Customers of Vistabeam in Nebraska and Wyoming who subscribe to the company’s rural Wireless Internet Service are about to discover their online activities are about to be capped… for real this time.

Matthew Larsen, who runs the Wireless Cowboys blog, includes some illustrative examples of Internet Overcharging schemes in action and what they’re all about.  He writes about his experiences at Vistabeam, which serves rural Nebraska and Wyoming with wireless broadband service.  The company started operations with an admittedly-unenforced 3GB usage limit, backed up with a stinging $25/GB penalty overlimit fee to underscore the point.  Today that cap is described by Larsen as “a joke” — too low to be taken seriously.  [Note to Frontier: Are you reading this?]

But the company was determined to monitor and measure its customers’ online activities and developed an in-house tool that is providing daily insights into customer usage, and gives Vistabeam the ability to begin penalizing customers who exceed the limits established by the provider.

Wireless providers, known as WISPs, often provide the only Internet access in rural areas that are too sparsely populated to deliver DSL service and where cable television is a financial impracticality.  For Nebraska and Wyoming residents bypassed by cable and underserved by DSL (if at all), it’s often a choice between dial-up, satellite fraudband service barely capable of 1Mbps service with a punitive “fair access policy,” or an independent WISP.  A number of customers have chosen the latter.

Vistabeam offers service plans for its 2000 customers ranging from 384kbps for $29.95 a month to 4Mbps service for $99.95 a month, with a discount for paying in six month increments.  That’s not cheap by any means.  But rural Americans routinely face higher broadband bills because of the inability of providers to achieve economy of scale.  Fewer customers have to share the expenses to construct, operate and maintain the service.

But those bills could soon grow even higher if customers exceed the new harder-line Vistabeam will take on usage cap offenses.

Larsen’s measurements identified what their customers were doing with their broadband connections and identified Vistabeam’s biggest users:

Out of 2000+ customers, 80 used more than 10 gigs for the month.

One customer – a 1 meg subscriber at the far eastern edge of our network, behind seven wireless hops and on an 802.11b AP – downloaded 140gig.

Another one, on the far western side of our network, downloaded 110gig.   We called them and found out that they were watching a ton of online video.

We discovered a county government connection that was around 100gig – mostly because someone in the sheriff’s department was pounding for BitTorrent files from 1am to 7am in the morning, and sometimes crashing their firewall machine because of the traffic.

One wonders what the sheriff’s department was grabbing off BitTorrent, but the question itself opens the door as to whether or not your provider (and by extension, you and I) should know what they are doing with their broadband connection in the first place.

Larsen says the other subscribers on his list were watching lots of online video, had a virus, or had “mistakenly” left their file sharing programs running.

Larsen’s solution is usage caps and overlimit penalties for his subscribers.

A home equipped with a WISP antenna on the roof

Package                                                               Monthly Download Cap

384k                                                                       10 gigabytes

640k                                                                       10 gigabytes

1 meg                                                                    20 gigabytes

2 meg                                                                    40 gigabytes

3 meg                                                                    50 gigabytes

4 meg                                                                    60 gigabytes

8 meg                                                                    80 gigabytes

Additional capacity over cap                        $1 per gigabyte over the cap

Although Larsen claims the cap and the overlimit fee isn’t “a profit center,” it would be disingenuous to suggest it isn’t about the money (underline emphasis ours):

I feel that these caps are more than generous, and should have a minimal effect on the majority of our customers.   With our backbone consumption per customer increasing, implementing caps of some kind became a necessity.    I am not looking at the caps as a new “profit center” – they are a deterrent as much as anything.    It will provide an incentive for customers to upgrade to a faster plan with a higher cap, or take their download habits to a competitor and chew up someone else’s bandwidth.

