[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/UBB is Nonsense.flv[/flv]

François Caron produced this video succinctly smashing the myth that “usage-based billing” and “usage caps” are about fairness or fight congestion.  In this case, Caron refers to Canadian providers, but the story is much the same south of the border.  These Internet Overcharging schemes are nothing more than an effort to control what you can do with your broadband connection.  AT&T wants a 150-250GB usage cap on broadband, but has limitless capacity for television and telephone service.  They also have $39 billion to buy T-Mobile, but need to overcharge you for broadband service.  Bell in Canada wants -every- broadband user in Canada to pay this ripoff pricing.  Share with anyone who thinks paying for usage is anything like paying for water, gas, or electricity.  It’s not!  (6 minutes)

In a stretch even the most accomplished Yoga master would never attempt, an industry-funded dollar-a-holler group has told Congress that Internet Overcharging is a useful tool to combat online piracy.

On Tuesday, Daniel Castro, an analyst at the Information Technology and Innovation Foundation (ITIF), testified before the House Judiciary Committee on the issue of combating “rogue sites [that] operate in a low risk, high reward environment.”

In December 2009, ITIF proposed a number of policies to help reduce online copyright infringement, especially in countries that turn a blind eye to copyright enforcement. The purpose of these policies is to establish a robust enforcement mechanism to combat IP theft online. These recommendations include the following:

• Create a process by which the federal government, with the help of third parties, can identify websites around the world that are systemically engaged in piracy;
• Enlist ISPs to combat piracy by blocking websites that offer pirated content, allowing pricing structures and usage caps that discourage online piracy, and implementing notice and response systems;
• Enlist search engines to combat piracy by removing websites that link to infringing content from their search results;
• Require ad networks and financial service providers to stop doing business with websites providing access to pirated content;
• Create a process so that the private sector can consult with government regulators on proposed uses of anti-piracy technology;
• Fund anti-piracy technology research, such as content identification technology;
• Pursue international frameworks to protect intellectual property and impose significant pressure and penalties on countries that flout copyright law.

Castro’s idea of allowing providers to establish “pricing structures and usage caps” stands out like a sore thumb in the context of battling piracy because it is the only recommendation on the list that targets every broadband user with the same broad brush, punishing every customer whether they are engaged in piracy or not.

It would be like setting up roadblocks and searching every vehicle in a city to search for a shoplifter.  Every individual is found guilty before being proved innocent, and will be forced to pay higher prices regardless of the outcome.

The ITIF proposal runs contrary to years of efforts by Internet Service Providers to avoid being involved in the personal business of their customers.  In 2009, major ISPs wanted no part of enforcing a proposal from the record industry for a “three strikes, you’re out” plan.  Verizon, among others, made clear copyright enforcement was not their responsibility to police, although many ISPs are willing to forward copyright infringement notices to individual customers.

Castro’s testimony goes over the top when he blames his own suggested pricing antidote for “hurting law-abiding consumers who must […] pay higher prices for Internet access to compensate for the costs of piracy.”

Of course, no ISP has ever suggested they would use the extra revenue earned from Internet Overcharging to combat another industry’s piracy problem.

His sweeping indictment against consumers extends beyond nipping at their bank accounts on behalf of telecommunications companies who help fund the group he represents.  He also suggests those who oppose his piracy prescriptions are either in league with, or defenders of piracy — or other offenders ranging from criminal enterprises to kiddie porn peddlers.

Castro’s support for usage caps to control illicit online activities leaves collateral damage as far as the eye can see.  It also simply won’t work for many forms of piracy Castro complains about.  ISPs with usage caps go out of their way to note even the most draconian limits still allow thousands (if not hundreds of thousands) of songs to be downloaded — legal or otherwise.  Castro testified e-published books are now increasingly vulnerable to piracy, content compact and easy to obtain even with usage limits.  Combating websites dealing in counterfeit goods with usage limits isn’t even worth trying.

