The audio from this morning’s conference call to introduce the legislation follows at the bottom of the page. Participants were: Rep. Eric Massa (D-NY), Ben Scott, policy director of Free Press, and Phillip Dampier, founder of StoptheCap!

WASHINGTON, D.C. – Today Congressman Eric Massa formally introduced the Broadband Internet Fairness Act, H.R. 2902. The drafting of the bill was prompted by thousands of constituents and industry experts who voiced their concerns in regard to the outrageous increase in fees proposed by broadband providers.

In April, when Time Warner Cable in Rochester announced that they would begin overcharging customers based on their bandwidth usage, a group of doctors approached Congressman Massa and informed him that if the proposal was enacted, they would be forced to raise rates on their patients. Time Warner’s new program would have raised the cost of their current unlimited internet plan from $50 per month to $150 per month, tripling customers’ monthly bill. The proposed increase in rates gouges customers and limits competition between internet video sites and cable networks that offer identical content. The intended result of this increase would be to reduce the public’s internet usage and send customers back to cable television.

The Broadband Internet Fairness Act will prevent the monopolistic rate increases of broadband companies by promoting the interests of broadband customers. Specifically the bill:

·    Requires internet service providers (ISPs) to submit plans to the Federal Trade Commission (FTC), in consultation with the FCC if they plan to move to a usage-based plan;

·    Prohibits volume usage plans if the FTC determines that these plans are imposing rates, terms, and conditions that are unreasonable or discriminatory;

·    Sets up public hearings for plans submitted to the FTC for public review and input;

·    Only affects internet providers with 2 million or more subscribers;

·    Imposes penalties for broadband ISPs that ignore these rules;

“Access to the internet has become a critical part of our economy and we can’t let corporate giants limit the public’s access to this important tool,” said Congressman Eric Massa. “The Broadband Internet Fairness Act is all about protecting consumers from outrageous internet overcharges and giving the public a voice in this process. I have taken lots of time to work on this bill and have consulted with my constituents and industry experts. Now the hard work of passing this bill begins.”

“Cable providers want to stifle the internet so they can rake in advertiser dollars by keeping consumers from watching video on the Internet.  But so long as Americans can’t choose which cable channels they want to pay for, I don’t think cable operators should be able to determine consumers’ monthly internet usage. Additionally, charging based on a bandwidth usage is a flawed model when the cost of usage is totally out of line with the price. Consumers are much better served by plans based on the speed of the connection rather than amount of bandwidth used. Competition is crucial to our economy and I refuse to let monopolistic corporations dominate the market and gouge my constituents.”

Conference Call to Introduce HR 2902 – the Broadband Internet Fairness Act – Washington, DC & Rochester, NY – June 17, 2009 (26 minutes)
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Rep. Eric Massa (D-NY) introduces pro-consumer legislation designed to stop Internet Overcharging schemes.

Congressman Eric Massa (D-New York) will formally introduce the Broadband Internet Fairness Act (H.R. 2902) this morning on a nationwide conference call with rep0rters.

Rep. Massa is joined by two organizations that helped to bring about the bill’s creation – Stop the Cap!, an all-consumer advocacy group opposed to Internet Overcharging schemes and service limits, and Free Press, a national, nonpartisan organization working to reform the media and promote universal access to communications.

Rep. Massa introduced the bill after hearing an outpouring of complaints from constituents in his home district in western New York.  Time Warner Cable’s Rochester division announced plans to implement an Internet Overcharging scheme on residential customers on April 1st which would dramatically raise rates on broadband service from $50 per month to $150 per month for continued access to unlimited service.  Other subscribers faced the prospect of a severely curtailed broadband service with limited usage allowances and overlimit fees for exceeding them.

“Access to the internet has become a critical part of our economy and we can’t let corporate giants limit the public’s access to this important tool,” said Congressman Eric Massa. “The Broadband Internet Fairness Act is all about protecting consumers from outrageous internet overcharges and giving the public a voice in this process. I have taken lots of time to work on this bill and have consulted with my constituents and industry experts. Now the hard work of passing this bill begins.”

