One of the principal components of Internet Overcharging is the so-called “usage meter,” a measurement tool designed to help customers keep track of their usage so they don’t exceed arbitrary usage allowances and face overlimit penalties or speed throttles.

But with no government agency or independent watchdog monitoring the accuracy of the meter, providers can claim any amount of usage they wish, and stick customers with the bill.

Telecom New Zealand is the latest ISP forced to admit its usage meter was wildly inaccurate, with nearly 100,000 accounts impacted by faulty meter measurements between November 2010 and June 2011.  At least 47,000 faced punitive measures including substantial overlimit fees or throttled speeds for exceeding usage limits, even though they actually didn’t.  Now Telecom has admitted the meter was wrong, it violated the Fair Trading Act in the process, and is refunding $2.7NZ million dollars in overcharges. It was either that or face substantial fines from the Commerce Commission.

Telecom called the error that forced some customers into more expensive plans to avoid additional overlimit fees “an incorrect perception about […] data usage.”

“We’re pleased to have reached a settlement with Telecom and that they have made prompt refunds directly back to the customers who have lost out,” said Stuart Wallace, Commerce Commission Competition Manager. “Telecom brought this issue to our attention as soon as they were made aware by their customers and have co-operated fully with the Commission. Due to Telecom’s immediate admission of a breach of the Fair Trading Act, followed by appropriate compensation to customers, the settlement is the best possible outcome for those customers and avoids potentially lengthy and costly court hearings paid for by taxpayers.”

It’s the second usage measurement failure announced by the company this month.  In a separate move, Telecom agreed to pay $31.6 million to five of its competitors overcharged for wholesale broadband service.

When technically-savvy customers realize they are being billed for non-existent usage and the media takes an interest, providers eventually disclose their mistaken measurement tools.

“Customers are expected to keep these ISP’s honest,” says Stuart Littlejohn, a Stop the Cap! reader in Wellington. “ISP’s never suggest their meters are anything except accurate until they are caught with their fingers on the scale, and always in their favor.”

Littlejohn has already received a refund from Telecom for illegitimate overcharges he incurred earlier this year.

“It was an absolute nightmare,” he shares. “We thought someone hacked our wireless network or someone in the home was lying about their usage, all theories encouraged by Telecom employees who pointed the finger at everyone but themselves.”

Littlejohn says after Telecom granted one credit as a “goodwill gesture,” subsequent overcharges that went unexplained were his problem, not theirs.

“After the first credit, everything else is your fault,” he says.

Littlejohn caught the company red-handed when storm damage disrupted his service for nearly a week, and Telecom’s usage meter recorded 22GB of usage on his down-and-out service anyway.

“They ultimately couldn’t argue with themselves, but they tried at first,” he says. “Then I told them to call the department responsible for repairing my service and they quickly learned the line they said used 22GB was out of service at the time the usage was supposed to occur.”

“Without that, they would have probably insisted I still owed them for that ‘usage.'”

Littlejohn wasn’t alone.  Other overbilled customers appealed their case to the New Zealand Herald last June, and two weeks later, Telecom admitted their usage measurement tool was faulty.  But by then, customers were already paying for the erroneous charges:

The Herald has received detailed internet usage logs from two Telecom customers – one in Dunedin and the other in New Plymouth – which show over-counting broadband downloads, in one period by as much as 139 per cent. Both have raised the matter repeatedly with Telecom, but have yet to get an explanation.

“We showed Telecom five days of data as early as February 14,” says director Mark Peisker of Dunedin’s CueClub. “There was massive variance between our data and that reported by the Telecom usage meter. I said to them: ‘Your counting has very little to do with what comes down my line to me’.”

CueClub’s data taken from its two internet routers shows an average of 62 per cent over-counting during a three month period – the worst month being May when Telecom counted an extra 118.24 gigabytes (GB) of usage amounting to $203.97 in overcharging.

“They’re crooks, plain and simple, and only when they were caught did they admit their mistakes, and the only ‘penalty’ they are paying is refunding their ill-gotten gains,” Littlejohn says. “Where is the substantial fine to send a message stealing from your customers is wrong?  A strong fine would tell Telecom they made a costly mistake not worth repeating.”

Internet Service Providers who use “increasing bandwidth costs” as an excuse to raise prices or implement an Internet Overcharging scheme like usage limits or usage-based billing are being dishonest.