Customers upgrading to a faster plan have to pay a correspondingly higher price for that service and taking their “download habits to a competitor” reduces the cost for the provider no longer encumbered with serving the higher-usage-than-average customer now heading for the door.  Among his 2,000 customers, the end effect will be what Larsen himself hopes is a deterrent for customers using increasingly common higher bandwidth applications like online video, file backup, and uploading and downloading files.  Larsen himself admits that one of his customers was a little bit upset to be told he was using too much.

Rural providers do face higher costs to provide service than their urban counterparts.  But before they enjoy any benefits from Universal Service Fund reform or other government-provided stimulus, customer-unfriendly Internet Overcharging schemes should not be part of the deal.

West Virginia residents are assured of an indefinite future with 1-3Mbps usage-capped “broadband” as Frontier won conditional approval of its plan to assume control of the majority of the state’s landlines.

Frontier Communications, the phone company with the 5 gigabyte monthly acceptable usage allowance, won approval from West Virginia’s Public Service Commission after nearly a year of opposition from several unions and consumer advocacy groups.  The opposition, led by the Communications Workers of America, charged that Frontier’s balance sheet made it impossible for the company to fulfill promises to deliver quality phone and broadband service to the majority of the state’s residents.  Consumer groups, including Stop the Cap!, argued Frontier’s DSL broadband service is inadequate for the state’s needs, because it typically only provides 1-3Mbps speed and is usage-limited for residential customers.

Verizon’s history of bad service in the state helped drive some to believe Frontier can do better

Verizon’s West Virginia division has frequently achieved a poor rating among many West Virginians upset with the company’s service record and broadband deployment.  Last Monday, the PSC announced that Verizon’s service in the state was so poor, it ordered the company to place $72.4 million in an irrevocable escrow account to be used to improve the quality of service.  The PSC found Verizon’s disinterest in delivering service in West Virginia had resulted in the deterioration of Verizon’s essential infrastructure.

The PSC-ordered escrow account will be used to maintain and improve everything from restoring copper wiring to vegetation control and pole replacement.

With a history of complaints like that, it comes as no surprise West Virginians are ready to wave goodbye to Verizon, hoping for better times with Frontier Communications.

Bray Cary

Bray Cary, a TV station owner in West Virginia, has hosted editorials on his network of local stations across the state promoting the transaction, believing it will bring a better future for the state’s telecommunications needs.  Just two weeks ago, he demanded the PSC make a decision on the proposed merger, claiming the state needs a “modern, cutting edge communication system that will bring high-speed Internet to every corner of this state.”  Unfortunately for Cary, there is nothing from Frontier that comes close to “cutting edge,” with the exception of the company’s brazen Internet Overcharging scheme now being tested in Minnesota that threatens to bring $250 monthly broadband bills to some residents.

[flv]http://www.phillipdampier.com/video/WOWK Charleston State Must Act on Verizon-Frontier Deal 5-4-10.flv[/flv]

WOWK-TV’s Bray Cary criticized the West Virginia Public Service Commission for stalling on a decision to move forward the Verizon-Frontier landline transfer in the state.  Just about ten days later, the PSC conditionally approved the deal.  [Video problems were a part of the original clip] (Aired: May 4, 2010 — 1 minute)

Frontier specializes in delivering slow-speed DSL service to most of its rural service areas, usually less than 3Mbps in speed.  Even in its largest service area, Rochester, N.Y., the company’s broadband options are an also-ran against the far faster and more reliable cable modem service from Time Warner Cable, which also beats Frontier’s out-the-door price.

Unfortunately, West Virginian media has never given important details to residents about the specific services Frontier is willing and able to offer residential customers.  It also never informed customers about the important limitations the company attaches to its “high speed Internet” Cary hopes to see available in every corner of the state.

Sometimes change for change’s sake is not an improvement.

