Fred Thompson.

As usual, the only people not on Arts+Labs’ People page are actual consumers.

To wrap up this party of special interests, which consumers aren’t invited to, we wind our way back to the home page of Digital Society, which features a familiar roster of recommended blogs and websites to visit.  Among them:

• Arts & Labs blog (Henke works with them)
• Broadband Politics (run by Richard Bennett, who forgot he worked for a K Street Lobbyist, actually on K Street (read the comments at the bottom of the linked article)
• Cisco Policy Blog (also a partner with Arts+Labs, has a direct interest in selling the bandwidth management hardware)
• Verizon Policy Blog (also a partner with Arts+Labs, and an interested provider in this issue)

In the beginning of this piece, I recited some of the “scare mongering” Ou accused groups of engaging in on the Net Neutrality debate back in 1996.  The first major Net Neutrality battle was with Comcast over bandwidth throttles.  The barely-conscious FCC under Kevin Martin spanked Comcast (who sued, of course) and we’ve been in a holding pattern ever since.  But the predictions have become remarkably true north of the American border, where Canada endures all of the things Ou swore up and down in 1996 would never happen.

• Most major broadband providers in Canada throttle the speeds of peer to peer applications, reducing speeds to a fraction promised in their marketing materials.
• Most major broadband providers in Canada not only charge customers based on broadband speed, but also by the volume of data consumed, causing spikes in customer bills and a reduction in usage allowances in some cases.  Customers now face overlimit fees and penalties for exceeding the Internet usage ration they are granted each month.
• In 2006, Shaw Communications in Canada tried sticking a $10 monthly fee on broadband customers wanting to use Voice Over IP telephone service.  Vonage Canada complained loudly at the time.
• As far as controlling what you see online, that’s already in the cards in the States, if the cable industry has any say in the matter.

With a pliable FCC, what exists in Canada today will exist in the United States tomorrow without Net Neutrality protections enacted into law.

(footnoted material appears below the break)

… Continue Reading

The Canadian Radio-television Telecommunications Commission is investigating Canadian ISP practices all week in a series of public hearings.

All week long, the Canadian Radio-television Telecommunications Commission (CRTC), Canada’s telecommunications regulator, is investigating Canadian ISPs who are throttling back speeds on certain Internet applications and engaging in “usage based pricing” of their wholesale accounts.

The hearings, which will run until Monday, will help the CRTC create regulations for how service providers manage their Internet traffic and address provider claims of network congestion.

A wide array of interests are represented at this week’s hearings (courtesy CBC):

1. ISPs that use internet traffic management for P2P file transfers

• Specifically: Bell Aliant, Cogeco, Rogers, Shaw, Barrett Xplor.
• What they are expected to say: Practices such as throttling are necessary to ensure fairness among internet users and prevent a few bandwidth hogs from slowing down the internet for everyone. Barrett Xplor use traffic management for satellite services, arguing that satellites are expensive and hard to upgrade.

2. ISPs that use other methods to deal with congestion

• Specifically: Telus, MTS Allstream, Primus, Quebecor on behalf of Videotron
• What they are expected to say: Methods such as usage-based pricing and network upgrades work well to deal with congestion, but each ISP should be allowed to make their own decisions regarding how they deal with congestion. Primus argues in its written submission that internet wholesalers such as Bell should not be allowed to impose their traffic management practices on the customers of other ISPs that buy wholesale network access from them.

3. Small ISPs, including those that may be throttled by their wholesalers

• Specifically: Coalition of Internet Service Providers Inc., Canadian Association of Internet Providers, Execulink, Cybersurf.
• What they are expected to say: Many of these companies buy internet access wholesale from companies such as Bell, create packages and resell it to their own retail customers. They argue that allowing wholesalers to apply traffic management to customers of other ISPs is anti-competitive.

4. The entertainment industry

• Specifically: Independent Film and Television Alliance, Canadian Film and Television Production Association, Alliance of Canadian Cinema, Television and Radio Artists.
• What they are expected to say: The internet is an important platform for distributing music, film and TV. ISPs should not act as gatekeepers for those.

5. Other businesses and organizations that rely on the internet to deliver services

• Specifically: Zip.ca, Jason Roks, Vaxination informatique, Norm Friesen, Canada research chair in e-learning practices at Thompson Rivers University, Open Internet Coalition
• What they are expected to say: Traffic management practices that discriminate against certain types of data could reduce investment in broadband networks and consumer choice, inhibit innovation and freedom of expression and be abused to engage in anti-competitive practices.

6. Consumer and public interest advocacy groups

• Specifically: Public Interest Advocacy Centre, Union des consommateurs, National Union of Public and General Employees, Canadian Internet Policy and Public Interest Clinic on behalf of Campaign for Democratic Media, Council of Canadians with Disabilities and ARCH Disability Law Centre
• What they are expected to say: Their position is similar to that of businesses and organizations that rely on the internet, but they are also concerned that technologies such as deep packet inspection could invade consumers’ privacy.

