AT&T wireless broadband customers who thought they could survive a smartphone data plan with only a 200MB usage allowance are discovering $15 overlimit fees applied to their bill because of mystery data usage consumed while they were asleep.

Stop the Cap! reader Pat dropped us a note to say she accumulated a whopping $45 in overlimit fees on her August bill for her family’s three iPhones because they exceeded their 200MB usage allowances while the family was unconscious:

At around 2AM most mornings, our phones regularly show usage of around 5-10MB each even though they are being charged and are not used by anyone in the family.  At first my husband thought an application on the phone was automatically exchanging data so we tried switching off 3G access and relied exclusively on Wi-Fi access, to no avail.  Sure enough, for the next seven days in a row, the phones all used between 5-10MB of usage.  We tried disabling and removing various applications and told others only to communicate manually.  That didn’t work either.  The mystery usage remained.

We contacted AT&T multiple times about this issue, because this usage easily put us over the limit, at which point AT&T bills a $15 penalty to buy you another 200MB of usage.  We got a lot of excuses, one month’s credit, but no answers.  One representative used the opportunity to try and upsell us on the 2GB plan to “avoid this from happening.”  It sounds like a nice scam.

Pat, it turns out this has been a significant issue for many AT&T customers dating back to the June introduction of the usage-limited smartphone data plans from AT&T.  We found threads on both AT&T and Apple’s websites running well into the dozens of pages, with nobody getting a definitive, consistent answer as to why this keeps happening.

In late July, the folks at Gizmodo got a statement from AT&T about the problem:

This is a routine update of your daily data activity on your device to ensure the accuracy of your data billing. Customers are not charged for data usage, given that no data session is generated. It’s not uncommon for devices that are ‘always on’, like iPhone, to process data event records for billing purposes after a certain amount of inactivity or after long periods of time. It’s also separate from how our system lets you monitor your data consumption.

Unfortunately, it’s also apparently inaccurate because subsequent comments indicate customers were, in fact, billed for that usage.

Customers have been told a variety of things to justify AT&T’s usage billing:

1. It’s an application on your phone polling for data and/or updates;
2. Your phone is sending and receiving e-mail;
3. If your phone goes “to sleep” it switches away from Wi-Fi and back to AT&T’s 3G usage, incurring data usage fees;
4. In the early morning, AT&T communicates with phones to exchange updates and data;
5. The usage reports represent cumulative usage made during the day but only later reported to AT&T;
6. It’s iTunes diagnostic information you agreed to share with Apple being sent to them every night;
7. It’s Apple’s fault.

The biggest problem? AT&T’s stingy usage allowances.  Many customers do not understand what a megabyte represents, but 200 of them sounds like a lot… until you browse to a page with multimedia content or utilize an application that exchanges a lot of data during the day.  AT&T has really not addressed the problem, other than to throw $10 credits to customers who complain the loudest.  Many just upgrade to the higher priced 2GB plan and hope the problem goes away.

AT&T’s Internet Overcharging scheme for wireless has trained customers to use less of a service they pay good money to receive:

• Customers think twice before installing and using data applications that could consume too much of their allowance;
• Customers train themselves to jump off of AT&T’s 3G network and switch to Wi-Fi wherever possible, despite paying for AT&T’s wireless data network;
• Customers quickly learn paying more for a more “generous allowance” is a “better value,” saving them the time and hassle of worrying about overlimit fees;
• Customers can complain all they like, but in the end they’ll grumble and pay the bill, facing exorbitant early termination fees if they want out of AT&T’s fee maze.

Unfortunately, without a team of lawyers or regulatory agencies breathing down AT&T’s neck to deliver a credible response to these overcharges, they are very likely to continue.  Although AT&T claims the 200MB usage plan was designed to save customers money and attract new users to smartphones, it’s no mistake the cheapest plan delivers a minuscule allowance.

The company knows very well that smartphone data usage increases as the phones and the software that runs on them become more sophisticated.  Customers delivered a tasty sample of 3G usage are likely to enjoy it and find themselves upgrading to a more profitable data plan with a comparatively larger allowance.  If they don’t, AT&T wins again because customers face paying at least $30 for 400MB of usage, even though a 2GB plan would have only set them back $25.

