Chiehyu Li and James Losey at the New America Foundation have completed an excellent comparison between broadband service overcharging schemes in the United States (and the slow speeds and high prices that accompany them), with broadband service in Japan, where download usage caps are unheard of, speeds reaching 1Gbps are priced at under $60 a month, and bandwidth throttling of peer to peer applications is uncommon at best.

Although services offered by Japanese ISPs are more expensive than these “economy plans,” they are not only much faster but offer considerably more flexibility in terms of bandwidth consumption. In Japan, the lowest cap for residential Internet of the companies we researched is 150GB per month for upstream only, implemented by i-revo, a nationwide fiber ISP that provides up to 100Mbps symmetrical access. BB Excite, SoftBank and Internet Initiative Japan (IIJ) also imposed 420GB to 450GB bandwidth per month only on the upload side.

Although pricing is higher for some of the “economy” plans in Japan, customers there have no risk of running into overlimit penalties and fees punitively placed on customers’ bills when they exceed the paltry caps usually found on Internet Overcharging “economy” tiers.  With some charging $2-10 per gigabyte, it’s easy to send bills much higher with very little usage.

The report “demonstrates that bandwidth caps in the U.S. are more restrictive than in Japan. ISPs in Japan only cap upstream traffic, if at all, and few impose network management practices to limit bandwidth consumption. The results of this report should encourage policymakers to investigate market conditions in Japan to determine how and why their networks supports far more per-customer throughput than comparable networks in the U.S. Additionally, regulators and policymakers need to investigate why Japanese high-speed Internet subscribers get faster speeds at lower prices, with fewer limitations than subscribers in the U.S.”

Of course, it’s no mystery why American providers are seeking to impose various overcharging schemes on their customers — they want fatter profits, and will leverage the barely competitive broadband market to get them, especially if they think policymakers won’t respond with the appropriate oversight and regulation, where necessary, to protect consumers from monopoly/duopoly-leveraged pricing.

Even comparing the higher bandwidth caps in the two countries, including the highest priced residential plans, bandwidth caps in the U.S. are drastically lower and more restrictive than those in Japan. Chart 2 shows service options with the highest bandwidth cap in the two countries. U.S. ISPs such as Cox, Charter, Comcast and Cable One cap bandwidth from 20 GB to 250GB per month for combined up and downstream traffic for their higher-priced Internet services. Among these ISPs, Cox has the highest monthly caps, offering 300GB for downstream and 100GB for upstream to Ultimate Package subscribers (50Mbps/5Mbps). Comcast caps bandwidth at 250GB a month, combined upstream and downstream, for all tiered Internet services. Continuing the U.S. trend towards more restrictive Internet service, AT&T has proposed bandwidth caps of 20-150GB a month. In addition, some of these ISPs have imposed network management on users’ Internet traffic.

The United States has one major multiple cable system owner that has sworn off these schemes – Cablevision.  A few competitors, including Grande Communications, found in Texas, also advertise they will not impose limits or schemes on their customers.  Frontier Communications has promised its customers it will not enforce any limits on its broadband customers until further notice either (although we’d prefer they eliminate the 5GB Acceptable Use language from their terms and conditions).  Verizon is perhaps the most important non-capper, at least for now.  It has no current plans to implement Internet Overcharging schemes on its customers.

Once again, the United States is heading backwards in broadband pricing, speed, and freedom for customers to use their service as they see fit.  Instead, providers with Internet Overcharging schemes seek to limit broadband usage to extract maximum potential profits, and protect their video business from online competition.  The fundamental question for the future will be, who controls America’s Internet?

Sen. Kay Bailey Hutchison (R-Texas)

Here’s a ‘shocking surprise’ for Texas readers.  Senator Kay Bailey Hutchison (R-Texas) is basically for whatever Internet Service Providers want when it comes to administering and charging for broadband service.  In a letter to Stop the Cap! reader Milan that confuses “Internet Overcharging,” the practice of throwing usage caps/limits or imposing consumption based billing on customers, with “Net Neutrality,” which guarantees that all network traffic is treated equally, Hutchison signals her opposition to government intervention in any of it.

Bizarrely, Hutchison claims that “congressionally mandated treatment of data” would “stifle competition” and “decrease incentive for [upgrades].”  That’s a logic train wreck.  How exactly telling a provider that they must treat data across their network equally would suddenly signal a potential competitor to throw in the towel escapes me.  If a provider is given the power to discriminate against traffic he or she doesn’t own, control, or partner with, the incentive to upgrade will never benefit the independent traffic anyway.

