While some American broadband providers continue to dream of Internet Overcharging schemes for American customers, one of the world’s most usage-capped countries continues its march forward to abolish them.  Australia’s Optus, a major broadband provider, today announced it was dramatically increasing usage allowances on customers, effective immediately.

The Fusion 99 plan, which bundles telephone and broadband service, sees its data allowance increased from just 15GB of usage per month to 500GB (twice that of American cable giant Comcast).  Ditto for the Fusion 109 plan, which originally doubled the 15GB limit to 30.  Now it offers a 500GB allowance of usage.

If 500GB isn’t enough, Optus has announced its Fusion 129 plan includes 1000GB — a terabyte — of usage per month, which includes unlimited long distance calling and calls to Australia’s mobile phone customers (most countries outside of North America require the calling party to pay mobile rates when calling a mobile customer).  Even customers on Optus’ budget-minded standard and “naked” (standalone) broadband plans will benefit from new 500GB allowances.  Those who manage to exceed their allowance will find broadband speeds reduced to 250kbps until the end of the billing cycle.

Some Australian ISP’s take all limits off during off-peak usage hours.  The country has traditionally suffered from usage caps because of international undersea cable capacity problems which restrict how much traffic can be sent and received between the South Pacific and North America and Europe.  Increased undersea fiber capacity is tempering those traffic restrictions, and momentum towards unlimited use plans (or those with ridiculously high allowances) is the result.

Lifehacker produced a broadband plan breakdown showing the dramatically increasing usage allowances for Australian broadband customers. Traffic shaping continues to be an issue, however. Such speed control measures traditionally target peer-to-peer traffic. Total cost is the total price of the service over the length of the term contract. This chart represents high end plans, typically offering the highest speed tiers. All dollar amounts are in Australian dollars.

[flv]http://www.phillipdampier.com/video/ABC The Gruen Transfer Telco Ads 11-2010.flv[/flv]

The Australian Broadcasting Corporation’s ‘The Gruen Transfer’ takes a humorous look at how phone companies Down Under advertise their services, including a reference about how “capped” services represent revenue gold to service providers.  (15 minutes)

Phillip "Of course you know this means war" Dampier

Sizing up the big winners from FCC Chairman Julius Genachowski’s latest Net Neutrality proposals is as simple as putting those praising Genachowski in column “A” and those outraged by downsized consumer protections into column “B.”  It comes as no surprise Big Telecom, the employees whose jobs depend on those companies, their trade associations and lobbyists are all living it up on the “A” side while consumers and public interest groups sit in the dark in column “B.”

Among the high-five club is Kyle McSlarrow, the outgoing head of the National Cable and Telecommunications Association, the cable industry’s top lobbying enterprise.

On the NCTA’s blog, an indication of your broadband future has been placed front and center — a meter.  Perhaps putting a coin slot on your cable modem or a credit card reader on the side of your monitor would be a bit too brazen, even for this industry.

McSlarrow, among others, heaped bountiful praise on the FCC chairman for his ‘enlightened’ views on Net Neutrality.  That hardly a surprise considering Genachowski has opened his phone line, and apparently his heart, to industry propaganda and arguments.

Genachowski’s remarks about usage-based pricing, in particular, were a breath of fresh air to Wall Street and providers clamoring to dispense with unlimited broadband service for consumers to increase profits:

Our work has also demonstrated the importance of business innovation to promote network investment and efficient use of networks, including measures to match price to cost such as usage-based pricing.

“This approach reflects a responsible and considered view of a fast-moving and highly dynamic marketplace but it doesn’t assume that there is any one ‘correct’ answer,” McSlarrow wrote.

It’s also a view consumers strongly disagree with, but those opinions are off the FCC’s radar.  Consumers don’t have the chairman’s direct phone number.  If they did, they could argue the fact “matching price to cost” would mean a dramatic reduction in pricing for today’s unlimited broadband account.  Instead, we have a lobbying effort to end “unlimited” entirely, backed by manufactured studies funded by providers expecting pre-determined conclusions.  Too bad the FCC doesn’t read provider financial reports.

Writes McSlarrow:

Some consumers don’t see the need to go online.  Others are constrained by cost.  Still others want to use the service they have in cutting-edge ways.  And the ability to pigeonhole companies and their business plans as being one thing or another is breaking down, particularly in an environment where Internet applications, content, and services change the way we behave as consumers, provide new opportunities for providers and consumers and alter how we all interact with both traditional and new devices and features.

The key point is that that we need to focus on what best serves consumers.  With all this change, it is necessary to have the flexibility to test new business models – and perhaps new pricing plans – in order to see if they make sense.