The Broadband Internet Fairness Act will prevent the monopolistic rate increases of broadband companies by promoting the interests of broadband customers.  Specifically the bill:

• Requires internet service providers (ISPs) to submit plans to the Federal Trade Commission (FTC), in consultation with the FCC if they plan to move to a usage-based plan;
• Prohibits volume usage plans if the FTC determines that these plans are imposing rates, terms, and conditions that are unreasonable or discriminatory;
• Sets up public hearings for plans submitted to the FTC for public review and input;
• Only affects internet providers with 2 million or more subscribers;
• Imposes penalties for broadband ISPs that ignore these rules.

Phillip Dampier, a consumer writer from Rochester, New York created a website in 2008 to combat Internet Overcharging schemes.  Stop the Cap! is an all-consumer, all-volunteer website combating Internet Service Providers attempting to impose arbitrary usage limits, unwarranted and overpriced “consumption billing,” and extra fees and penalties on broadband subscribers.  The site has been visited by more than 100,000 people in the past year, particularly during Time Warner Cable’s proposed Internet Overcharging trial.

“When word of Time Warner Cable’s plan reached us in western New York on April Fool’s Day, we had to verify this wasn’t simply a bad joke,” Dampier said.

Phillip Dampier

“The Internet Overcharging scheme Time Warner Cable was proposing would have tripled our broadband bill for the exact same level of service we enjoyed as loyal Road Runner customers since 1998, when the service first became available in Rochester,” Dampier said.

“At a time when the economy is hurting, and our family already spends more than $175 a month on Time Warner Cable services, asking us to pay at least $275 a month was way out of line,” he added.

Dampier’s website quickly mobilized Time Warner Cable customers in all of the cities chosen for the proposed trial.

“People from New York, North Carolina, and Texas may not always agree on everything, but we found common ground with our friends in Austin, San Antonio, Beaumont, and the Triad region of North Carolina in absolute opposition to these pricing schemes,” Dampier said.

Media attention on the story, particularly in Rochester, was relentless.  One news anchor said few issues had provoked as much outrage from viewers than Time Warner Cable’s proposed pricing changes for Internet service.

In mid-April, Time Warner Cable CEO Glenn Britt announced that the company was “shelving” its pricing experiment until customers could be “educated” about the benefits.  Since that time, Time Warner Cable officials have continued to make public statements praising what they call “consumption-based billing.”

Dampier believes that means Time Warner Cable will be back for more.

… Continue Reading

Beaumont & Golden Triangle, Texas residents were the first to face Time Warner Cable Internet Overcharging experiments.

For awhile there, it seemed like nobody in the Golden Triangle on the Gulf Coast of Texas was paying attention to the fact their region was the nation’s guinea pig for Internet Overcharging schemes.  How wrong we were.

Stop the Cap! reader Mark, who lives just north of Beaumont in the city of Silsbee, had been fighting a one man battle against not one, but two providers serving his community of 7,400 — Time Warner Cable and AT&T.  Mark may exemplify the average consumer in the Golden Triangle, unaware that their broadband service had been subjected to Internet Overcharging experiments until the bill arrived in the mail.  Both providers have a track record of not always disclosing such schemes to their customers when trying to sign them up for service in southeastern Texas.

Both providers have used the area for pricing experiments, providing paltry usage allowances and charging steep overlimit fees for exceeding them.

Mark’s problems began when he unknowingly set himself up to be overcharged later.  Originally a Time Warner Cable customer, Mark decided to give AT&T’s Elite DSL package a try, primarily because it was less expensive than Road Runner service and supposedly faster as well.  AT&T claims their Elite DSL service in Silsbee provides up to 6Mbps down/768kbps up speed for $35 a month, compared with Time Warner Cable’s Golden Triangle Road Runner, providing (at the time) 5Mbps down/384kbps up speed for $44.95 a month.

“After DSL was installed, we discovered we were too far from the [phone company facilities] to get Elite speed, and instead of informing us about the problem, they switched us to Basic service speed, which is up to 768kbps down/384kbps up, and never bothered to tell us,” Mark writes.

The bill Stop the Cap! reader Mark received showing $73 in Internet Overcharging penalties (click to enlarge)

After Mark’s family felt AT&T was too slow to meet their needs, they ventured back to Time Warner Cable for Road Runner service.  The salesperson offered a “welcome back” discount, and mentioned nothing about the fact Time Warner Cable had implemented an Internet Overcharging scheme on the residents of the Golden Triangle region.  Instead of his old service priced at $44.95 a month for unlimited use, his new standard service was priced at $54.95 a month, and was limited to 20GB of usage per month before a $1/GB overlimit penalty kicked in.

