The days of free Internet access are back… sort of.

United Online, Inc. announced Monday that it will offer free wireless Internet access through its NetZero service, provided as a “loss leader” that depends on users upgrading to paid access to cover the service’s costs.

NetZero became familiar to most Americans in the 1990s when the company handed limited dial-up Internet access, paid for through online advertising that subscribers endured in return for getting the service for free.  But broadband costs considerably more, so as the transition away from dial-up turned into a stampede, NetZero faded into memories about as much as AOL signup floppy disks and CD’s.

But now the company is back pitching free access to “4G wireless Internet” with no strings attached, contract commitments, or overage fees.  But that does not tell the full story.

While there is no contract commitment, NetZero requires an upfront investment in wireless hardware — $50 for a USB antenna stick suitable for a laptop or $100 for a “mobile hotspot” that can deliver a Wi-Fi connection to other nearby devices.  The devices are for sale on NetZero’s website.

The “free wireless” offer is probably better described as dim sum — it comes with a 200MB monthly usage limit, which makes it suitable for basic web browsing and e-mail only.  Once your limit is reached, the service is cut off for the remainder of the month, unless you agree to one of several paid usage plans that range from $9.95 for 500MB to $49.95 for 4GB, billed monthly.

After 12 months, NetZero’s free ride is over unless you agree to continue with a paid usage plan.  It ends even sooner if you choose to upgrade to a paid plan anytime during the first year.  Once you do, you lose the option of switching back to the free plan.

Whether paid or not, NetZero users ride on Clear’s troubled 4G WiMAX network, which Sprint — Clear’s largest customer — is planning to eventually abandon for more advanced LTE.  The long term future of Clear, also known as Clearwire, is also up in the air.  The company has ceased investing in its WiMAX network and is making preparations of its own to switch to LTE 4G technology — incompatible with the NetZero hardware you will spend $50-100 to acquire.

Clear’s network has also received considerable criticism for its speed and performance.  Because it operates on much higher frequencies, Clear’s wireless signal has problems penetrating indoors, and has even more trouble where energy efficient window coatings are used, especially in the south.

While NetZero does, in fact, deliver the service for free, the upfront investment and potential service headaches limit its usefulness.  Light users may find free Wi-Fi, increasingly common in a number of businesses, more convenient, affordable, and faster than the NetZero alternative.

In the era of today’s “triple play” package of voice, data, and phone service, satellite television providers have been left at a competitive disadvantage.  Both Dish Network and DirecTV can sell you all the television signals you want, but their satellite-based distribution limits the options to include broadband and telephone service in the package.  Now Dish wants to convert some of their satellite spectrum to sell voice and data service over a network of land based wireless towers that will put the company in direct competition with AT&T and Verizon Wireless.

Dish CEO Charlie Ergen hopes to avoid making the same mistakes that threaten to kill a similar venture — LightSquared, because of interference concerns.

Dish’s spectrum is way, way up the radio dial, above 2,000MHz.  Other spectrum users in the neighborhood are primarily low-powered, line of sight communications, often satellite-based.  LightSquared’s service would have operated at around 1,500MHz, had it not obliterated reception of global positioning satellite services (GPS) in certain instances.  Whenever new spectrum users begin to move into a neighborhood, those already there feel threatened, primarily from the fear of interference problems.

Both LightSquared and Dish’s proposed services operate at considerably higher power than other incumbent users, and interference to existing services is a proven problem when sensitive reception equipment is unprepared to deal with signal overload.  The Federal Communications Commission found just cause to deny LightSquared operating permission for precisely that reason.  Ergen hopes to sell the FCC on a plan he says will avoid those interference problems.

Ergen

Ergen’s spectrum doesn’t sit immediately next door to other, existing users.  His frequencies are comparable to living the next block over, and there is a protective fence keeping the neighbors apart.

“It’s not as close to GPS, so it’s unlikely to interfere,” Matthew Desch, chief executive officer of Iridium Communications Inc., which operates more than 60 satellites, told Bloomberg News. “But the approval is going to take some time. The FCC is going to make sure they don’t have another LightSquared problem on their hands.”