Several interest groups are willing to advocate for certain bandwidth management techniques over others, much to the consternation of some consumers following the hearings.  Jacob Glick, Canada policy counsel for Google, for example, told CRTC commissioners he supported usage based pricing if it meant throttled broadband would end.  In his written and spoken comments before the CRTC, he indicated that throttled broadband was the worst choice for ISPs:

They have the potential to hurt innovation and other techniques are preferable, including:

• Boosting network capacity.
• Using different pricing models.
• Using techniques that target the amount of bandwidth use rather than the type of application using the bandwidth; for example, slowing a user’s connection after reaching a certain limit.

Glick argued that such techniques helped Comcast reduce network congestion after it was ordered by regulators to stop throttling its customers.  Comcast has a 250GB monthly consumption allowance.

John Lawford, counsel for the Public Interest Advocacy Centre, which claims to represent three Canadian consumers groups, also advocated usage based pricing telling the Commission it was an acceptable alternative to dealing with network congestion issues.

But Timothy Denton, national commissioner for the CRTC, inquired about whether usage based pricing would inhibit the development of innovative, but bandwidth intensive, services like online video.  Marvin Ammori, general counsel for Free Press argued that it very well could.  Ammori pointed out there are anti-competitive issues to consider because many online innovations, particularly video, may compete with Internet providers’ own services.

Canadian consumers following the hearings on several technology websites were hostile to both usage based pricing and Net Neutrality violations.

John from St. Catherines wrote Stop the Cap!:

“I don’t know who these groups claim to represent but they sure as hell don’t represent me or any of the other consumers I know.  It sounds like some of these so-called pro-consumer groups are being funded by commercial services that will be harmed more by bandwidth throttles than with these overcharging scams.  Rogers does it all – they throttle, they cap, they charge penalties, and they raised their prices anyway!  Glick is part of Google which has their own agenda which isn’t consumers, and Lawford is full of crap.  He and his friends are like the passengers on the Titanic clawing their way to the front of the ship as it goes down. He’s not smart enough to realize all he’s accomplishing is going down with the ship a few minutes after the rest of us. He’s still going to drown, along with all of the consumers these people claim to represent.”

Canada’s largest online movie rental firm was particularly concerned about usage pricing models.

Rob Hall, Chairman of Zip.ca, Canada's leading online movie rental firm, told the Commission his business could go down if providers continue throttling traffic and limiting usage.

Rob Hall, chairman of  Zip.ca and CEO of its parent company told the Commission its plans to provide direct delivery of movies and other programming directly to consumers online, without waiting for a DVD to arrive in the mail, could be jeopardized by speed throttles and usage limits.  Hall said that cable and telephone video providers get to deliver their own programming to viewers over the same wires as their Internet service, but without any limitations.  Hall said that represents evidence that providers are giving priority to their own network traffic over others.

“The same rules must apply to both,” Hall said.

Hall was also concerned about ISPs spying on customers and potentially taking advantage of the data they collect:

Some ISPs are throttling peer-to-peer file transfers using programs such as BitTorrent, which “might be an ideal platform” to deliver Zip.ca’s movies, as it uses the network efficiently.

Deep packet inspection, a technique used for traffic control, will be abused to access marketing information about users that his company has collected.

If rules change suddenly, and there is no way to resolve the problem quickly, his company could be put out of business.

Independent ISPs are also concerned about the implications of throttled service.  They purchase Internet access from large providers like Bell (Canada) and then resell that connectivity to their customers.  Recently, Bell started imposing usage based billing on their wholesale accounts and throttled their speeds, forcing providers to raise prices and limit access.

The proposition, according to several providers, is that they are supposed to compete with Bell and large cable operators with a service that is identical or worse than what those providers offer, with the same limitations on usage and service, at a price that reduces or eliminates potential savings and benefits for their customers.  They believe many providers will be driven out of business because of the anti-competitive marketplace.

Many appearing at the hearing were skeptical about the effectiveness of bandwidth throttling, particularly of peer to peer applications.  Many such networks are rapidly moving to hiding traffic to avoid the network throttle.  Jean François Mezei, who runs the consulting company Vaxination Informatique, told the Commission that those heavy users of such applications will switch to a less efficient protocol to hide their traffic, which would only increase congestion further.

Toronto-based technology consultant Jason Roks said the real problem is false advertising by providers who are overselling their networks to subscribers.  Roks said advertised speeds in provider promotions rarely meet expectations, companies do not disclose the actual speeds of throttled services, and consumers are not given access to that information.  Roks told the Commission bandwidth providers are using throttles and other control measures to avoid investing in expanding their networks.

“If they can’t afford to upgrade their networks to support that many customers at advertised speeds, they should let customers go,” he argued.

More reactions from Canadian consumers below the fold.

… Continue Reading

[Updated 1:00pm ET: Stop the Cap! reader Michael Chaney found a video interview done last fall with some Australian providers falling all over themselves to praise themselves for Internet Overcharging schemes, and suggest American providers learn from them how to get away with trying the same thing.]