When the first bill arrived showing his family exceeded that amount, it was quite a shock.  In addition to the $54.95 charge for “Roadrunner Residential”, there was a $73.00 fee entitled, “Road Runner Select Plan Additional Usage.”  (They also nickle and dimed him $0.99 for a “Paper Invoice Fee.”)

This was the first time Mark had encountered an “additional usage” overlimit fee, so he called Time Warner Cable to investigate.  Despite what the salesperson had sold him on, and online promotions were still selling to attract new customers, Mark learned for the first time Time Warner Cable changed pricing.  The Golden Triangle Division of Time Warner Cable implemented an Internet Overcharging scheme in June 2008, but only applied it to new customers.  Had Mark never left Time Warner Cable for AT&T, he would have never been an unwilling participant in the experiment to extract an extra $73 from his wallet.

Because he returned to Time Warner Cable after the “experiment” commenced, he was stuck.

Mark was angry.  He contacted the Better Business Bureau (BBB), the Federal Trade Commission, and the Federal Communications Commission to complain about unfair business practices, improper disclosure of the Internet Overcharging scheme, and abusive pricing.

Time Warner Cable's 4/7/09 letter in response to a Better Business Bureau complaint regarding Internet Overcharging schemes implemented in the Golden Triangle, Texas (click to enlarge)

The most productive response came from Time Warner Cable, responding to the BBB complaint Mark had filed.  In addition to giving the standard talking points about Internet Overcharging schemes, Alberto Morales, Southwest Division Customer Advocate for Time Warner Cable, suggested the company would do a better job of training salespeople to disclose “the disclaimer regarding the consumption based billing when processing a new Roadrunner order.”  Morales also issued a one time credit for the $73 in overlimit fees charged to Mark’s account.

Mark recognized the language of the letter for what it was — propaganda from a cable broadband provider looking to cash in at the expense of their customers.  Among the dubious reasons given in the letter:

It’s also recognized that the Internet was not designed to handle the mass amounts of video that are now being consumed, therefore there is a risk that service speeds could slow down dramatically.  Video over the internet is an interesting and growing phenomenon.

So are Internet Overcharging schemes, but few would call them “interesting.”  Using the company’s own logic, Time Warner Cable should not be placing video on their own customer website, much less embark on a grand experiment called TV Everywhere to stream enormous amounts of video at broadband speeds to their customers.  Now that is interesting.  The “Internet brownout” theory of slowdowns and outages can occur when a provider chooses to pocket profits instead of keeping up with required investments to maintain their broadband network.  Time Warner Cable CEO Glenn Britt disputes there is a problem with Time Warner Cable’s network as-is, telling a conference sponsored by Sanford Bernstein in May that, “I’m very comfortable with our plant… I don’t see a need for a massive upgrade.”

By implementing the Roadrunner Select Plan (where a customer can choose the level of speed they desire for their internet use), each level has its own cap of bandwidth consumption allowance per month.

Of course, customers cannot choose the one plan that has been an outstanding success for Time Warner Cable since its inception – the one they have right now (or had in the Golden Triangle prior to the “experiment”), unless they were willing to pony up 300% more for the same level of service, based on the last proposal Time Warner Cable introduced before temporarily “shelving the plan” due to customer outrage.

In the Golden Triangle, the maximum amount of usage was 40GB per month, followed by “the sky is the limit” $1/GB overlimit penalties.

Morales claimed that only “5% of users actually exceed their limit.”  But 100% of the Golden Triangle’s customers were left waiting for the arrival of a “gas gauge” measuring their usage, something they would now be required to check daily if they wanted to be sure not to exceed the paltry level of “bandwidth allowance” they were granted.

Time Warner Cable's follow-up letter of 4/29/09, in response to Mark's complaints that he was never told about the Internet Overcharging plan which subjected him to a 20GB monthly limit and $73 in overlimit penalties. (We assume the June 6, 2009 reference is a typo and should have read 2008) (click to enlarge)

Mark wasn’t sold by any of the arguments Morales was making.  That’s because he read Time Warner Cable’s own shareholder documents, as he had been accustomed to doing since he bought shares himself.  They told a very different story — one he shared in a letter to Morales:

“In 2007, Time Warner made $3,730 million dollars on high speed data alone, and then had to turn around and spend $164 million to support the cost of the network,” Mark writes. “In 2007, total profit on high speed data was $3.566 BILLION dollars.”