What Castro’s proposal will do is limit access to the growing amount of legitimate online video traffic.  While the author cites statistics that “one in four bits of traffic traveling on the Internet today is infringing content,” (taken from a report commissioned by NBC-Universal, who has a major interest in this battle) he ignores other facts.  Namely, more than three-quarters of all broadband traffic is legal and legitimate.  Nearly 20 percent of primetime broadband traffic is coming from companies like Netflix who are in the business of providing a legal alternative to video piracy.

Castro’s argument on usage caps simply falls apart: ISPs, who have never been particularly interested in being the enforcement divisions for Hollywood studios, should be given the right to limit broadband usage and raise prices to combat piracy even when most of that traffic heads for legitimate websites?

Public Enemy #1 for Content Theft circa 1981: The $1,400 VCR

Online piracy enforcement should not involve Internet Overcharging schemes, and arguments that it should only illustrate why so many consumers and public interest groups get nervous about industry-proposed enforcement mechanisms.  Too often, they ignore presumption of innocence before guilt, browbeat alleged offenders into settlements to avoid costly litigation — guilty or not, and turn over policing to an industry with a long track record of overreach to protect their business interests. The record speaks for itself:

• Demands to ban videotape recorders in the 1970s and early 1980s for “piracy reasons”;
• Tax cassettes and video tapes to cover alleged piracy losses in the 1980s;
• Tax blank digital media in the 1990s because of “rampant piracy”;
• Impose monthly “piracy recovery surcharges” on broadband users in the 2000s;

Now the industry wants to police the piracy problem on its own terms.  As before, the proposed solutions are worse than the problem.

Back to the future.  In 1981, ABC’s Nightline ran this report on the entertainment industry suing a VCR owner, retailers, and manufacturers for piracy over taping a television station with a videocassette recorder.  The concern in 1981 — technology was moving faster than copyright law could keep up.  Many of the yesterday’s players are part of today’s debate, including Universal, the company that purchased research indicting 20 percent of all Internet traffic as “illegal.” (Part 1 of 3 – 9 minutes – Courtesy WEWS-TV Cleveland, ABC News, and ‘videoholic1980s’)

Today’s piracy debate rehashes the same accusations of content theft, only the technology has changed.  One executive tells the Nightline audience he’s offended at being told the industry already earns enough.  The movie and television industry predicted calamity over the VCR more than 30 years ago, saying it would cost them billions in lost profits.  Hollywood eventually lost the argument against the VCR and their businesses turned out fine, earning billions in revenue selling videotapes of movies and television shows to consumers they were willing to sue just a few years earlier. (Part 2 of 3 – 9 minutes)

Before Washington is asked to join the panic-frenzy over online piracy, perhaps they should recall the same predictions of doom and gloom made by many of the same companies — predictions that were overstated.  Imagine if they had succeeded in banning the VCR?  Indeed, just as before, Hollywood stands to earn billions online when they make their content available for easy, legal viewing at a reasonable price.  Slapping usage limits on broadband consumers is the worst idea ever to promote legal viewing of digital content because it discourages customers from shopping for it.  (Part 3 of 3 – 4 minutes)

South Africans won uncapped broadband service one year ago tomorrow when an upstart provider — MWeb — unveiled its “Free the Web” campaign, delivering usage-limit free Internet access to customers across South Africa.

The company’s move to unlimited, flat rate service was heavily criticized by competing providers, who enforce draconian usage limits and have tried to convince customers the global trend was moving towards metered broadband.  But MWeb president Rudi Jansen dismisses the notion limiting broadband is the way to go, suggesting usage caps and meters are more about profits than serving customers.

Today, MWeb’s uncapped broadband is a runaway success, with more than 50 percent of its customers switching to the meter-free service.  It has been profitable, too.

“We are running ahead of our business plan and all our products are profitable,” Jansen tells TechCentral.

Now the nation’s semi-privatized, 39% state-owned phone company Telkom is widely expected to stop the erosion of its own broadband customers by adopting flat rate broadband service itself.

For Jansen, that would represent a welcome move.  The Internet visionary wants to transform South African broadband away from its current expensive pricing model and throw the Internet wide open.