Apparently allowing providers to manage congestion on their networks the way they see fit is the only way consumers will be protected from “reduced speeds” and “higher costs.”  Yet many consumers already are faced with slower speeds created by providers who are decreasing investment in their own networks, despite earning continued healthy profits from them.  Consumer costs are increasing with or without Net Neutrality, and as consumers who were to be subjected to Time Warner Cable’s “experiment” with consumption based billing discovered, a $50 monthly broadband bill would have increased to $150 a month for an equivalent level of service.

The one clear fact of life Senator Hutchison either doesn’t realize or chooses to ignore is that consumers are the victims of America’s special interest-serving telecommunications policy she and other members of Congress helped put into place, assuring most Americans of anything but healthy competition.  Most Americans face a duopoly – one cable and one telephone company for broadband access.  Often, services from those two providers are not equivalent in terms of speed and performance, much less availability.

Competition is to be applauded, but using the word in a sentence does not provide Americans with assurances of getting it.  Forward thinking telecommunications policy promotes a true open market, investigates providers that refuse to overbuild into each others’ territories, demands robust oversight and regulation when necessary, and guarantees that no provider has the power to discriminate against traffic carried over that network, particularly when that traffic represents a competitive threat.

We’ve seen the results of the highly uncompetitive broadband marketplace most consumers, particularly in rural areas, face. It originates from policies that always benefit the providers first and foremost, while allowing the United States to continue to fall behind in broadband rankings measuring availability of fast, affordable, reliable and open broadband service. Continuing with these policies only assures providers get ahead while leaving you and I behind.

Sen. Kay Bailey Hutchison:

Dear Friend:

Thank you for contacting me regarding equal and unrestricted access to the Internet. I welcome your thoughts and comments on this issue.

The Internet is a valuable tool that facilitates business, education, and recreation for millions of Americans.

In 2008, an estimated 220 million Americans had access to the Internet at home or work. As Ranking Member of the Senate Commerce Committee, I am committed to ensuring that consumers benefit from competition in the telecommunications industry, resulting in lower prices, improved service, and access to 21st century technology.

Instrumental to the success of the Internet is the longstanding policy of keeping the Internet as free as possible from burdensome regulations. Increased investment in upgrading and expanding America’s Internet infrastructure, as well as innovative new broadband networks, will ensure that all Americans have access to affordable high-speed Internet. However, intensified regulation of the Internet, such as congressionally mandated treatment of data, would stifle competition and would decrease the incentive for network operators to invest in the Internet infrastructure.

It is my concern that mandates that prevent network providers from managing congestion on the Internet will reduce service speeds for many users, and eliminate a valuable tool for ensuring the most efficient use of network pipelines, resulting in increased costs to the consumer.

In a June 2007 report on the issue of “network neutrality”, the Federal Trade Commission (FTC) stated that no “demonstrated consumer harm from conduct by broadband providers” had occurred due to network providers managing Internet traffic.

More recently, the Federal Communications Commission (FCC) issued a decision involving Comcast and certain network management practices. While this decision works its way through the courts, Congress may continue reviewing network practices and Internet congestion issues.

Should any legislation regarding Internet access come before the Senate Commerce Committee, you may be assured I will keep your views in mind. I appreciate hearing from you, and I hope that you will not hesitate to keep in touch on any issue of concern to you.

Sincerely,

Kay Bailey Hutchison
United States Senator
284 Russell Senate Office Building
Washington, DC 20510
202-224-5922 (tel)
202-224-0776 (fax)

Phillip Dampier

Today is Stop the Cap!‘s first anniversary.  One year ago today, this website was launched with the news that Frontier Communications, the local telephone company in Rochester, New York and in dozens of mostly rural communities nationwide, had quietly changed its Acceptable Use Policy to define appropriate maximum usage of their DSL service at a measly 5GB per month.

The  boneheaded, out of touch decision was called out for what it was: a profiteering provider pilfering wallets of their broadband customers.

All the signs of a Money Party among cable and DSL providers at consumer expense were apparent last summer.  Time Warner Cable was experimenting with a consumption billing plan in Beaumont, Texas.  In Canada, rhetoric about “bit caps” was already being circulated, trying to convince Canadians that broadband service was somehow as difficult to provide there as it is in Australia and New Zealand, where such caps were already in place.

To bring limits, rationing quotas, and consumption based billing to the United States would require consumers to ignore massive profits broadband providers were harvesting quarter after quarter at existing prices.  But demands for big profits from Wall Street meant they had to come from somewhere, and for cable companies with eroding profits from their cable TV divisions, and telephone companies dealing with disconnect requests for wired telephone lines, broadband was their choice.