That’s the conclusion of a new British report that found providers grossly overestimating the costs of meeting increasing usage demands of their customers.  In some cases, providers are inflating the price of usage by 1,000 percent or more over their own costs.

“Traffic-related costs are a small percentage of the total connectivity revenue, and despite traffic growth, this percentage is expected to stay constant or decline,” claims the report, commissioned by the British Broadcasting Corporation, Britain’s Channel 4, and Skype.  “Studies in Canada and in the UK put the incremental cost of fixed network traffic at around €0.01-0.03 per GB.”

That represents a cost of pennies per gigabyte, yet many providers charge anywhere from $0.20-10.00 or more to residential customers, an incredible markup.

The study further concludes ISP claims of “ballooning costs” are simply “a myth,” and points to company financial reports which clearly show “for fixed networks, traffic-related costs are low, falling on a unit basis and likely to fall overall given declines in traffic growth and on-going cost-reducing technical progress.”

In fact, most broadband providers are reporting decreasing costs and investment in their broadband product line, while enjoying unprecedented increased profits.

As broadband traffic increases, the technology to sustain that traffic has improved, and brought unit costs for broadband traffic to an all-time-low.

The report admits that costs for wireless technology are higher, primarily because of limited airwaves, a shared usage infrastructure, and initial expenses in delivering improving connectivity with cell or wireless radio towers.  But with the advent of 4G technology, providers can sustain increased speeds, traffic, and revenue from selling wireless service that can handle higher bandwidth applications.

Plum Consulting authored the new report.

Plum Consulting, which wrote the report, concluded that even in more expensive wireless service areas like the United Kingdom, smartphone data tariffs amounting to around €10 per GB are not justified on 4G networks.

“The cost to the mobile network operator is under €1 per GB,” Plum Consulting found.

Predictably, service providers are dismissive of the report’s findings.

Trefor Davies, CTO of communications provider Timico and a member of the board at the Internet Service Providers’ Association (ISPA) says bandwidth costs are a real problem, especially for smaller ISPs that rent access on a usage-based, wholesale access plan.

“Bandwidth is by far the greatest proportion of cost for an ISP,” Davies told PC Magazine. “It’s very much you pay for what you use,” he said. “If you use twice as much bandwidth, you’re going to be paying twice as much.”

[Thanks to Stop the Cap! reader Bill H. for sharing the news.]

Bell’s Fibe customers in Ontario noticed something unusual in the company’s latest newspaper ads luring potential new signups for the company’s fiber-to-the-neighborhood service.

Subscribe to Bell Fibe™ Internet and get way more than the cable company for a lot less.

Get super-fast download speeds of up to 25 Mbps – more than double the 12 Mbps on cable.
Watch way more stuff online with 125 GB of usage – more than double the 60 GB on cable.
Plus, share pics and videos more than 12x faster than cable, with upload speeds of up to 7 Mbps.
All this for less than the regular rate you’re paying with cable’s 12 Mbps service.¹

See full offer details.¹²

Offer ends October 31, 2011. Available to residential customers in select areas of Rogers’ footprint in Ontario where technology permits. Modem rental required; one-time modem rental fee waived for new customers. Usage 125 GB/month; $1.00/additional GB. Subject to change without notice and not combinable with any other offers. Taxes extra. Other conditions apply.

¹Current as of Sept 29, 2011. Based on customer’s subscription to Rogers’ Express Internet package at the regular rate of $46.99/mo., prior to August 4, 2011.

²Available to new customers who subscribe to Fibe 25 Internet and at least one other select service in the Bundle; see bell.ca/bellbundle. Promotional $33.48 monthly price: $76.95 monthly price, less the $5 Bundle discount, less the monthly credit of $38.47 applicable for months 1-12. Total monthly price after 12 months is $71.95 in the Bundle.

75GB for existing customers, 125GB for new ones.

Setting aside the fact Bell’s package costs $71.95 a month after the first year, compared with Rogers’ regular everyday price of $46.99, existing customers were surprised to learn Bell’s usage cap for new customers (located in select areas of Rogers’ competing footprint in Ontario) was 125GB per month.  That stood out, because existing customers currently live with a monthly cap of just 75GB per month.