A usage-based pricing model, for instance, might help spur adoption by price-sensitive consumers at the lower end of the socioeconomic ladder.  As Sanford Bernstein analyst Craig Moffett noted in a report issued yesterday, “{u}sage-based pricing for broadband would have profound implications.  At the low end, it would allow cable operators to introduce lower priced tiers that could boost penetration and help in efforts to serve lower income consumers.”

McSlarrow

Evidently, to chase the small percentage of Americans who either don’t have an interest in going online, or think it costs too much, the NCTA wants those already online to face Internet Overcharging schemes ranging from usage caps to metered billing.  Is it flexible for consumers who face the end of broadband pricing as they’ve lived with for more than a decade or is it flexible for providers who can run to the bank with the higher profits rationed broadband delivers?

McSlarrow quotes Moffett’s quest for higher profits for his clients — Wall Street investment banks, but ignores the implications Moffett himself admits — consumer rebellions, self-rationing of usage, a stifling of online innovation from independent companies not connected with providers, and higher prices.

American providers look north for an example of Big Telecom’s pot ‘o gold — Canadian ISPs that have managed to wreak havoc on the country’s broadband rankings, forcing consumers to live with higher prices and, in some cases, declining usage allowances.  Canada’s broadband innovation graveyard is an object lesson for Americans: usage-based pricing doesn’t deliver savings to anyone except the most casual users living under constrained speeds and paltry allowances as low a 1GB per month.  For everyone else, broadband prices are higher, speeds are slower, and usage allowances deliver stinging penalties for those who dare to exceed them.  What do Canadian providers do with all of the money they earn?  A good sum of it goes towards acquiring their competitors, further reducing an already-poor competitive marketplace.

As one Ontario reader of Broadband Reports noted, “our largest cable company has the money to buy three professional sports teams but not enough to roll out DOCSIS 3 [to all of its customers.]  Our largest phone company, Bell, has the money to buy half the news stations in Canada, but cannot seem to get users off of 3Mbps DSL service.  The whole system is a scam.”

While the rest of the world is decidedly moving away from limited-use broadband, American providers have sold Genachowski that rationing the Internet is “innovation.”

Of course, you and I know real innovation means investing some of the enormous profits providers earn back into their networks to keep up with growing demand.  Providers can innovate all they like to attract price sensitive customers, so long as current unlimited plans remain available and affordable.  But as AT&T illustrated earlier this year, the first thing off the menu is “unlimited,” replaced with overpriced and inadequate wireless data plans that only further alienate their customers.

AT&T should take a lesson… from AT&T.  While it gouges its customers on the wireless side, the company has managed to solve the affordability question all by itself, without resorting to wallet-biting.  It dramatically reduced prices on its DSL services — now just $14.95 a month for its customers, which includes a free gateway and modem.  That sure sounds like a solution for budget-conscious customers and delivered all without antagonizing those who want to keep their current unlimited service plans.

AT&T seems to have managed to solve the affordability question without overcharging their customers.

Cable companies deliver their own budget broadband plans, but it comes as no surprise they barely market them, fearing their premium-paying customers could downgrade their service.

In short, Internet Overcharging is a solution chasing a problem that simply does not exist in a responsible broadband marketplace.

McSlarrow says he’s not arguing for or against any particular model.  All he is really confident about is that the marketplace is changing and that “companies will have to adapt to that change.”

But as is too often the case, McSlarrow, his industry friends and colleagues, and Chairman Genachowski have forgotten it’s ultimately consumers who have to adapt to change, and we promise it means all-out war if providers tamper with unlimited broadband service.

When the FCC delivers for Big Telecom's agenda, stocks soar. Comcast shares exploded on news the company could largely do as it pleases with its broadband service. (CNBC)

Comcast’s stock price soared today as Wall Street was cheered by news America’s largest cable operator would likely face little regulatory restraint from consumer protection policies designed to keep broadband providers from meddling with Internet traffic.  But investors were also excited by the green light signaled by Federal Communications Commission chairman Julius Genachowski that launching Internet Overcharging schemes like “usage-based” billing, speed throttles and hard usage caps on broadband consumers was also acceptable marketplace behavior.

Craig Moffett, a Wall Street analyst with Sanford Bernstein said Genachowski’s remarks left the marketplace with little doubt it can get away with price increases and new limits on broadband consumption.

“The FCC here is expressly acknowledging the need to ration broadband, and that’s a really big deal,” said Moffett, appearing on CNBC this afternoon.  “I think you are going to start to see usage-based pricing plans from the broadband providers pretty quickly.”