The PSC attaches conditions to its approval

The Commission did not grant blanket approval to the transaction.  The PSC is requiring that Frontier:

• Honors all existing obligations of Verizon following the close of the sale, including the currently effective Retail Quality Service Plan approved by the Commission to continue through at least July 2, 2011.
• Makes capital investments in Verizon of $30 million during the second half of 2010, $75 million in 2011 (including $12 million targeted at service quality), $63 million in 2012 and $63 million in 2013.
• Makes additional capital investments of at least $48 million to increase broadband deployment and subscription in the Verizon service territory.
• Expands broadband availability in Verizon service areas so that by no later than the end of the fourth year following the close of the sale, access to broadband service will be available to no less than 85 percent of the households within Verizon service areas.
• Locates its Southeast regional headquarters in Charleston, WV, after closing the sale. Charleston will be Frontier’s Southeastern regional headquarters, and will be a major employment center for Frontier in the region. It will be the hub for engineering, technical, operation and executive personnel for Frontier’s operations in West Virginia, Tennessee, North Carolina, South Carolina, Mississippi, Alabama, Georgia and Florida.
• Adopts all of Verizon’s tariffs, price lists and contracts, including long distance, under the same terms and conditions at closing.
• Caps all regulated rates subject to jurisdiction of the Commission for one year after close of the transaction.
• Provides E-911 functionality provided by Verizon prior to close.
• Waives early termination fees for current Verizon customers participating in a Verizon bundled service package for the first 90 days after closing.

Reactions from all over

“We’re pleased the commission has approved the transaction. The record developed in this case provides comprehensive evidence and assurances that the transaction with Frontier Communications is in the public interest and will provide many benefits to West Virginia residents, including increased investment and broadband availability in the state, while protecting jobs and promoting employment.”

— Verizon-West Virginia President B. Keith Fulton

“We’re in the process of evaluating the order. After full review we’ll look at what we can do that will best serve West Virginia consumers and CWA members. Of course, we’re disappointed but we’re heartened by the fact that at least one person on the three-member commission agreed with us and more than 80 legislators, several county commissions and a broad coalition of consumer, union and first responder organizations that this deal is too risky and not in the public’s interest. The split decision shows our arguments about the deal had validity.”

— Communications Workers of America, District 2 Vice President Ron Collins

Byron L. Harris heads the Consumer Advocate Division of the West Virginia Public Service Commission

“There are many areas of West Virginia that will always be dependent on landlines, absent some sea of change in technology. Those are the people I’m most concerned about. They’re the truly captive customers of now Verizon and, in the future, Frontier.”

— West Virginia Public Service Commission’s consumer advocate Byron Harris

“We’ve seen how Wall Street’s investments can backfire. Like Frontier today, Wall Street once put its confidence in Global Crossing and that led to a disastrous bankruptcy. We’re concerned that the Rochester-area and other existing Frontier properties may be starved to fund this expansion.”

— John Pusloskie, President of CWA Local 1170 in Rochester, N.Y.

“Today’s approval is a welcome and important step. Our goal is to gain the approval of the FCC so that we can close the transaction and begin bringing its benefits to consumers and businesses.”

— Maggie Wilderotter, Chairman and Chief Executive Officer of Frontier

West Virginian media covers the conditional approval

A handful of television stations covered the conditional approval, most without much depth.  West Virginian newspapers covered the fight between Verizon and Frontier and the unions and consumer groups, but no paper really provided in-depth coverage into the challenges of West Virginia broadband and what precisely Frontier is capable of providing to solve it.  Consumers will discover soon enough that West Virginia has yet again gotten the short end of the online stick.  Only this time, they better not wave it around too much — it might exceed your monthly stick-waving allowance.