That means new Bell customers, who happen to also have the choice of being served by Rogers Cable, evidently have a considerably less “congested” network that allows a more generous 125GB usage cap over nearby neighborhoods not served by Rogers, where things must be “much worse” to justify the current usage limit of 75GB per month.

Customers call it another example of providers subjectively setting usage limits not according to technical need, but competitive reality.

“If having separate rates by province wasn’t enough, now we have different rates based on the neighborhood,” shared one Toronto Bell customer. “I will need to call them to adjust this.”

Bell’s website provides conflicting information to existing customers over exactly what their usage cap is.  Despite the advertised 125GB cap promoted online, many existing customers are still finding 75GB to be their monthly limit.  Customers are getting some satisfaction calling Bell and threatening to cancel service over the discrepancy.  Don’t bother with the regular customer service representatives — readers report they can do nothing for you.  Instead, tell Bell you are canceling service, get transferred to the Customer Retentions Department, and then tell them you will stay if you get the new customer promotion that comes with the 125GB usage cap.  If you ask, Bell will often configure your account with the promotion noted above, which comes with the automatically more generous usage cap.

Stop the Cap! has always believed usage caps have nothing to do with the network congestion and “fair use” excuses providers like Bell have repeatedly argued.  They exist because market forces allow them to, and when competitors arrive with more generous allowances (or none at all), incumbent providers suddenly find enough capacity to be more generous with their customers.  At least some of them.

South Africa’s largest Internet Service Provider, the former state-owned telephone company Telkom, has introduced uncapped broadband service across the country.

Telkom’s Do Uncapped offering removes usage limits after “intensive market research” and “data usage trials” concluded South African consumers absolutely despise usage limits on their Internet access.

In fact, in overwhelming numbers, consumers preferred unlimited access over faster broadband speed packages.  Even throttled “fair use” policies which slightly reduce speeds during peak usage periods are more tolerable than restricted usage allowances, overlimit fees, and punishing “dial-up” speeds when customers exceed their usage limit.

“To feed the hunger for data, Telkom has tailored its Do Uncapped range according to consumer usage patterns derived from findings of the Company’s broadband trials on higher cap trials conducted earlier this year,” the company said in a statement.

Inexpensive, lower speed offerings are available at 384kbps and 1Mbps, but do come with certain daytime speed restrictions, especially on peer to peer traffic.  The premium 4Mbps package is truly unlimited.

South Africa’s challenged telephone network has resulted in relatively low broadband speeds when compared against Asia, North America, and Europe, but the unlimited offerings are being welcomed by Telkom customers across the country.

Because DSL service from the phone company has traditionally been slow and, until recently, expensive, many South Africans rely primarily on wireless mobile services, which can be more reliable in some parts of the country.  Some purchase wireless broadband service from providers like MTN instead of DSL from the phone company.

As a home broadband replacement, wireless mobile broadband has always meant compromising on usage, because most plans are heavily capped and some block access to certain web content.  But MTN is responding to Telkom’s move away from usage caps by removing them from its own wireless network, at least during a promotion.

MTN is kicking off the South African summer with its newest promotion, unlimited speed and uncapped wireless data access on the company’s HSPA+ network, effective Oct. 1.

The limits stay off until the end of summer — Jan 2012.

“We have seen a significant number of our customers taking up latest smartphones, tablet PCs, wireless routers and laptop deals that MTN is offering,” said Serame Taukobong, MTN South Africa Chief Marketing Officer. “This promotion is a response to the increased data appetite that comes with the usage of these devices.”

That’s an attitude foreign to North American mobile operators, who see those devices as enemies of their wireless network (or the basis for future profits).  In South Africa, consumers adopting new wireless devices and increased usage has triggered a marketplace response that eases or ends usage caps.  In North America, the opposite is happening.

MTN has slashed its mobile broadband prices over the course of 2011 for the highest speed, unlimited access package from a budget-busting $248 a month to $111 a month.  A slower speed unlimited package now sells for $37 a month.  That becomes very affordable for Internet users who use their mobile devices exclusively for access.  Even a package selling over $100 a month may be comparably affordable to an American who is required to maintain a home broadband and mobile broadband account.

MTN even allows wireless peer to peer traffic, but the company asks subscribers to be reasonable and not leave it running 24/7.