Rogers Communications claims usage caps are not creating problems for customers, but if and when they do, the company says it will get rid of them.

Luiza Staniec, manager of public relations for Rogers’ Quebec and Atlantic Canada region, made that remarkable claim in an interview with the New Brunswick-based Times & Transcript.

“At this point there is a cap. It hasn’t really caused a problem,” Staniec said.  “If the cap begins to affect users online, we will abolish it.”

At issue is Netflix’s popular streaming service, which opened for business in Canada last year.  Consumers are embracing the $7.99 service which delivers unlimited streaming of the Netflix online library.  But an increasing number of customers are discovering that while they can watch as much Netflix as they’d like, Internet Service Providers like Rogers have usage limits in place to keep online viewing under control.

Netflix told investors to expect $50 million in operating losses in international business this year, in part because growth in Canada is being hampered by stingy usage limits and high priced broadband.  Once consumers get a broadband bill with overlimit fees attached, some are reconsidering their love affair with video streaming.

Lindsey Pinto, communications representative for OpenMedia.ca, a consumer rights organization, says a regime of usage limits in place at most Canadian ISPs will ruin high bandwidth applications and services like Netflix, as consumers find them too expensive to use.

“It takes a lot of bandwidth to stream a movie or watch Netflix,” Pinto told the newspaper. “People will stop doing things that will bring them over the cap. There will be a disintegration from these services under this model.”

Staniec counters that Rogers offers higher usage cap plans (for more money) to accommodate Netflix viewing.

“If you watch a lot of movies, pick the package with the highest cap,” she says. “If you don’t watch too many, you don’t need the high cap.”

She added Rogers is willing to be flexible, adjusting caps “to suit the consumers.”

But last summer Rogers actually reduced the usage cap of its popular Extreme service plan from 95GB to just 80GB per month, one day after Netflix announced plans to enter Canada.

[Updated 5:12pm EDT — We heard from Ms. Staniec who wants readers to know she was respectfully misquoted by the reporter at the Times & Transcript:

“The correct message I conveyed was that our offer will evolve as customers needs/use evolves. The journalist added, ‘perhaps one day they will be abolished altogether.'”

Staniec would like our readers to know she herself made no statement about the issue of abolishing usage caps.]

Bright House Networks, a cable company primarily serving Florida and other southeastern states says it has no plans to implement Internet Overcharging schemes like usage caps or consumption billing.  But a company spokesperson went even farther, telling Tampa Bay Online the cable company was not even considering them.

Bright House, which relies on Time Warner Cable’s programming negotiators and sells broadband under the Road Runner brand, was among the only companies in Florida that was willing to go on record stating they were not considering limiting broadband customers.

Other providers were unwilling to follow Bright House’s lead:

• AT&T: “2 percent of our customers were using 20 percent of our bandwidth,” said an AT&T spokesman, so the company slapped 150GB usage limits on DSL customers, 250GB on U-verse customers.  The overlimit fee is $10 for every 50GB extra.
• Verizon Florida: “At this point, we’ve not implemented any usage controls or broadband caps.  We’ll continue to evaluate what’s best to ensure our customers get the highest quality broadband service for the best value,” the company said.  But it also added: “We’re continuing to evaluate usage-based pricing for our wireline broadband customers.”

“Bandwidth caps stifle consumer choice,” said Parul Desai, public policy counsel for Consumer’s Union.  Desai notes customers do not sign up for pricey high-speed FiOS broadband service from companies like Verizon just to read e-mail.  Customers who are willing to pay premium prices for super high speeds certainly don’t want a usage cap devaluing their broadband package.

Comcast, for example, uniformly limits consumption to 250GB per month, even on high speed plans delivering over 50Mbps service.

“It’s like building a rocket that you blow up after it reaches 250 feet into the air,” says Stop the Cap! reader Will in Tampa, who shared the article with us.  “What is the point of having 50 or 100Mbps service from any provider if they slap a limit on it like that.”

Will thinks customers will abandon higher speed packages in droves once they realize they really can’t use them.

“With some of these companies talking about caps around 40GB per month, you can’t even take your connection for a test drive,” he says.  “You might as well stick with basic speeds, just to remind and discourage you from putting yourself over their stupid limits.”