It seems that what was insanely profitable a decade ago, when cable modem and DSL service started to introduce Americans to broadband, would now simply be ‘piles of  cash stacked like cord wood’-profitable as traffic increased. As the broadband adoption rate increased, bandwidth costs plummeted, and several providers also proudly trumpeted their reduced investments in their networks as a hallmark of keeping “costs under control.”

Consumers began actually using their service for… broadband-specific services, at the encouragement of providers’ marketing departments, touting their “always on” connection at “blazing fast speeds” to download music, movies, play games, and more.  Network utilization increased, and providers want someone to pay for a “bandwidth crisis” that isn’t a crisis at all.  Responsible investment in network infrastructure should be a given, in recognition that at least a small portion of those growing profits must be spent on maintaining and improving service.

One year ago, I laid out what was before us:

Cable operators have been discussing implementing usage caps in several markets to control what they refer to as a “broadband crisis.” The industry has embarked on a lobbying campaign to convince Americans, with scant evidence and absolutely no independent analysis of their numbers, that the country is headed to a massive shortage in bandwidth in just a few short years, and that a tiny percentage of customers are hogging your bandwidth.

Frontier, ever the rascally competitor, has decided to one-up Time Warner’s Road Runner product by slapping on a usage cap now for DSL customers before Road Runner considers doing the same. And in a spectacularly stupid move competitively, they have implemented a draconian cap that even the cable industry wouldn’t try to implement.

Time Warner Cable “took one for the team,” according to industry-friendly Multichannel News, when it introduced a ludicrous Internet Overcharging experiment of its own announced this past April, which would have “saved” customers money by getting them to “pay for what they use.”  In fact, their plan proved my point last summer, following the same roadmap of “bandwidth crisis” to “heavy downloaders” to trying to squeeze customers for more money for upgrades they could easily have done with the enormous profits they already earn.

Their proposal would have made a deliciously profitable $50 a month Internet service now cost consumers $150 a month with absolutely zero improvement in service, speed, or performance.  But Wall Street would have been happy with the higher returns.

Some 400+ articles later, we’ve educated consumers across North America about the reality of Internet Overcharging.  Despite industry propaganda “education” efforts, astroturfing groups we’ve exposed as having direct connections with the telecommunications providers paying them to produce worthless studies, fear-mongering about Internet brownouts by equipment vendors with solutions to sell, and a hack-a-thon of formerly respectable broadband pioneers and ex-government officials who sold their credentials for a paycheck to lobby and spout industry propaganda, most consumers continue to reject overcharging for their broadband service.  Consumers instinctively know a cable company with a rate change always means a rate increase, and plans to “save people money” actually means they will “protect industry profits.”

We have achieved victory after victory in 2008-2009:

• Fought back against Frontier’s boneheaded plan, and convinced them that DSL can compete best on price and flexibility — no usage cap has ever been enforced at Frontier, and today they are using Time Warner Cable’s blundering profiteering experiment against them in their marketing materials.  For rural Frontier customers with no other broadband provider, that’s a major relief from being stuck with one broadband option that rations their usage to ludicrously low levels.
• Stopped Time Warner Cable’s experiment before it got off the ground in several “test cities.”  The people of Austin, San Antonio, Rochester, and the Triad region of North Carolina did Time Warner Cable customers nationwide a tremendous service in halting this experiment before it spread.  Our efforts even brought a United States Senator, Charles Schumer, to the front lawn of Time Warner Cable in Rochester to announce the nightmare was, at least for now, over.  We managed to even see an end to the overcharging of customers in Beaumont, Texas who lived through a summer, winter, and spring, overpaying for their broadband service.
• We raised hell in the North Carolina state legislature, coming to the aid of Wilson and other communities in the state trying to get municipal broadband projects off the ground.  Communities across the state faced anti-consumer corporate protectionist legislation written by the telecommunications industry, introduced by willing elected officials who took big telecom money, and sold out their constituents.  We killed two bills, forced a sponsor of one such measure to repudiate his own bill, and gave major headaches to legislators that thought they could just cash those big checks, vote against your interests, and you’d never know.  Those days are over.
• We helped bring legislation up in Congress to draw attention to the issue of Internet Overcharging, and have called out providers who want to use their marketing departments to lie to customers about their broadband costs and profits, while being considerably more honest with their shareholders in their quarterly financial reports.  Congressman Eric Massa’s legislation would demand companies show proof of the need to implement consumption based billing.  Indeed, as consumers find out how profitable broadband service is at today’s prices, they’ll never tolerate the profit padding providers seek with tomorrow’s caps/limits, penalties and fees, and unjustified tiers.