For now, the best we can recommend is completely powering off the phone overnight and seeing if it still incurs any phantom charges.  You should also complain, regularly and loudly, to AT&T each time it happens.  Contact your state Attorney General and file a complaint if AT&T’s answers are unsatisfactory and urge their office to begin an investigation.

As Stop the Cap! has said from day one, Internet Overcharging schemes force customers to spend time and energy doublechecking usage gauges that may or may not be accurate and make you think twice about everything you do online, wondering what it will ultimately do to your bill at the end of the month.  It’s all a win for service providers, who get the benefit of conservative usage from the “think-twice” mindset and revenue enhancing overlimit fees from those who never worry.  You lose either way.

Phillip "It's Haunting Time for AT&T, Verizon and their good friends at Digital Society" Dampier

Imagine if you lived in a country where broadband competition actually delivered real innovation and savings, overseen by a consumer protection agency that made sure providers in a barely competitive marketplace actually delivered on their “highly competitive” rhetoric.

Australia’s National Broadband Network (NBN) will deliver exactly that, with a check and balance system that makes sure advertiser claims meet reality and that “robust competition” means… robust competition.

One industry-backed front group, Digital Society, doesn’t think that idea is fair to big telecom companies (like those funding its operations), and wants none of that here in the States.

Nick Brown doesn’t object too much to Australia’s plan to deliver fiber-to-the-home connections offering 100/50Mbps service to 93 percent of residents.  He just doesn’t want the Australian government overseeing how private providers use (and how much they can charge to access) the publicly-owned network:

Internet Service Providers in Australia will be forced to compete with each other via the “Competition and Consumer Commission”.  The problem with this is that a supposedly ubiquitous commission deciding what is and what isn’t competition and fair pricing stands a fair chance of not actually playing out in any other fashion than simply being a price fixing commission.

[…]Because the NBN will only act as a wholesaler and treat all ISP retailers equally, ISP’s no longer have the ability to develop their own unique contracts that would reduce costs to consumers.  All backhaul would be priced to all ISP’s at the same rate.  So realistically no company has a significant advantage over the other.  That does potentially create a good deal of choice, but that does not necessarily ensure competition.  This would be akin to going to the grocery store and on the shelf were 5 different brands of soft drink, but every single brand tasted exactly like Coca-Cola.  You would have a lot of choice in that situation, but there would be no real competition between those 5 brands, because taste is the competitive factor.  For the Australian, this means that ISP’s will likely be forced to start bundling services to gain advantages over one another.  Something that is not always considered attractive here stateside.

NBNCo is responsible for the deployment and installation of Australia's fiber to the home network.

Brown’s bitter-tasting public-broadband philosophy is based on the inaccurate notion that incumbent private providers are just itching to deliver state-of-the-art broadband service across Australia.  If the darn federal government didn’t get in the way and steal their thunder with a nationwide fiber network, Aussies would be enjoying world class Internet access over copper phone wires and usage-limited wireless 3G networks right now.  Even worse, the Australian government that will finance the entire operation also has the temerity to set ground rules for private companies reselling access to consumers and businesses!  How dare they oversee a network bought and paid for by Australian taxpayers (he objects to the funding as well.)

Brown must also still be living in Australia if he missed the parade of American providers repricing services to push people into “triple-play bundles” whether they want them or not.  And we don’t even get the fiber to go with it.  For most Australians, they no longer care whether it’s Diet Coke, Pepsi One, Cherry Coke, or even RC Cola for that matter — as long as it arrives on a fiber network built by and for their interests (instead of Telstra’s), it’s far better than what they have now.

In reality, broadband issues hold a front-and-center position in Australian politics, and the Labor Government which supports an aggressive national broadband plan that puts America’s proposed broadband improvements to shame was -the- issue that keeps that government in power today.  Why?  Because Australia is well behind others in providing broadband access at reasonable speeds and prices.  Australian private providers maintain a nice little arrangement delivering sub-standard, near-monopoly service at some of the highest prices around, all usage-limited and speed throttled. Despite years of negotiations with big players like Telstra, the privatized phone company, broadband improvement has moved at a glacial pace (too often by their design).