Desai suspects broadband companies will try limiting their customers, if only because they face few competitors consumers can use instead and they have video services to protect.  But she suspects some consumers will either abandon or seriously downgrade their broadband service and find other ways to trade large files and content.

“It’s not inevitable they’re going to succeed,” she told TBO. “People only find value in broadband because of what they can access with it. If more people feel constrained, they’ll start looking for another way.”

Get government subsidized satellite "broadband" at speeds up to 1Mbps, as long as you honor strict usage limitations.

With much fanfare, ViaSat’s WildBlue has unveiled a special discounted satellite “broadband” offer that comes courtesy of United States government taxpayer funding:

WildBlue’s same great service at an ultra-low price, courtesy of the U.S. government.

WildBlue, through the U.S. Recovery Act brings a special offer for high-speed Internet to areas unserved by wireline providers. It’s the most affordable deal we’ve ever offered, and the monthly price for this special package is guaranteed for as long as you remain a WildBlue customer. Take advantage of government funds to get High Speed Internet at discounted rates.

For $39.95 per month, WildBlue will provide the satellite equipment to deliver qualified subscribers up to 1Mbps service, subject to a monthly download limit as low as 7.5GB per month for downloads, 2.3GB per month for uploads.  Customers who exceed the limits will have their 1Mbps service throttled to near-dial-up speed until usage falls below the company’s “fair access policy.”

WildBlue explains the limited-time offer is made possible by funding from the American Recovery and Reinvestment Act of 2009.  Through a grant from the Department of Agriculture’s Rural Utilities Service (RUS), certain rural customers might qualify for the discounted pricing.

WildBlue only received authorization to deliver the discounted service to locations west of the Mississippi — specifically those not within an existing RUS project zone, are located in a defined rural area, and cannot receive service from a telephone, cable, or fiber provider.  Current WildBlue customers also do not qualify.

The grant funding covers installation and equipment charges, the client only pays for the service itself.  But would-be customers are required to commit to at least one year of service or face an early termination penalty and must pass a credit check.

WildBlue customers, as well as those of other satellite providers, have given satellite Internet access low satisfaction scores, primarily because of speed and usage limitation issues.  But for some without any other choice, it is a service they live with for basic web access.

Phillip Dampier

This week, the tech community has been buzzing over new entrants in the world of cloud computing.  Apple’s iCloud in particular has sparked enormous media coverage as the company plans to encourage customers to access all of their favorite content over their broadband connection.  Apple is also moving towards online distribution of many of its software products, including the forthcoming OS X Lion operating system, suggesting consumers can pass up traditional physical media like CD-ROMs or DVDs.

Cloud storage theoretically allows you to store your entire music, video and photo collection online for easy access from any device.  Watching the 20-somethings buzz about 100GB+ secure file lockers and the end of traditional file storage as we know it has been amusing, but these people need to get their heads out of the clouds.  Unless they become politically involved in America’s broadband debate, it is not going to happen the way they hope it will.

Tech entrepreneur?  Meet broadband provider reality check: the Internet Overcharging usage cap and “excessive use” pricing scheme.

While Steve Jobs was introducing iCloud, broadband providers and their industry friends have been ruminating over the impact all of this new traffic will have on their broadband networks.  In an homage to former AT&T CEO Ed Whitacre’s “you can’t use my pipes for free,” the drumbeat for implementing “control measures” for cloud computing and video traffic has been amplified several times over by certain providers, Wall Street analysts, and their trade press and equipment supplier lackeys.

One alarmed provider pondered the impact of iCloud in terms of their past experience with iTunes, which also spiked traffic when it was first released.  Others balk at the notion of consumers using broadband platforms to move entire libraries of content back and forth, especially on wireless networks.  The only sigh of relief detected?  Apple won’t start iCloud with video content — just music, at least at first.

The enemies list

The biggest targets — the companies that get a lot of pushback from providers for using “their networks” to earn millions for themselves are Google, Netflix, Amazon and Apple.  Each of them are rapidly moving into the online entertainment business, threatening to provoke more cable TV cord-cutting.  Netflix is now responsible for 30 percent of online traffic during primetime hours, a fact that some use as an accusation — as if Netflix should be held to account for its own success. Amazon has opened its own cloud based music storage and is also increasingly getting into online video content streaming.  Apple has a novel approach at handling its forthcoming iCloud music feature which should save hours in uploading, but the company is also moving towards online distribution of a growing proportion of its software, including the huge bug fixes and upgrades that will easily exceed a gigabyte if you own several Apple products.