He adds, “in 2008, Time Warner made $4,159 million dollars on high speed data alone, and then spent just $146 million to support the cost of the network, a decline from the year past.  Total profit in 2008 on high speed data: $4.013 BILLION dollars.”

Mark realized “it cost Time Warner 11% less money to keep their network running in 2008 than in 2007.”

He also knew Time Warner Cable’s experiment in his city was done where the only alternative was his AT&T DSL service, which hardly offered comparable competition.

In a follow-up letter responding to Mark in late April (after the four city experiment was shelved), Time Warner Cable made it very clear their position was firmly planted in the ground:

“There are no plans to deviate from the consumption based billing plan.”

The company also elected to blame the customer for not understanding that an Internet Overcharging scheme had been introduced in the first place.

“When a customer goes online at www.roadrunneroffers.com, a disclaimer appears on the page with the first sentence including the following, “Subject to change without notice.  Some restrictions may apply.  Installation fees may apply.” This information is in view for anyone to read before proceeding with an order entry.

The fact this kind of disclaimer is, in the company’s view, sufficient notice for implementing Internet Overcharging schemes, is hardly adequate.

“We eventually dropped them again,” Mark writes. “We thought a usable slower Internet was better than a faster one we were not going to use.”

Mark realized Time Warner Cable’s business practices and models aren’t a good fit for the way he feels companies should treat their customers, and he dumped his Time Warner Cable stock and did what so many customers have also chosen to do: use the one word Time Warner Cable did seem to understand during their Internet Overcharging experiment:  C A N C E L.

As long as broadband providers continue to believe that Internet Overcharging schemes are the best way to protect their business models and leverage even more profits from their broadband division, action on every front, from legislative to direct consumer protest and refusal to do business with such companies remain the best course of action.

Stop the Cap! will continue to help deliver that action, along with a consumer education campaign that doesn’t require focus group testing to sell, because it’s based on common sense and not dollars.

Still to Come: Mark takes his battle to AT&T and gets an upper level AT&T retention agent to mark his account “exempt” from Internet Overcharging fees and penalties.  Perhaps you can, too!

If cable operators intend to impose Internet Overcharging schemes to measure and cap residential broadband accounts, the Federal Communications Commission (FCC) must impose equal treatment on traditional video cable television packages to allow customers to subscribe to only the channels they want.

The Austin Broadband Interest Group, a not-for-profit broadband advocacy organization, calls out the cable television industry for advocating an end to flat rate broadband service at the same time they continue to resist a-la-carte pricing for cable television packages.

In a filing with the FCC as part of a nationwide broadband policy inquiry, the Texas group recites the history of Time Warner Cable’s recent proposed experiment curtailing current flat rate Internet service.  Time Warner Cable planned to expand its Internet Overcharging market test conducted in Beaumont, Texas into four additional cities: Austin and San Antonio in Texas, Rochester in western New York, and the Triad region of North Carolina.  Customers in the test would have faced the prospect of paying 300% more for an equivalent level of flat rate service, with bills increasing from $40-50 a month to a staggering $150 a month, with no increase in speed or immediate improvement in service.

The Austin group claims that such Internet Overcharging efforts are designed to protect Time Warner Cable’s video business model, which includes the packaging of flat rate video cable TV packages to customers across the country.  Time Warner Cable, among other cable providers, have grown increasingly concerned about free online video potentially discouraging customers from subscribing to a cable television package.  Industry executives fear that new generations of Internet users will dispense with traditional cable TV service, obtaining video entertainment online, instead.

The group advocates the FCC enforce a rule that any broadband provider that wants to implement limits or consumption-based service tiers must also offer the same pricing model for video programming.  Matthew A. Henry and Chip Rosenthal, authors of the filing, include other competing video providers in their comments.  Telephone companies, including AT&T and Verizon, have begun offering video services to customers in addition to broadband packages.  AT&T is testing an Internet Overcharging scheme to limit consumption in two cities — Beaumont, Texas and Reno, Nevada.