As you can see, Internet Overcharging is not a dead concept.  An educated consumer will recognize a swindle when they see one, and providers continue to test overcharging schemes in focus groups in different parts of the country.  They’ll use any analogy, from a buffet lunch to a toll road traveled by big trucks and little cars.  They’re looking for anything they can find to sucker you into believing paying more for your broadband service is fair.

Broadband service must be fast, affordable, and competitive.  In too many communities in Canada and the United States, a monopoly or duopoly marketplace has guaranteed none of those things.  In our second year, we must remain vigilant in our core mission to fight Internet Overcharging, but we also need to fight for more competition, regulation where competition does not exist, oversight over providers, and support for projects that will enhance broadband and make it more affordable than ever.  With your help, we can stand toe to toe with any provider, because the facts are on our side, not theirs, when it comes to Internet Overcharging schemes.

Welcome to Year Two!

Suddenlink Usage FAQ:

On June 1, 2009, we notified residential Internet customers in our Clovis, New Mexico cable system of a new online tool to help them monitor their Internet usage each month and determine if they are in the typical usage range.

If they are well above the typical range, it could mean several things. For instance: a virus or “spyware” application might have infected a customer’s computer and started generating high levels of Internet traffic, or someone else might be using a customer’s Internet connection without his or her knowledge. To help guard against those issues, we are offering customers a list of steps they can consider, to help make sure their computers and Internet accounts are protected and secure.

We introduced this Internet usage summary tool in Clovis, to evaluate its usefulness, after which we will consider expanding it to all of Suddenlink’s residential Internet customers.

Longtime Stop the Cap! readers will recognize this trick only too well.  When a small cable operator spends its time, talent, and resources on “measuring tools” to help customers “determine if they are in the typical usage range,” it’s only a matter of time before that ‘experiment’ will turn into typical Internet Overcharging activity — usage caps, consumption-based pricing, overlimit fees and penalties, or service termination for those outside of that “typical usage range.”

Suddenlink, one of the nation’s smaller multiple cable system owners serving 1.3 million customers in mostly rural areas, is among the worst-rated providers in the country, based on actual customer reviews.  Its journey towards Internet Overcharging schemes will do its ratings no favor when customers find out.

Suddenlink’s approach is less brazen than earlier Internet Overcharging attempts consumers have fought back.  The company attempts to leverage the usual talking points about Internet activity into a justification for measurement tools, and cleverly tries to suggest the impetus for doing so is to protect customers who might have been hacked or have family members engaged in online activities unknown to others in the home.  But the road that measurement tools provided by a cable company pave today lead to limits and higher pricing tomorrow.

Suddenlink’s contribution to the “education campaign” consumers are being subjected to before the pickpocketing begins does bring some useful information to the table, however.  This small, mostly rural provider, turns in stunning statistics about average customer consumption:

Suddenlink 'Typical Usage' Statistics - Clovis, New Mexico (Suddenlink website 7/23/2009)

Those numbers represent one of three things:

1. Suddenlink is the first provider in a long list of providers producing honest statistics about broadband usage, not the low-ball estimates others have provided to make consumers feel guilty for exceeding them;
2. Suddenlink’s statistics are wrong;
3. People in Clovis download A LOT.

Just about every other major provider, and many small ones, have spent the past year telling the media and the public “the average user” consumes far less than what Suddenlink reports for Clovis, New Mexico:

• Frontier Communications: “Today, the average residential customer on Frontier’s network uses 1.5 gigabytes of bandwidth each month.” — Ann Burr 10/10/2008
• Time Warner Cable: “Our usage data show that about 30% of our customers use less than 1 GB per month.” — Landel Hobbs, COO 4/9/2009
• Time Warner Cable Austin: ‘Users download between 5-6GB per month on average.’ — Scott Young, senior director of digital systems  10/2008
• Comcast: “The average customer uses two to three gigabytes a month.” Jennifer Khoury, Comcast spokeswoman 10/29/2008
• Sunflower Broadband: “Our average users, about 77%, use 6 gigabytes or less of bandwidth per month. Our high-end subscribers, about 2%, use 50 gigs or more.” Sunflower Broadband Website 7/23/2009
• Bell (Canada): “Usage has increased… to more than 10GB (per average user) in 2008.” Bell Internet Usage Tutorial 7/23/2009

For the benefit of Suddenlink subscribers joining Stop the Cap! for the first time, here’s a road map for where things have traditionally gone among every other Internet provider that has introduced “measurement tools” for “your benefit” that were not beaten back by angry subscribers:

… Continue Reading

The Internet Innovation Alliance claims to advocate for consumer interests, but has telecom backing.