Google is a frequent Washington target and honestly delivers the only truly effective corporate pushback to anti-consumer broadband pricing some providers have contemplated.  In fact, Google is putting its money where its mouth is building a gigabit network larger providers repeatedly scoff at as unnecessary, too costly, and too complicated.

While millions in venture capital funds new online innovations, only a miniscule amount of money is being spent to counter the lobbying major providers are doing in Washington to redefine the broadband revolution in their terms, complete with usage pricing that bears no relation to cost, arbitrary usage limits, and ongoing lack of true competition.

Online innovation is grand, but allowing providers to strangle it with Internet Overcharging schemes guarantees to end the party real fast.

Individually, none of the new cloud services are likely to blow out usage caps in excess of 100GB, but in combination they certainly could.  Anyone using online file backup, cloud storage of video and large music collections, uses Netflix or other online streaming services, and spends lots of time on the web will easily approach the limits some providers have established.  That doesn’t even include large software updates.  Unless you have an unlimited usage plan on the wireless side, don’t even think about using most of these services with AT&T’s 2GB monthly wireless usage cap.

Glenn Britt: The Internet is a utility which is why we can keep raising the price.

In the handful of countries with ubiquitous Internet Overcharging, little of this will pose a problem — companies won’t launch cloud computing services in markets where usage caps will effectively keep customers from using them.

That is why it is critical for some of America’s largest technology companies to get on board the fight against Internet Overcharging, and demand Washington recognize broadband as a utility service that should be wide open and usage cap free.  The evidence is right in front of you.  Time Warner Cable CEO Glenn Britt recognizes the fact broadband is an essential part of our lives today, which is why he is confident enough to keep raising the price and charging even more in the future.  It’s not about “network congestion,” “building the next generation of broadband,” or “pricing fairness.”  Stop the Cap! started at ground zero for Time Warner Cable’s 2009 version of “pricing fairness” — $150 a month for an unlimited use broadband account that likely cost major providers less than $10 a month to provide.  It’s about pure, naked profiteering, unchecked by free market competition in today’s broadband duopoly.

Unless a company like Google can vastly expand its own broadband rollouts, it is increasingly apparent to me (and many others), we may have to move towards an entirely different model for broadband in the United States — one built on the premise of the Interstate Highway System.  One advanced, publicly-owned fiber network open to all providers on which telecommunications services can travel to homes and businesses from coast to coast.

Nobody says private companies shouldn’t be able to compete, but every day more evidence arrives they will never be inclined to deliver the next generation of service that other countries around the world are starting to take for granted.  They will instead protect their current business models at all costs, even if that means throwing America’s broadband innovation revolution under the bus.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CNN Will iCloud Measure Up 6-7-11.flv[/flv]

CNN takes a look at what makes Apple’s iCloud service different from competitors from Google and Amazon.  (5 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CNN Dropbox Cloud Computing 6-8-11.flv[/flv]

CNN talks with the folks at Dropbox about their cloud file storage system.  (3 minutes)

The $49 "cap" plan isn't your maximum monthly fee, it's the MINIMUM monthly fee. The company selling it was fined for misleading advertising.

Banking on the fact most consumers do not understand what a “gigabyte” represents, much less know how many they use per month on usage-capped broadband plans, large telecommunications companies enjoy a growth industry collecting enormous overlimit fees that bear no relation to their actual costs of delivering the service.

The social implications of “usage cap and tier” pricing are enormous, according to Australia’s Communications & Media Authority.  Australia remains one of the most usage-capped countries in the world, and broadband providers have taken full advantage of the situation to run what the ACMA calls a broadband Confusopoly.

As a growing number of mobile broadband customers in the United States and Canada approach the allowance limits on their mobile data plans, Australia’s long experience with Internet Overcharging foreshadows a North American future of widespread bill shock, $1000+ telecom bills, and families torn apart by finger-pointing and traded recriminations over “excessive use” of the Internet.