The group managing director of Telstra (Australia), Justin Milne, wants you to know that the era of free love is over.  They are sick and tired of letting content producers like Ninemsn (a partnership between Australia’s Nine Network ((think ABC or CBS)) and Microsoft’s MSN) use their pipes for free to send those video clips to their customers.  It’s time to break out the checkbooks and start paying them for freeloading on their network.

In a commentary for ZDNet Australia, Milne equates Net Neutrality with greed and “economic self-interest dressed up as moral virtue.”  Pot to kettle, especially when he quotes Franklin Roosevelt:

Franklin Roosevelt said during the Great Depression that heedless self-interest reflected not only bad morals but bad economics too.  Seventy years on, his advice still rings true.

Yes it does, and Telstra is a perfect example of that in practice, offering dreadful broadband service with paltry limits on usage and heavy throttles on speed when one exceeds them, all for a substantial price.  Telstra’s own self-interest leaves a lot of Australians despising the provider and begging for alternatives.  The morality of a company that now wants content providers, with whom it has no business relationship, to pay them money to reach their customers, can be left to the reader’s determination.

This is a tune we’ve heard before.  AT&T’s former CEO Edward Whitacre was the guy who first lit the flame to the gas line of abusive provider tactics using generally the same language:

How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?  (11/07/05)

Justin Milne

After Whitacre was educated that providers already pay hosting fees, infrastructure and licensing costs, and provide the very stuff that drives consumers to sign up for AT&T’s broadband services (and pay them for it) in the first place, Whitacre did a full reversal three months later:

“Any provider that blocks access to content is inviting customers to find another provider. And that’s just bad business.” (3/21/06)

Milne follows in Whitacre’s earlier footsteps, except he wants to be paid by everyone.  His customers are already subjected to limits on usage, which have limited Australia’s multimedia online experience years behind most others, and now he wants to have the money he earns from Internet Overcharging -and- the right to limit content that reaches his customers to only those who pay Telstra for the right to deliver it:

“Some content providers such as ninemsn argue that Telstra should subsidise the cost of the ninemsn customers visiting their internet sites. We might also assume [they] would prefer petrol to be free for their cars, and Hayman Island would like air travel to the resort free,” Milne wrote.

“But Shell, Qantas and Woolworths do not give their services away for free. Just like BigPond and the rest of Australia’s ISPs, they need to charge their customers a fee so that over time their investment is recouped,” he said.

Of course, Shell, Qantas and Woolworths only charge once for their products and services.  They don’t install a toll booth on a road and claim that because a full petrol tank weighs more than a near-empty tank, there needs to be a surcharge toll.  Qantas doesn’t send people down the aisle on a flight with a collection plate demanding more money for your ticket because the plane was packed.  All of Australia’s ISPs charge their customers for providing broadband connectivity.  Telstra does as well.  The difference is that Telstra wants to charge its customers a fee and also charge the websites you choose to visit a “transport fee” on top of that.  Your bill as a customer doesn’t go down because of “cost sharing.”  Telstra’s profits simply go up.

Milne’s problem with Net Neutrality is its core principle that all legal data traveling across the net must be treated equally.  That means Telstra has no way to enforce their HissyFit.  In the absence of Net Neutrality, they can block, limit, or throttle those that refuse to pay them.

The cost of the infrastructure to support this traffic has been borne almost entirely by internet service providers, and not by the publishers. In Telstra’s case alone, the company has invested billions of dollars in the Next G mobile broadband network covering 99 per cent of Australian consumers, the HFC cable network in major cities and the extensive ADSL network.

Unfortunately there is no magic pudding, so this investment must be repaid by the beneficiaries of the internet — the users on the one hand, and the publishers who seek to make money from those users through advertising and subscriptions.

Milne almost suggests they did this out of the goodness of their heart, and their investment was not going to be paid back.  The fundamental reality is that subscribers to those services are Telstra’s customers and they pay for that service, such as it is.  That is where that investment will be recouped.  Demanding a company that has no business relationship with your company to pay up or else face the potential of being cut off is akin to extortion.

I offered Milne two alternative suggestions:

• Expand your network to create infrastructure suitable to meet the needs of your subscribers, who will sign on in greater numbers to your service.
• Create hosting platforms and services at attractive prices to content providers who will use your service to host their content (and pay you for actually doing something for them).

Barring that, this is nothing but a HissyFit from another provider looking for a payday.

Michael Chaney, one of our readers, discovered this video interview compilation done last fall by ZDNet.  Enjoy the Internet Overcharging excuse making, where the customer becomes the enemy, and the creativity to find new ways to charge more in without bounds.

“The attempt is being made certainly in the UK but also in the US to push that cost onto the content owner by saying, you pay, and we’ll prioritise your traffic,” he said. “[And] if you don’t pay, your traffic will be really crap.”

[flv width=”480″ height=”360″]http://www.phillipdampier.com/video/ZDNet Australia Providers 2008.flv[/flv]