[flv width=”500″ height=”395″]http://www.phillipdampier.com/video/WOWK Charleston Union – Verizon-Frontier Deal Bad for W.Va., Verizon Responds 5-14-10.flv[/flv]

WOWK-TV in Charleston delivered the most substantial report on the sale, including this brief interview with PSC spokeswoman Sarah Robertson.  (2 minutes)

[flv]http://www.phillipdampier.com/video/WTAP Parkersburg Verizon-Frontier Deal Approved 5-14-10.flv[/flv]

WTAP-TV in Parkersburg ran this brief in-studio report about the Verizon-Frontier approval.  (1 minute)

[flv]http://www.phillipdampier.com/video/WDTV Bridgeport Verizon Sells Land Lines to Frontier 5-14-10.mp4[/flv]

WDTV-TV in Bridgeport explained the requirements of the conditional approval.  This was the only report on the approval that included the opposition’s perspective.  (1 minute)

Telekom Malaysia

A scheme to impose usage limits and speed throttles on Telekom Malaysia’s broadband customers was beaten back just a day after the plan was announced.

Malaysia’s largest telecommunications company announced the limitations at the same time in introduced new speed tiers and new pricing for them.

Customers were not pleased when they discovered TM’s UniFi broadband service came with high prices and usage caps:

TM UniFi Broadband Packages

• 5/5Mbps Service RM149/$46.73 now capped at 60GB per month.
• 10/10Mbps Service RM199/$62.41 now capped at 90GB per month.
• 20/20Mbps Service RM249/$78.09 now capped at 120GB per month.

In comparison, residents in nearby Singapore can buy 100Mbps service, with no limit, for RM200/$62.73 per month.

Those who exceed the limits would find their speeds throttled to about 10 percent of the speed they purchased, for the rest of the month.

Telekom Malaysia CEO Datuk Zamzamzairani Mohd Isa said the measures were part of its Fair Usage Policy.

Dato’ Zamzamzairani

“This policy is a standard industry practice to ensure that all subscribers get to enjoy the same web surfing quality,” he said.

Only it’s not standard industry practice, despite that often-heard excuse.  In countries where usage limits are common, those limits are being eased or discontinued as broadband expansion and competition drives the unpopular usage limits out of the market.

Malaysians weren’t willing to wait.

The social media firestorm of protest that followed the announcement forced the company to back down just one day after announcing the Internet Overcharging scheme.

An announcement on Twitter, noting customer feedback, stated “no volume cap 4 all #unifi packages 4 now.”  The company did say it would continue to “reserve the right to enforce a download limit to ensure all UniFi subscribers receive equal service quality,” but that type of language has been standard in service provider agreements for years.

Company officials told The Malaysian Insider customers “may abuse” the service, which is why they wanted the cap.

But customers feel they deserve value for money — the price being charged can be considered high for many countries in Asia even without the cap.

The Star newspaper notes:

With the latest announcement by Telekom Malaysia, many people are rejoicing. Among them is communications consultant Justin Then, who said he’s happy to note that Telekom Malaysia listens to consumers.

“Capping our high speed Internet access doesn’t make sense, if the Government wants Malaysians to seek out knowledge and be innovative,” he said.

A Twitter user, who asked to be identified only as Flo, said she’s glad Telekom Malaysia has decided not to employ the cap for now.

“We are paying a premium for technology that offers super high bandwidth, so a daily cap shouldn’t be applied. There’s no value in that; we would be better off with regular broadband,” she said.

One caveat.  As has been the case with a handful of U.S. providers seeking to monetize your broadband usage, rescinding usage caps today doesn’t guarantee they won’t be back tomorrow.  Indeed, TM has yet to remove them from their website, instead inserting in the fine print, “The monthly download volume policy will not be implemented until further notice.”

[flv]http://www.phillipdampier.com/video/Malaysia Telekom UniFi Promotional Video.flv[/flv]

TM’s slick promotional video unveiling the faster UniFi broadband packages asks y0u to “imagine.”  We did… imagining how in the world we can accomplish all of the things they show in the video with the company’s proposed arbitrary usage limits and speed throttles.  Imagine actually getting the service you paid to receive without a provider imagining how much use = “abuse.”  (6 minutes)

WTTG's "Ask Allison" segment answers a question about unwelcome mandatory data plans

Ever wonder why your cell phone bill seems to keep increasing when you renew your contract?