Not helping matters are providers themselves, some who distort and occasionally openly lie about their plans.  In Australia, Optus was fined $200,000 for advertising a “Max Cap $49” plan that led many to believe their maximum bill would amount to $49.  But not so fast.  Optus turned the meaning of the word “cap,” typically a usage limit, upside down to mean a capped minimum charge.  Indeed, the lowest bill an Optus customer could receive was $49.  Using data services cost extra.  The company also claimed customers could use accompanying call credits “to call anyone,” another fact not in evidence.

Another common marketing misconception is the “unlimited mobile broadband” plan — the one that actually comes with significant limits. In most cases, providers want “unlimited” to mean there are no overlimit fees — they simply throttle the speed of the service down to a dial-up-like experience once a customer exceeds a certain amount of usage.  Companies like Cricket disclose their usage triggers.  Others, like Clearwire, do not — and they are applied arbitrarily based on customer usage profiles and congestion at the transmission tower.  While annoying, at least these plans do not impose overlimit fees which lead to the growing problem of “bill shock.”

Bill Shock

North Americans getting enormous mobile data bills remains rare enough to warrant attention by the TV news.  Often the result of not understanding the implications of international roaming, customers can quickly run up thousands of dollars in mobile bills while touring Europe, cruising, or even just living along the Canadian-American border, where accidental roaming is a frequent problem.

But as Americans only now become acquainted with usage-capped mobile data plans with overlimit fees, bill shock may become much more common.

In Australia, which has had a head start with usage-capped mobile data, an incredible 58 percent of customers exceeded their usage allowances at least once in a calendar year, and this statistic comes from April 2009.  The bill shock problem has now become so pervasive in Australia, in 2010 the office of the Telecom Ombudsman received more than 167,955 consumer complaints about the practice.

In the United States, one in six have already experienced surprise data charges on their bills — that’s 30 million Americans.  The Federal Communications Commission found 84 percent of those overcharged said their cell phone carrier did not contact them when they were about to exceed their allowed service limits. In about one-in-four cases, the overlimit fee was greater than $100.

Sen. Tom Udall (D-N.M.) proposed legislation that would require a customer to consent to overlimit fees before extra charges accrue for voice, data, and text usage.

The Cell Phone Bill Shock Act of 2011 would also require carriers to send free text messages when a customer reaches 80 percent of their plan’s allowance.

“Sending an automatic text or email notification to a person’s phone is a simple, cost-effective solution that should not place a burden on cell phone companies and will go a long way toward reducing the pain of bill shock by customers,” said Udall, a member of the Senate Commerce Committee. “As more and more cell phone companies drop their unlimited data plans, this problem only stands to get worse. I am proud to stand up for cell phone consumers and reintroduce this important legislation.”

In Australia and North America, legislation to warn consumers of impending overlimit fees has been vociferously fought by the telecommunications industry.

Udall

The CTIA-Wireless Association in Washington said such measures were completely unnecessary because consumers can already check their usage by logging into providers’ websites.  Even worse, they claim, bills like Udall’s threaten to destroy innovation and harm the industry by locking a single warning standard into place.  CTIA claims that wouldn’t help consumers.

But Australian regulators, who have years of experience dealing with unregulated carriers’ usage limit schemes say otherwise, noting industry efforts to self-regulate have been spectacular successes for the industry’s bottom line, just as much as they are a failure for consumers who end up footing the bill.

Even worse, unregulated providers taking liberties with marketing claims can have profound social implications when customers find they can’t pay the enormous charges that often result.

The Brotherhood of St. Laurence, a charity, reported one instance of an elderly client who received a $1,200 broadband bill he couldn’t pay outright.  Even as he negotiated a monthly payment plan with the provider, the company shut off his home phone line without warning.

“His telephone service was particularly important because he used a personal alarm call system, which entailed wearing a small electronic device that he could activate in the event of a medical emergency,” noted a report on the incident.

The Australian Competition and Consumer Commission found a long-standing competitive feud by two large mobile providers in Australia — Telecom and Optus — has only brought more instances of marketing excesses that ultimately don’t benefit consumers.  The Commission increasingly finds it lacks the resources to keep up with the slew of questionable advertising.

Some industry critics suspect providers treat ACCC’s fines as simply a cost of doing business, and some like Optus have been rebuked more than once by the regulator for false advertising.

The ACMA says the longer government waits to protect citizens from provider abuses, the more consumers will be financially harmed, especially as data usage grows while usage caps traditionally do not.