The development of the National Broadband Network for Australia was driven by private provider intransigence.  Even Brown recognizes the logistics of the proposed fiber network is “very smart and very common sense” for a country like Australia, which he considers a close cousin geographically to the United States.  Brown also admits the use of fiber straight to the home “‘future proofs’ Australian networks and would allow for easier improvement in the future.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ABC Radio Battle of the broadband 8-11-2010.mp4[/flv]

ABC Radio National offered a comprehensive review of the competing plans from Australia’s political parties to address broadband issues as the country drops to 50th place worldwide in broadband excellence.  (9 minutes)

While Australia ponders a fiber future, today’s broadband picture across the country is less idyllic.

The minority of Australians receiving service over cable broadband, available mostly in the largest cities, continue to face usage-limited service and higher prices than American providers.

Most Australians get their service from DSL connections offered by Telstra and third party companies leasing access to Telstra facilities.  Telstra’s network is based almost entirely on aging copper wire that cannot deliver broadband to most rural populations.  Telstra’s long term broadband plan for Australia depends on milking every last cent out of those copper wires while raking in even bigger profits from usage limited and expensive wireless data plans.  Just last month, Telstra was fined $18.5 AUS million dollars for monopolistic behavior by impeding competitive access to its telephone network.  No wonder the country had enough.

Brown labeled the Australian government’s buyout of Telstra’s copper wire network a “negative,” as if they were stuck with a pig in a poke.  That suggests Brown does not understand the actual plan, which relies on reusing existing infrastructure like poles and underground conduit to install fiber at an enormous savings — both in billions of dollars in reduced costs and deployment time.  The alternative would require the government to obtain agreements with Telstra-owned facilities to share access or construct their own facilities from the ground up.  Telstra has no incentive to spend money to upgrade their networks, much less decommission them.  Logistically, the plan cuts through enormous red tape and guarantees Australians no one will be stuck waiting decades for the eventual retirement of copper phone wiring.

Call it Fiber Optic Broadband for Copper Wire Clunkers — the government has not nationalized the phone network — it wants to buy it a fair price, from a willing seller who will be able to use the new network to deliver some of its own services.

The horror show for groups like Digital Society is the thought private companies will actually be forced to deliver the competition and real savings they routinely proclaim in press releases, but never actually deliver to consumers.  The Australian people will own the fiber playground private companies will play on, so why shouldn’t they have the benefit of oversight to make sure the game is played fairly?

Australia’s Competition & Consumer Commission is equivalent to the Consumer Product Safety Commission, the Federal Trade Commission, and a state Attorney General all rolled into one.  The ACCC is an independent statutory authority that works for consumers.  It promotes and enforces real competition and fair trade.

The ACCC’s involvement in broadband regulation includes: stopping false advertising, helping intervene and resolve disputes over access and billing issues, and being an impartial observer about broadband uptake and measuring how competition actually delivers better service and savings for consumers.

What Brown dismisses as “a price fixing commission” is in reality a consumer protection agency with enforcement teeth.  The ACCC has a solid track record.  For instance, the broadband industry in 2009 itself admitted the ACCC stopped a “race to the bottom” in wild advertising claims:

In August last year, we sat down with the CEOs of the major telecommunication providers, Telstra, Optus and Vodafone Hutchison Australia. They acknowledged that there was a problem, exacerbated by a “race to the bottom” by industry participants in their advertising practices. The CEOs showed a ready willingness to resolve the issue on an industry-wide basis.

After analysing complaints, the ACCC identified the 12 most prevalent types of potential misleading conduct made in telecommunications. Some of these included:

• use of terms such as “free”, “unlimited”, “no exceptions”, “no exclusions” or “no catches” when this is not the case;
• headline price offers in the form of “price per minute” for calls made using mobile phones and phone cards when there are other fees/charges which are not clearly disclosed; or
• headline claims relating to price, data allowances, total time allowances, speeds and network coverage, where the claims cannot generally be achieved by consumers.