American wireless phone companies have discovered that subjecting an increasing percentage of customers to required data plans can create a revenue bonanza for companies, whether customers use many data services or not.

Many customers are just learning of new, mandatory data plans now required by all four of the country’s major carriers.  Verizon, AT&T, Sprint, and T-Mobile now compel customers upgrading to new “smartphones” — designed to be used for accessing online services — to also choose an extra add-on plan to cover their data usage.  In some cases, that can add an additional $30 a month to monthly cell phone bills.

Some Verizon customers have learned about this the hard way when they tried to buy a new phone at the end of their two year contracts.  For those longstanding Verizon customers grandfathered on service plans developed five or more years ago, being forced to switch to one of Verizon’s current plans carries quite the sticker shock, especially for those who only occasionally send text messages or use data features.

The insistence by Verizon that Smartphone owners commit to their $29.99 unlimited data usage add-on plan adds considerably to monthly bills.  Many Verizon customers don’t care about increasing sizes of calling allowances — Verizon customers already enjoy free night and weekend calling and free calls to other Verizon Wireless customers (of which there are many — Verizon is now the nation’s largest wireless provider).

Here is a comparison between two near-equivalent Verizon Wireless calling plans, ones from 2005 and the other currently in effect.  There is a dramatic difference in pricing, particularly for those who would find a 250 text message allowance, and data usage counting against your minutes allowance more than sufficient to meet their needs:

AMERICA’S CHOICE II FAMILYSHARE PLAN (2005)

Plan Details

Promotion details

UNLIMITED N&W MINUTES, UNLIMITED VERIZON-TO-VERIZON CUSTOMER CALLING, MOBILE WEB – WEB USAGE COUNTS AGAINST MINUTE ALLOWANCE

Additional features

250 MESSAGE TEXT PLAN, INCLUDING TEXT AND VIDEO ($5 PER MONTH)

NATIONWIDE FAMILY TALK & TEXT SHAREPLAN (2010)

Plan Details

Promotion details

UNLIMITED N&W MINUTES, UNLIMITED VERIZON-TO-VERIZON CUSTOMER CALLING, UNLIMITED TEXT, PICTURE, AND VIDEO MESSAGING

Additional Features

REQUIRED UNLIMITED DATA PLAN (SMARTPHONE) ($29.99 PER MONTH)

Before taxes, fees, and surcharges, Verizon Wireless customers holding onto their legacy FamilyShare plan from 2005 would pay $65.00 per month for two lines sharing 700 minutes of calling, with one line also getting 250 text, picture, or video messages, and a data plan that ate from your minutes allowance, instead of charging you per megabyte.

Today’s plan costs far more — $129.98 — more than double, for most of the same features.  The only difference is that Verizon Wireless doesn’t presently limit your data usage or messaging on their SharePlan.

No wonder consumers are getting sticker shock when upgrading their phones.  The paradigm shift to a “required data plan” forces customers away from older service plans onto new ones.  The result is a much higher monthly bill.

All this and the same companies that have figured out how to effectively double your cell phone bill in five years are also contemplating taking away the “unlimited” part of the required data plan.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/WTTG Washington Is It Legal to Require A Phone Data Plan 5-7-10.flv[/flv]

WTTG-TV’s “Ask Allison” feature recently answered a question from a viewer who just discovered the “mandatory data plan” as an unwelcome part of her new phone purchase.  The Washington, D.C. viewer wants to know if that’s legal.  Allison educates viewers in the nation’s capital that isn’t the only trick or trap cell phone companies have in store for you.  Bottom line: maybe you don’t want that new phone after all.  (3 minutes)

AT&T has discovered marketing gold.  What do you do when you run one of America’s worst-rated mobile networks — the one that drops your calls, doesn’t provide uniform reception and is often woefully overloaded — and don’t want to spend what it takes to upgrade?  How about developing a “Home Cell Tower” device that helps solve AT&T’s problems, but adds to yours by charging you $150 for the privilege of owning one.