Moffett also acknowledged his firm’s own research showing consumers despise such pricing schemes and admits the impact on America’s broadband landscape is likely to include a dramatic shift in how customers use their Internet accounts.

“When customers think they are going to be charged when they click on that link and watch a movie, they are going to be inclined to watch fewer movies,” Moffett said.  “You can’t expect linear progression of online video because there are going to be feedback loops like usage-based pricing that are going to limit usage.”

Moffett says cable operators are benefiting from Chairman Genachowski’s new approach because it opens the door to repricing wired broadband accounts to limit broadband consumption.  Since most analysts guessed regulators would allow usage-based pricing to remain on wireless broadband, the unexpected green light for similar rationing plans on cable broadband, DSL, and other wired services was welcome news, at least for providers and Wall Street.

Consumers that don’t deliver a resounding negative response to elected officials, the FCC, and the White House better start thinking twice about clicking that YouTube video, because that few minutes could cost plenty if providers slap higher prices and limits on broadband service in the coming year.

[flv]http://www.phillipdampier.com/video/CNBC The Fight for Your Right to Surf the Web 12-1-10.flv[/flv]

A Wall Street telecom analyst predicts the end of unlimited home broadband accounts is going to come quickly, now that the FCC has capitulated on Net Neutrality policies.  (3 minutes)

Studies find few surprises for cable and phone companies that pay for them.

Internet plans with term contracts, usage limits, and other pricing tricks are good for consumers and save them money over comparable unlimited usage plans.

That is the conclusion of a new study from the Technology Policy Institute, an industry front group funded by AT&T, Comcast, the National Cable & Telecommunications Association, Qwest, Time Warner Cable, T-Mobile, and Verizon.

Scott Wallsten and James Riso’s “study,”Residential and Business Broadband Prices, Part 1: An Empirical Analysis of Metering and Other Price Determinants,” claims to have taken a comprehensive look at 25,000 plans offered across North America, Europe and the Pacific to make their case that a residential service plan with a 10GB monthly usage cap would save consumers 27 percent over the price of a comparable unlimited plan, as long as data use stays below the cap.  They also suggest additional savings can be had if consumers lock themselves into term contracts with service providers (most of which carry hefty fees to exit early.)

These results suggest that the unlimited data plans typically offered by most U.S. wireline broadband providers may not be optimal for many consumers. The details of capped plans matter, and how an individual user is affected depends on the base price, allowed data usage, and consequences for exceeding the cap. Nevertheless, because capped plans are—all else equal—cheaper than unlimited plans, many consumers, particularly the low-volume users, are likely to pay less for broadband with data caps than they would for plans offering unlimited data transfer.

Wallsten and Riso make much of AT&T’s recent decision to end unlimited usage for wireless broadband, suggesting that consumers are saving money with new, low-use plans over the company’s old unlimited pricing.  The authors claim close to 70 percent of iPhone users consume less than 200 MB per month, which is the cap for AT&T’s cheaper data plan.

But the authors concede that usage is growing — rapidly in the case of online video, which sets the stage for consumers saving money today, but facing serious overlimit charges on their bills tomorrow:

Some analysts, however, remain concerned that these plans make video streaming impractical given the bandwidth it consumes, could eventually cost consumers more as they use their wireless devices more intensively, and generally make it less likely for wireless to become a viable substitute for wireline broadband. To be sure, while Figure 3 shows that the vast majority of users consume small amounts of data today, it also shows per user mobile data consumption growing quickly, so the number of people who exceed the caps could increase significantly in a relatively short period of time.

Major U.S. wireline providers have not yet introduced metered pricing successfully, though, as shown above, it is common in other countries. An experimental metered pricing plan by Time Warner Cable garnered strong reaction, prompting one group to demand that Congress ―investigate ongoing metered pricing practices to determine the impact on consumers. Some in Congress did, in fact, hold hearings on the plans. In response to this backlash, Time Warner Cable canceled its experiment.

Despite the political reaction, all consumers are not inherently worse off or better off with metered pricing. Low-volume users are likely to be better off under metered plans and high volume users worse off. The net effect on any given consumer depends on his data use, the base price, how much data the base price allows, the price of data when exceeding the cap, and how much he would have paid for an unlimited plan.

Wallsten and Riso also admit several parts of their study are “incomplete,” and “lack data.” We would also include the facts they ignored whether consumers prefer unlimited plans, how customers would feel about a bill with overlimit fees attached, or whether the usage cap levels the authors note in their study are adequate.  They also completely ignore the critical issue of bandwidth cost trends and their relationship to consumer pricing.

But of course they would, considering the same providers who want these pricing schemes are paying the costs for the study.