The cable industry has struggled with Congress and the Commission for years to prevent the imposition of a-la-carte video programming pricing, permitting customers to pay for only the channels they want to watch.  The industry claims it would destroy the business model of cable television, where cable programmers like CNN, The Weather Channel, A&E, and most others impose a subscription fee based on the number of “basic cable” subscribers that have access to those channels.  Most networks charge between 10-80 cents per subscriber, with some sports-related channels charging considerably more.  By dividing the costs among every subscriber, the industry argues, it can deliver a robust video package to everyone for the same price.

Unfortunately, cable programmers continually increase the rates they charge for their cable networks, often well above the rate of inflation, and many broadcast networks and stations also demand cable companies take on new networks they may not necessarily want, to obtain continued permission to carry local stations on the cable dial. The result: relentless annual rate increases for cable television packages.

The inequity of cable’s argument that it must be allowed to continue providing flat rate television programming packages (and disallow a-la-carte) while programming costs increase, while demanding an end to flat rate Internet pricing, despite a decrease in the costs to provide it, suggests “fairness” is not the motivation for proposing such Internet Overcharging schemes:

In May of 2009, Time Warner Chief Executive Officer Glenn Britt essentially admitted that the competitive threat of online video to traditional cable is the driving force behind the company’s capped and metered pricing model. Mr. Britt told investors, “If, at an extreme, you could get all of the programming you get over cable for free on the Internet, over time people will stop buying (TV).”  Unfortunately, Time Warner has chosen to protect its cable revenues through unfairly restricting usage of its broadband service. This clearly demonstrates the need regulatory ground rules aimed at dissuading such anti-consumer and anti-broadband business practices.

Rather than representing a “fair” method of billing, metered pricing plans and usage caps are a strategy intended to salvage diminishing cable revenues by forcing users to use less Internet. Users have been watching increasing amounts of video online, with some abandoning their cable service altogether in favor of broadband (an effect that has been sped by the struggling economy). This presents an obvious dilemma for broadband providers that also offer a cable product, like Time Warner: as online video watching goes up, the revenue-generating cable usage goes down. Online video is bad for business because a cable company directly profits from its cable content through advertising, pay-per-view and video-on-demand, but can’t profit off Internet content. The fact is that Time Warner is offering competing products and the company has a vested interest in cable video prevailing over Internet video. Time Warner introduced metered pricing and usage caps to make its customers turn off their computers and pick up the remote.

Craig Moffett, cable and telecom analyst at Sanford C. Bernstein & Company, is back rallying for consumption based billing, dismissing accusations it represents a stealth rate increase.  Moffett characterized Time Warner Cable’s negative experience as only a temporary setback.

Moffett told The Wall Street Journal:

“Look, there’s a real argument for some form of consumption-based billing, and it’s going to happen,” he said. “Time Warner got the pricing wrong, it got the P.R. wrong, but this is not some kind of stealth price increase. They’ve been clear – they don’t want to discourage the use of the [broadband] product, but they have be able to manage the increased use of bandwidth that goes with Web-based video.”

In the same article, however, Moffett had nothing but praise for attempts to control web video so that only authenticated cable TV subscribers get access, for a price.  Bandwidth caps and limits help discourage online video consumption among subscribers concerned about exceeding monthly limits, particularly those set at paltry levels that virtually assure video watchers exceed them.

One topic addressed at the Bernstein conference was “TV Everywhere,” the initiative spearheaded by Time Warner Cable to make sure that online viewing of cable programs is only available to consumers who subscribe to video service provided by a cable, satellite or telephone company.

Cable operators say that if they’re going to pay millions of dollars in fees to film and TV studios in exchange for the right to air their programs, those studios shouldn’t turn around and offer the same shows over the Web for free.

Moffett says that while there “are a lot of specifics” to be worked out, including how to authenticate paid video subscribers on the Web without hassle, “TV Everywhere” is a “very positive step for operators and programmers, because it’s at least some attempt at a strategic alignment, rather than for each side to go it alone, which is what they’ve done traditionally.”

The broader scope of the Journal article was to measure Wall Street’s reaction to cable stocks in general.  Investors are looking for assurances of significant returns, something more difficult to achieve in a problematic economy.  Stop the Cap! contends that changing the business model of cable broadband with Cap ‘n Tier billing like Time Warner Cable tested, is precisely aimed at increasing those returns, particularly in markets where limited or insufficient competition holds customers virtually hostage to the cable provider.