The three industry leaders have provided a court enforceable undertaking to review and improve advertising practices so that consumers are better informed about the telecommunications products they purchase. They have undertaken that their advertising will not make these claims in circumstances where they are likely to be misleading to consumers.

Further the majors have also agreed that they will take reasonable steps to ensure that this commitment will extend to any other players with whom they have commercial agreements which allow them to control the advertising and promotion of goods or services.

Australians are starting to receive consent forms for free installation of fiber broadband in their homes.

I can see why Digital Society, a group partly funded by telecommunications companies, would object to the ACCC stopping Big Telecom’s ill-gotten Money Party-gains.

ACCC also put a stop to promotions that tricked consumers into signing up for mobile data plans that included “free” netbooks, high value gas gift cards, or cash rebates.  The Commission discovered these “promo plans” weren’t giving away anything at all — they simply added the retail cost of the “free” item to the plans’ charges.

The ACCC received a court enforceable undertaking from Dodo Australia Proprietary Limited for the advertising of some of their mobile plans. Dodo had advertised that consumers would receive either an Asus Eee PC, a fuel card or a cash payment when they signed up to a ‘free offer’ plan.

However, cheaper mobile cap plans that did not include the ‘free’ offers were comparable in value and services. After raising these concerns with Dodo, they promptly ceased publishing the ‘free offer’ advertisement and undertook to ensure the affected customers would receive the goods for free, either by way of cash refund or by reducing the monthly charges for the ‘free offer’ plans.

That mean and nasty ACCC, ruining all of the fun for providers delivering tricks and traps for their customers.  Caveat emptor, right?

But the most ludicrous claim of all comes towards the end of Brown’s piece, when he claims the National Broadband Network will leave Australians with even higher priced, usage-capped access:

Australia traditionally has had low bandwidth caps.  Even just five years ago while most Americans were enjoying unlimited bandwidth with their broadband connections, I was living in Melbourne, Australia and was limited to a 1GB cap per month via my Telstra connection.  The likelihood of seeing 100Mb uncapped connections is highly suspect.  Australians may enjoy these speeds, but they will likely be extremely expensive with low bandwidth caps or limited to high priced premium tiers.

Brown can’t blame the private company that delivered his abysmal Internet service without his “free market knows best” philosophy falling apart.  It wasn’t the Australian government that provided him a 1GB monthly usage allowance — it was Telstra, and five years later the company is still usage-limiting Australian broadband consumers.  The National Broadband Network was designed to tackle that problem once and for all.  Brown apparently doesn’t realize the last argument private providers have used to justify usage caps — insufficient overseas capacity — is being addressed by new super-high-capacity undersea fiber cables stretching across the Pacific.  The issue of “usage cap” abatement is among the top bullet points for constructing the NBN.

Brown would be right when he suggests that Australians may enjoy faster speeds, but with low usage caps and high prices — if Telstra was the only company providing the service.  The new network will provide speeds faster than most Americans enjoy, with enormously expanded capacity.  Providers like Telstra have an incentive not to deliver the unlimited service that fiber network can deliver, as it will reduce their profits.  But since any company can access the network and compete, Telstra’s loss in market power will also erode their pricing power.  When a consumer protection mechanism is added, Telstra won’t just be answering to their shareholders’ demands for greater value.  They’ll also answer to the ACCC and the consumers who will pay for and maintain the network.

That may not add up to mega-profits for Big Telecom, but it certainly makes a whole lot of sense to consumers and small businesses who will finally be able to get 21st century broadband at a reasonable price.

Even worse for Digital Society’s friends — AT&T and Verizon — who fund the group through its connection with Arts+Labs, it might provide a blueprint for how America’s broadband future should be built.