Welcome to the world of Hired Gun Research.

Wallsten, in particular, has been singing the same cap-happy tune for several years now, churning out the same industry-financed conclusions about broadband.  Back in 2007, he delivered a piece trumpeted by the Progress & Freedom Foundation and the Heartland Institute — two groups notorious for parroting corporate-friendly talking points.  Back then it was about Internet overloads and supporting Internet toll booths for “congestion pricing” after Comcast got caught secretly throttling broadband customer speeds.

Dave Burstein of DSL Prime notes most consumers don’t like caps, lock-in contracts, or speed throttles.

“Policymakers should normally assume that imposing caps generally results in negative consumer welfare. The small efficiency gains don’t come close to making up for a second rate Internet,” Burstein writes. “Everyone is better off with a robust, unthrottled Internet. It allows for an important form of video competition and market access for innovative new net offerings. It’s a better experience for the user and hence more people will be connected, a good thing.”

In this latest study, the two authors completely ignore some very important facts:

• Who sets the pricing for unlimited and usage-capped broadband?  Providers.  Do consumers save money from usage limited plans because of decreased provider costs passed along to consumers or pricing schemes that artificially inflate unlimited broadband pricing to drive customers to “money-saving” limited plans that teach usage restraint or expose consumers to dramatic overlimit fees?

• What are the trends for wholesale bandwidth costs and how does that trend comport with industry pricing schemes that have increased broadband pricing in the United States?  An honest study would reflect these costs are dropping… dramatically, and would introduce the very real question of whether unlimited broadband is a problem in search of a revenue-generating solution that would come from further monetizing broadband with so-called “consumption pricing.”

• What is the consumer perception of usage-limited broadband?  An important part of this equation is whether consumers want unlimited broadband service to be discontinued.  Every study to date not paid for by the providers themselves shows consumers are willing to pay today’s prices for the peace of mind they receive in not being exposed to limits or overlimit fees.  Wallsten and Riso touched on the consumer backlash, to a considerable part coordinated by Stop the Cap!, over Time Warner’s pricing scheme which would have tripled broadband pricing for an equivalent level of service.  But the authors charge on with their pro-cap conclusions regardless.

• Wallsten and Riso’s study only casually mentions the dramatically different paradigms of wireless and wireline broadband.  The former is delivered using technology that is recognized to have limitations that can only be seriously addressed with additional spectrum allocation that could take years to address.  The latter is already being mitigated by cable broadband technology upgrades, fiber optics, and improved backbone connections that often deliver much better access at a fraction of the price providers paid just a few years earlier.  Drawing comparisons between AT&T’s wireless broadband pricing and wireline broadband is dubious at best, especially since two companies largely control pricing and service for the majority of wireless customers in the United States.

• To prove its contention limited broadband service is “common in other countries,” the authors cite a Frequently Asked Questions article by Comcast trying to justify that company’s own usage cap to its customers.  So because Comcast’s PR department says it, it must be true.  In fact, in countries where usage capped broadband has been a traditional problem, consumer demand and public policy efforts have moved providers towards offering unlimited service plans to meet popular demand.  In fact, in countries like Australia, New Zealand, and South Africa, governments have cited usage caps as a serious disadvantage to growth of the digital economy.  Consumers certainly agree.

Burstein adds:

Caps or other throttling measures are almost never imposed because of actual congestion problems (on large, wired networks.)  The caps would be at far higher levels if they were, like Comcast’s 250 gigabytes. The usual explanation is bogus. The typical consumer advocate believes the caps are about preventing competition to the carriers’ own video package. That’s certainly common, but so is price discrimination to yield increased potential revenues. As Scott notes, price discrimination in a strongly competitive market can work out well for all concerned. With strong competition, the benefits flow through to consumers. Since competition in broadband is typically weak, I believe it far more often has little consumer benefit but is good for company profits.

The authors conclude that despite limitations on data available, “The policy implications, however, are clear.  Policymakers should not immediately conclude that data caps and other pricing schemes that differ from traditional unlimited plans are necessarily bad.”  Instead, the authors suggest pricing trends should be evaluated over time to identify the effects on prices, investment and usage.

Although that’s a point Burstein agrees with, we feel there is substantial evidence this debate is based not on experimental pricing to find new customers, but rather a defensive position to respond to an inevitable public backlash against Internet Overcharging schemes.  Providers are desperately looking for excuses to further monetize broadband, cut costs, and deliver an effective impediment to online video competitors using broadband networks to deliver alternative, less expensive services to consumers.