The Internet Innovation Alliance released a report Tuesday telling you what you already know (thanks to Stop the Cap! reader ‘Bones’ for sending the link):

(1) Consumers receive more than $30 billion of net benefits from the use of fixed line broadband at home, with broadband increasingly being perceived as a necessity;
(2) With even higher speed, broadband would provide consumers even greater benefits – at minimum an additional $6 billion per year;
(3) Significant broadband adoption gaps exist between various groups of households;
(4) Among those who are connected to broadband at home, there is no significant valuation gap based on race, although there are valuation gaps along other lines;
(5) The total economic benefits of broadband are significantly larger than our estimates of the consumer benefits from home broadband.

Astroturf Thursday

In simpler terms, the IIA did a study that discovered consumers value broadband in dollar amounts higher than they currently pay for it.  To the general media, it will be interpreted as evidence that broadband is wonderful in the United States and may be underpriced.  That’s music to the ears of providers, who also study the gap between what a consumer would be willing to pay for a product versus what they actually pay.  That gap represents the wiggle room for providers to raise prices and safely predict consumers will not be outraged about it.

The IIA also trumpets the value of broadband in their study, entitled The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households, for the benefit of their benefactors, who stand to gain substantially from broadband stimulus funding.  The IIA, one of the many astroturf organizations out there supported by the telecommunications industry, advocates for a “partnership” between private providers and government to deploy broadband.  In other words, they want the government to hand over tax dollars to private providers to construct broadband networks while preserving the completely deregulated “free market” broadband marketplace.  The “free market” concept now seems to include public taxpayer dollars subsidizing private business, all while providers demand no oversight or regulation to “hamper their innovation.”

Public money funneled to private business with no regulation or oversight = broadband goodness.

Still, it’s not all bad.  Even the IIA understands the obvious — providing faster broadband speeds not only enhances the perceived value of the product, consumers are also willing to happily pay higher prices to obtain it.  They didn’t study Internet Overcharging schemes like usage caps, consumption-based pricing, and other similar pricing schemes, presumably because the results would have shown dramatically dampened consumer enthusiasm.

What Is The Internet Innovation Alliance?

Who They Say They Are: “[A] broad-based coalition …committed to more widespread usage and availability of broadband through wise policy decisions.”
Who They Really Represent: Members include telecom business such as AT&T, and telecom trade associations such as the Information Technology Association of America.
What They Say They Do: “[A]ssist public policy makers to better understand new technologies and to promulgate smart policies that facilitate their growth.”
What They Really Want: To create a tiered Internet and allow broadband providers to charge web sites like Google and Yahoo! for the ability to reach their subscribers.
On the Web: http://www.internetinnovation.org/

The Internet Innovation Alliance runs a slick website dedicated to promoting broadband Internet policies that “will improve Americans’ lives.” While the Alliance claims to include “consumer advocates” in its coalition, no true consumer groups can be found anywhere in its membership list. But AT&T, one of the largest telephone companies in the country, is on the list. As recently as late 2004, the Internet Innovation Alliance (IIA) did seem to be on consumers’ side on the issue of network neutrality – the principle that your Internet service provider shouldn’t be able to block or interfere with your ability to access any content or use any services on the web.

Take a look at IIA’s scathing statement after SBC Communications revealed plans to charge fees to web-based telephone providers (also called Voice-over-Internet-Protocol, or VoIP): “SBC’s charging of higher fees to VoIP providers …is discriminatory in nature and is a dangerous first step toward eradicating the vast array of benefits services like VoIP will provide to consumers. VoIP promises great consumer benefits provided it remains unburdened by regulations and access fees…. SBC apparently missed the memo or chose to ignore it in the face of larger profits.”

So where was the outrage a year later when SBC head Ed Whitacre told Business Week magazine that broadband Internet providers should be allowed to charge fees not only to VoIP companies, but to any web-based company or service? “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. …We [the telephone companies] and the cable companies have made an investment and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!,” argued Whitacre.

This time, the Internet Innovation Alliance was nowhere to be found. Why? Maybe because SBC Communications was in the final stages of a merger with AT&T—one of IIA’s “member” groups. IIA does not disclose how much its “members” contribute to the organization, but in the case of AT&T, it appears to be enough to have bought IIA’s silence. — Common Cause