[flv]http://www.phillipdampier.com/video/ABC TV National Broadand Network 8-15-10.flv[/flv]

ABC-TV (Australia) debated the merits of competing broadband plans from the incumbent Labor government, which supports a National Broadband Network delivering fiber to the home, versus a cheaper plan from the coalition opposition which promoted a private industry-favored initiative delivering improved broadband only to rural areas.  The Labor government initiative won the day when two rural independent members of Parliament, Rob Oakeshott and Tony Windsor announced they’d support Prime Minister Julia Gillard, giving her the 76 votes required to form a minority Labor government.  Windsor is an enthusiastic supporter of the NBN, telling Sky News “’you do it once, you do it right, you do it with fiber.”  Oakeshott said Labor’s plan to deliver real broadband for the 21st century was a major reason he backed the Labor government.  For the first time ever, fiber optic broadband was the key factor in determining who would govern a country.  (5 minutes)

Cricket, the regional wireless carrier that claims to offer “unlimited” data plans that really are not, has jacked up prices on its wireless broadband plans and reduced wireless data usage allowances.

Cricket used to charge $40 a month for 5GB of monthly usage, $60 for 10GB.  No more.

Now the company wants you to pay more for less:

2.5GB for $40, 5GB for $50, and 7.5GB for $60 is hardly "respeKting" your wallet

Thankfully, existing Cricket customers are grandfathered into their existing $40 for 5GB plan, so they do not face the price hike and allowance cut.

Cricket’s claimed speeds up to 1.4Mbps are fiction — in our own tests we found service never exceeding 650kbps, and often averages 500kbps or less in the Rochester, N.Y. area.  When Cricket cell sites become congested, as they have in the southeastern part of the city, speeds can drop to 56kbps or less, making the service completely unusable.  While web page browsing and audio streaming are acceptable using Cricket, video streaming is not.  YouTube and other video multimedia was too painful to watch.

Cricket’s best advantage in the wireless broadband market was its pricing.  Customers accepted dramatically reduced coverage areas (don’t expect Cricket to work outside of the city, nearby suburbs, and adjacent major highways), slower speeds, and a “Fair Access Policy” that throttles your connection to dial-up speeds (or less) once you exceed your monthly allowance, all in return for service priced $20 less than most of the competition.  The modem is usually free or deeply discounted, and there is no contract requirement.

But at Cricket’s new pricing, consumers should take a look at Clearwire’s new 4G service, Comcast High Speed 2Go, or Road Runner Mobile instead.  Clear’s 4G-only plan offers unlimited access for $40.00 a month without a “Fair Access Policy” throttling your service to dial-up speeds, and much faster service than Cricket can provide.  The only downsides are the up front cost of the modem and being sure 4G is available in your area.

Clear, Comcast High Speed 2Go and Road Runner Mobile offer 4G service plans with a fallback option to 3G coverage for about $55 a month.  Clear and Comcast do not limit 4G usage, but do limit 3G access to 5GB per month before overlimit fees apply.  Road Runner Mobile offers unlimited access to both 3G and 4G service.

Cricket likes to claim it “respeKts your wallet.”  Raising prices and reducing usage allowances isn’t exactly a sign of respect.

Obama

President Obama signed a memorandum this morning that will free up 500Mhz of government and privately-owned spectrum over the next decade to double the amount of wireless broadband capacity in the United States.

The Obama Administration claims the newly available spectrum will throw a rescue line to overburdened wireless networks that are facing a spectrum crunch.  The White House estimates wireless data usage will explode — growing between 20 and 45 times in the next five years.

President Obama:

Few technological developments hold as much potential to enhance America’s economic competitiveness, create jobs, and improve the quality of our lives as wireless high-speed access to the Internet.  Innovative new mobile technologies hold the promise for a virtuous cycle — millions of consumers gain faster access to more services at less cost, spurring innovation, and then a new round of consumers benefit from new services.  The wireless revolution has already begun with millions of Americans taking advantage of wireless access to the Internet.

Expanded wireless broadband access will trigger the creation of innovative new businesses, provide cost-effective connections in rural areas, increase productivity, improve public safety, and allow for the development of mobile telemedicine, telework, distance learning, and other new applications that will transform Americans’ lives.

In practical terms, the reallocation of spectrum could spark a battle between the current spectrum holders — often government agencies and private UHF television stations — and the government.  Parts of the plan will require Congressional approval, a sure-fire guarantee that wireless providers will have to write some more checks to their astroturf and sock puppet friends to help sell the benefits of the plan to a wary Congress.