“I’m looking forward to it,” Jansen says. “The sooner they launch it the better.”

The arrival of flat rate broadband made headlines across the country in 2010. (click to enlarge)

South African broadband has coped with challenges few other countries endure.  International connectivity has always been one of the biggest — sustaining traffic on satellite backbone links or underpowered undersea cables first forced providers to limit Internet use because of capacity concerns.  But new fiber-based underseas cables from Seacom and Wacs, including the forthcoming 5.1Tbps West African Cable System project will dramatically increase capacity and slash costs.

Jansen (Courtesy: TechCentral)

Yet several of his competitors want to keep the caps on and prices high, earning lucrative profits on a service Jansen says is becoming less costly to deliver every day.

Jansen admits MWeb is currently forced to traffic shape certain activities on his network, particularly bandwidth-intensive peer to peer traffic, because other providers in the country don’t agree with his wide-open view of the Internet.

He wants every provider in South Africa to agree to “open peering,” a practice that allows providers to exchange traffic with each other without charging transit fees.  He also wants to see wholesale mobile wireless pricing come down.  In Africa, mobile broadband has a strong place in a market where cable infrastructure (and broadband speed) is often lacking.

Telkom, South Africa’s equivalent to AT&T or Bell, is cited by Jansen as the biggest impediment to his plan to deliver truly unfettered, unlimited access.

Some South Africans deride the state phone company as "Hellkom"

In South Africa, broadband customers pay two providers — Telkom for the monthly rental of the telephone line and an ISP for the DSL service that connects through it.  Jansen says Telkom’s broadband line rental prices are too high.  But more importantly, the interconnection fee Telkom charges providers to access its network is “absolutely ludicrous.”

“Those prices are far more than the price of international connectivity,” Jansen says. “Telkom charges us to get access to their last mile and then charges end users to get access to the same last mile, so they make double money on it. And it’s completely mispriced.”

Despite the challenges from other providers, MWeb will celebrate the first anniversary of uncapped broadband tomorrow with a surprise announcement, probably targeting small business clients.

Wonder Twins: AT&T and Wall Street team up to support Internet Overcharging. "Shape of usage caps, form of ripping broadband users off."

The Wall Street Journal has left its readers with the impression America is the last bastion of the unlimited, all you can use, broadband plan.

In a story for the Dow Jones Newswires, Roger Cheng reports AT&T’s imposition of data caps and other Internet Overcharging schemes “is the latest step taken to get people out of the mindset that online access is an all-you-can-eat buffet. It’s part of a broader shift by companies on both the wireless and fixed-line sides to get consumers comfortable with a usage-based pricing model, in line with how the service is delivered elsewhere around the world.”

But that statement is provably inaccurate.  In fact, usage limits and so-called “usage-based pricing” is a phenomenon growing mostly in under-competitive markets in North America.

As Stop the Cap! has reported over the past few years, while the rest of the world is moving away from these usage-limited plans, providers in the United States and Canada are seeking to impose them to boost profits and monetize broadband traffic.  Some are even exploring charging you based on individual web applications and websites visited.

At the same time Korea is moving towards delivering 1Gbps unlimited broadband to every resident by 2013, American providers are trying to limit the broadband party to protect their own business interests.  In Canada, AT&T’s counterpart Bell was caught distorting the record on why it wanted to cease unlimited access, eventually admitting it was about getting users to reduce usage, particularly of video services which compete against its own pay television product.  Shaw Cable was caught lowering usage allowances when the threat of Netflix arrived in Canada.  So did Rogers Cable.

Around the world, usage-limited broadband is either yesterday’s story, or will be soon:

• The Philippines fought off unjustified efforts to impose usage limits on broadband service to boost provider profits.  So did Malaysia.
• Australian providers forced to impose caps because of undersea fiber capacity issues are relaxing them as capacity increases.
• Australia’s government has made abolishing data caps a national priority with its National Broadband Network, because they harm innovation and entrepreneurship.
• In New Zealand, providers and government officials have made it clear, “we hate data caps,” and they are benefiting from new underseas fiber that will eliminate them once and for all;
• In South Africa, MWEB abolished usage limits and now waits for additional underseas cable projects to finish before boosting speeds.
• Just this week, BT in the United Kingdom joined a parade of other providers eliminating usage caps on its broadband service.