Policymakers should listen to their constituents, who are more than comfortable with today’s unlimited broadband experience.  Nobody objects to experimental low usage plans with discount pricing, but not at the expense of ending or repricing existing unlimited service into the stratosphere.  Today’s broadband industry earns billions in annual profits, even as their costs decline.  Providers have done considerable profit-taking in the last few years from their broadband divisions, slashing upgrades and other investments to keep pace with traffic demands.

Stop the Cap! comments: After today’s confirmation of the story below, it turns out that not only will Charter enforce its usage caps, it is also implementing a throttling scheme that will turn down speeds for “heavy users” when Charter’s overburdened broadband network is congested.  We’ve seen how that works in Europe.  Network management techniques like throttling and usage caps allow providers to turn up the speed and usage controls and turn down the level of investment to grow their broadband networks to meet growing customer demand.

Wall Street will certainly encourage this kind of behavior so long as Charter customers have few alternative choices.  This is bad news for Charter customers who may find the phone company’s unthrottled and typically unlimited broadband a much better alternative, even if it does run slower.

Two separate e-mails arrived in our mailbox this evening from individuals claiming to work for Charter’s call center informing us customer service agents are required to attend a meeting Thursday to explain Charter Cable’s new hard-usage cap Internet Overcharging policy.

It’s too late for us to touch base with company officials for verification, but both our sources shared nearly-identical details of the forthcoming hard usage cap program:

“Effective Nov. 16th, Charter will begin enforcing their Usage Cap policy strictly:

• Base Service: 100GB per month
• Plus & Max: 250GB per month
• Ultra: 500GB per month

Violators will receive two warnings and then face service suspension for up to six months unless they switch to a Business Class broadband product.”

Our other source tells us CSR’s are being trained to deal with irate customers who are deemed violators, all because Charter is in no financial position to keep up with network demands.

Until we receive absolute verification, this should be considered unconfirmed information.

Charter Cable has maintained soft usage caps for some time, rarely enforced on a system-by-system basis with phone calls.  The details are buried on Charter’s website.  They have generally left most customers alone.  But if Charter intends to enforce a formal Internet Overcharging scheme, customers will have just one more reason to despise the company, which already rates as the worst cable broadband provider in the United States according to Consumer Reports (only Wildblue and HughesNet — both satellite fraudband providers scored worse for broadband).

Updated 3:04pm ET:  Here is a statement we received from Charter regarding this matter:

Charter is introducing some new programs designed to improve our high-speed Internet service.  We had planned to send information your way when we start to inform our customers directly; however, in the spirit of flexibility here is a quick summary for you today.

As I know that you know, Charter has long offered graduated tiers of Internet service, ranging from lower speed “Lite” (1 Mbps) versions to “Ultra60” (60 Mbps) and each service level has a monthly usage threshold within which customers are supposed to limit their usage.  Until this point, we haven’t taken action to enforce our thresholds; however, in order to continue providing the highest quality Internet service, we do plan to begin enforcing our “No Excessive Use of Bandwidth” policy documented in our Acceptable Use Policy (AUP). The thresholds are substantially above typical use for approximately 98% of our customers.

In December, we will begin reaching out to a select group of customers whose use is excessive to make them aware of their usage patterns, to help identify possible causes (e.g., unsecured wireless routers or viruses) and review security options with these customers to reduce the risk of unauthorized Internet use. We are currently working on a way to present data usage to customers so they can self-monitor their bandwidth usage.  Until we make that tool available directly, customers who are notified of excessive use will be provided a contact at Charter who can check the customer’s usage throughout the month to help them better manage their Internet usage. If the excessive usage continues repeatedly, their Internet service could be suspended. Our intent is to prevent the very small number of users who are consuming excessive amounts of bandwidth from negatively impacting the experience for the majority of our customers.

In tandem with enforcing our “Excessive Use of Bandwidth” policy, we will also introduce a congestion management policy to improve the Internet experience for all of our customers.  Congestion Management will become part of our standard Network Management practices, and the policy will be protocol agnostic, which doesn’t distinguish among the online activities, protocols or applications a customer uses. It applies only during periods of congestion (which we find to be relatively rare).  It affects only the heaviest users (less than 1%) in small time increments, who will have their bandwidth limited during times of congestion, however, no Internet activities will be blocked.  We based this system on the “fair share” model described to the FCC in September of 2008.

We certainly wanted you to know about these initiatives and believe these steps will help us deliver the best possible Internet experience for our residential users.

Anita Lamont

[Updated 12:14pm ET:  We reached out to Charter Cable’s social media reps and media relations in e-mail this morning and are still waiting for a confirmation/denial/comment on this story.  If/when we get one, it will appear here as an update.]