Since most of the spectrum would likely be sold at auction, the proceeds could deliver the administration a tidy sum to either reduce the federal budget deficit and/or fund broadband initiatives.

But what might seem at first like a win-win might not turn out that way in the end.

We have the following concerns:

Past spectrum auctions have largely benefited incumbent wireless carriers, especially companies like AT&T and Verizon who have the deep pockets that guarantee successful bids at auctions.  Both wireless carriers are not actually using all of the spectrum they already acquired in earlier auctions and have essentially warehoused those frequencies, particularly in rural areas, to keep them out of the hands of other companies that could deliver service.  FCC requirements that auction winners actually utilize their acquired spectrum have been so lax as to be laughable.  Carriers can easily satisfy FCC requirements building only in urban areas and leaving large swaths of the countryside unserved. The FCC must set rules that auction winners use their allotments in both rural and urban areas, or face fines or forfeiture.

Setting aside some frequency blocks for smaller providers and would-be competitors is critical.  In today’s mobile wireless marketplace two companies are superpowers and then there is everyone else.  Both AT&T and Verizon have the resources to outbid virtually anyone.  Allowing blocks of frequencies to be reserved exclusively for new competitors would bolster competition and give consumers more choices.  Those frequencies must be sold in a block that is identical nationwide — not leftover spectrum running through several frequency bands.

Providing additional spectrum for wireless broadband isn’t a problem, but with complaints about wireless service providers growing, along with consumers’ bills, now is the time to reform wireless for the benefit of consumers.  Let’s make it a “win” for everyone.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Obama Proposes to Double Airwaves for Mobile Web Access 6-28-10.flv[/flv]

Bloomberg News explains the controversy behind the transfer of spectrum from the government and broadcasters to the mobile broadband industry.  (2 minutes)

AT&T offers up the common practice of boasting about how much you can do with a usage-limited account, based on the thousands of e-mails you'll never send, the 500 pictures you'll never take, or the one minute YouTube clips you'll never watch. Notice they never seem to include figures for streaming multimedia applications like music, movies, and TV shows or playing more bandwidth-intensive games. To do so would only upset customers further.

AT&T claims that 98 percent of its customers will save money under its new lower-priced usage-limited data plans, but an analyst predicts those savings will vanish for half of AT&T’s customers by 2013, exposing them to steep overlimit penalties.

Independent analyst Chetan Sharma crunched the numbers:

The average customer will consume more than 2 gigabytes of data a month within three years, up from 150 megabytes in 2009. Though AT&T could change its rates in the future, the cost of such data use at current rates is $35 a month. That would make it more costly than the $30 AT&T previously charged for unlimited data use.

“The devices are getting much, much better so the opportunities to multitask are more attractive,” said Sharma, who has written five books on mobile technologies and consulted for companies such as Motorola Inc. and Qualcomm Inc.

It’s not only heavy data users who may be affected, Sharma said. By year’s end, the average AT&T customer will have doubled their data consumption from 2009 to 320 megabytes, according to his estimates. Only 35 percent of AT&T’s smartphone customers use 200 megabytes of data or more, the company said.

Sharma’s forecast that half of AT&T’s smartphone customers will use more than 2 gigabytes of data is “not unreasonable,” said Christopher King, a Stifel Nicolaus & Co. analyst in Baltimore, though he said it’s difficult to predict such trends because they depend on the introduction of new phones, applications and wireless technologies.

AT&T’s new Internet Overcharging scheme has built-in profits as customers increasingly bump into the subjective limits the company imposes on its wireless customers.  Many customers have complained the 200 megabyte plan is too small to accommodate anyone but the most casual data user, while others find 2 GB too small to make video viewing more than an occasional treat.  Customers who exceed either limit face higher bills:

• Customers exceeding 200 MB in a monthly billing cycle face a $15 overlimit penalty, which nets them another 200 megabytes of service;
• Users who exceed the 2-gigabyte level will be forced to pay an additional $10 per month for an additional 1 gigabyte of service.

Even King believes AT&T’s limits are too low.

“There’s no way that AT&T is going to maintain their tiered pricing as they do today,” he said. “They’ll have to raise the caps on data usage.”