Make no mistake: every survey ever conducted on this issue shows consumers loathe Internet Overcharging schemes and prefer unlimited access usage plans, particularly for wired broadband:

• In Europe, where unlimited access plans are already available on the wired side, consumers there now want limits also lifted on mobile networks;
• In the United States, Americans despise usage capped broadband;
• Another survey shows usage caps alienate providers’ best customers;

South Africa adopts unlimited Internet.

It’s no wonder telecommunications companies rival big banks among the Wall Street Cheat Sheet’s 18 Most Hated Companies.  Among the despised: AT&T, Comcast, Time Warner Cable, Cox Cable and Charter Communications.

Why?  Pricing and usage caps are covered among the reasons.

Despite the overwhelming evidence to the contrary, Wall Street analysts joined AT&T’s chorus claiming such usage capped broadband was the wave of the future:

1. DISTORTED CLAIM: “All-you-can-eat is a uniquely American service,” said Dan Hays, who covers telecom for consultancy PRTM. Consumers, who have enjoyed years of flat-rate pricing for Internet, may have a hard time accepting limits on their landline service, analysts said.
2. BROKEN RECORD: “We expect the cable operators to follow AT&T’s move by introducing pricing plans that include caps for lower end packages,” said Craig Moffett, analyst at Sanford C. Bernstein & Co. Moffett said the logical reaction to more cord-cutting would be usage-based pricing.

Hays is provably wrong on his claim unlimited access is “uniquely American.”

Moffett said precisely the same thing in December (and earlier) when Net Neutrality was halfheartedly adopted at the FCC.  He had called for these pricing schemes in the past and will continue to do so.

Both of these analysts work for companies who favor the higher profits Internet Overcharging will bring providers (and their investing clients), so it’s no surprise both are willing to cheerlead price hikes.  But readers are left in the dark as both are quoted with the impression they are independent observers with no interest in the outcome.

As for the impact on consumers, nobody from the Wall Street Journal bothered to talk to any to find out.

What AT&T has proven, yet again, is that American broadband is moving backwards to enhance their profits as the rest of the world advances.

Craig E. Moffett joined Sanford C. Bernstein & Co. as the Senior Analyst for U.S. Cable and Satellite Broadcasting in 2002.

Craig Moffett, perennial cable stock booster, predicts AT&T’s move to implement usage limits on its broadband customers will provide cover for cable operators to rush in their own Internet Overcharging schemes, starting with budget-priced usage plans.

Moffett released a research note Monday claiming Charter Communications, Cox Communications, and Time Warner Cable are among the first most likely to move towards limiting their customers’ broadband usage, with Comcast standing on the sidelines, at least for the moment.

Moffett thinks AT&T’s announcement is excellent news for wired providers, who could reap enormous new profits on top of some of the world’s most expensive broadband packages.

“AT&T’s move provides air cover that makes it easier for all of them to follow,” Moffett told his clients. “We view the move as good news for all the terrestrial broadband operators.”

Moffett believes usage caps have everything to do with stopping the torrent of online video.  He notes AT&T’s caps are set high enough to target AT&T customers who use their connections to watch a considerable amount of video programming online.

“Only video can drive that kind of usage,” Moffett writes.

Moffett has repeatedly predicted any challenge to pay television models from online video will be met with pricing plans that eliminate or reduce the threat:

“[I]f consumption patterns change such that web video begins to substitute for linear video, then the terrestrial broadband operators will simply adopt pricing plans that preserve the economics of their physical infrastructure,” Moffett said. “Of course, any move to preserve their own economics has far-ranging implications. Any move towards usage-based pricing doesn’t just affect the returns of the operators, it also affects the demand of end users (the ‘feedback loop’).”