AT&T’s 3G MicroCell shouldn’t need to exist.  If AT&T had reliable coverage, nobody would need to own a device that helps their bottom line far more than yours.

The MicroCell is sold to customers who are stuck walking their AT&T mobile phone over to the nearest window in order to get a signal from AT&T.  The unit, manufactured by Cisco, plugs into your home broadband connection and effectively creates a tiny “home cell tower.”  Suddenly, you now have five bars of reception indoors and can make and receive calls and reliably use the data features of your smartphone.  AT&T effectively moves your service off their own congested, weak-signal mobile network,  and routes everything over your Internet connection instead.

AT&T 3G MicroCell

It’s a win-win for AT&T.  They get to charge you a substantial markup for a device that costs far less than $150 to manufacture and reduces the urgency to commit to needed upgrades to solve congestion problems.

But AT&T’s marketing department has also figured out a way to earn an even bigger bonus along the way.

Customers who do not choose a special added-cost AT&T MicroCell add-on plan (a ludicrous $19.99 per month plus a $1.25 monthly bill-padding-“regulatory recovery fee”) will be shocked to discover AT&T deducts minutes from your calling allowance even when using the MicroCell to provide you with service.  It takes a special kind of nerve to charge customers for making and receiving calls that don’t even use the company’s mobile network.  It’s like AT&T setting up a kiosk in front of the nearest Verizon payphone and charging you $1 for the privilege of paying Verizon 25 cents to make a call.  The $20 a month add-on plan doesn’t even cover data usage, which means AT&T charges you for accessing data and text messages sent and received over your own home broadband connection.

The Associated Press reviewed AT&T’s 3G MicroCell and seemed unimpressed.

Despite marketing claims it will deliver more bars in more places within 5,000 square feet, the AP found the MicroCell only managed a less impressive 40 feet. AT&T admits concrete or brick walls can also reduce coverage. For all practical purposes, don’t expect the device to provide much help out in the yard.

AT&T also claims MicroCell users can initiate calls from the MicroCell and have them “seamlessly” transferred to AT&T’s mobile network when they walk out of range.  The AP found more times than not, AT&T simply dropped the call, forcing the customer to start a new call.  Even worse, customers initiating a call on AT&T’s mobile network will find the MicroCell can’t take over when they arrive home, making the primary reason for getting the device irrelevant the moment you walk in the door and risk dropping the call.

The only good news is that introductory promotions can knock down the upfront price.  Customers committing themselves to the $20 MicroCell add-on calling plan qualify for a $100 rebate when purchasing the MicroCell.  If you also sign up for new AT&T DSL or U-verse service when buying the MicroCell, you can get an additional $50 rebate, effectively making the MicroCell free to own.  AT&T broadband customers will also get $10 off the MicroCell add-on calling plan.

There is nothing inherently wrong with offering customers these devices, known in the industry as femtocells, but companies like AT&T should be providing them at-cost and be grateful when customers use them.  Instead, the company treats these customers as nothing more than another profit center, ripping them off with a ludicrously priced add-on calling plan to avoid watching call allowances erode away, even when calls don’t travel over AT&T’s mobile network.

[flv width=”586″ height=”310″]http://www.phillipdampier.com/video/ATT MicroCell Demo.flv[/flv]

This video covers how AT&T markets their MicroCell device and accompanying add-on plan and also includes a brief tutorial on how the device works.  (4 minutes)

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/AP ATT’s Home Cell Tower Delivers an Added Cost 5-5-10.flv[/flv]

The Associated Press reviewed the AT&T MicroCell and ultimately wondered why customers had to pay for a device to improve service you already pay to receive.  (2 minutes)

[Updated 2:30pm — Coverage area correction made.]