Mike Marcus, director of Marcus Spectrum Solutions LLC adds Dish has some space between its frequencies — known as a guard band — and other users.  Marcus believes Dish won’t have an interference problem unless existing wireless carriers market handsets and other equipment insufficiently selective to reject interference from higher powered users nearby.

But whether Dish will ultimately spend the billions required to build a nationwide satellite and land-based broadband and phone network to accompany its existing satellite service remains unknown.

Bloomberg reports Wall Street analysts may prefer Dish sell its spectrum assets for a quick profit.  Barclays Capital estimates Dish’s spectrum could net the company about $7.3 billion.  If AT&T or Verizon Wireless were buyers, it would also protect them from new competition in the wireless market.

Regulators may be prepared to limit any such sale, however.  Industry analysts note a similar license for LightSquared required government approval before leasing capacity (or selling the network outright) to AT&T or Verizon Wireless.  The government may seek the same limits on Dish Network’s spectrum.

Ergen may have the final word however.

Vijay Jayant, an analyst at ISI Group in New York:

If the government sets rules that limit how Dish can use the spectrum, Ergen may choose to hoard it, said Jayant, which could be antithetical to the government’s mission of promoting wireless competition.

“Dish isn’t a patsy for the government,” Jayant said. “Dish’s attitude is, ‘Make the rules fair and we’ll do the right thing. Make them unfair and we’ll sit on the spectrum,’ and it will be another black eye for the government.”

A British advertising firm is paying homeless people to act as mobile hotspots for the 4G-challenged in a controversial pilot project that has left some wondering whether it is appropriate to use the disadvantaged as walking wireless access points.

The project took off at this week’s SxSW Interactive conference in Austin, Tex.  Anyone within 20 feet of a roving homeless person outfitted with a transmitting device can make a wireless connection with a 4G network.

BBH New York says it just wants to fill the need for better Internet connectivity at the convention center site.

“Our hope is to create a modern version of this successful model, offering homeless individuals an opportunity to sell a digital service instead of a material commodity,” BBH New York says. “SxSW Interactive attendees can pay what they like to access 4G networks carried by our homeless collaborators.”

BBH has 13 homeless volunteers walking around the convention center announcing they are available to facilitate immediate 4G access for data-hungry attendees.

“Hotspots, Hotspots! If you need to get online, I am your guy,” yelled one homeless volunteer to hundreds of people passing by.

Those who take them up on their offer can make donations for the access, which volunteers get to keep.

The company admits it has received some criticism from those who think the program exploits the homeless, but the company had no shortage of volunteers willing to participate.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KXAN Austin Project makes homeless a mobile hotspot 3-12-12.mp4[/flv]

KXAN in Austin explores the “Homeless Mobile Hotspot” project that has a lot of people talking at this year’s South by Southwest Interactive conference.  (2 minutes)

California AT&T customer Matt Spaccarelli can’t understand why his wireless phone company is selling him an “unlimited data plan” for his iPhone that is subject to being throttled to dial-up speeds after as little as 13 minutes of Netflix viewing per day over the course of a month.

Spaccarelli argued his case with several AT&T representatives, who recommended he “upgrade” his account to a tiered plan that would guarantee him at least 3GB of an unthrottled experience for the same price he was paying for an ostensibly “unlimited use” plan.

“That to me says ‘if you pay more, then you get what we promised you in the first place,’ and that is not cool,” Spaccarelli told the Associated Press.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/AP ATT Backpedals on Throttling 3-1-12.mp4[/flv]

The Associated Press talks with Matt Spaccarelli, who successfully sued AT&T over his throttled Internet connection.  (3 minutes)

The Simi Valley man did what few AT&T customers have dared — he took the company to small claims court, and won a judgment of $850.

A Ventura County judge took a dim view of AT&T’s claim that customers can enjoy an “unlimited usage” experience, as long as they understand AT&T never promised what speeds customers would receive along the way.

AT&T lost, according to the judge, because of the legal concept of “justifiable reliance,” which means because AT&T advertises itself as the “fastest wireless network,” a normal consumer with an average understanding of mobile broadband should not expect to have their speeds on an advertised “unlimited use” plan reduced to something akin to an AOL dial-up account.

After AT&T’s representative read the company’s carefully-constructed legalese in its contract and terms of usage in court, even the judge was confused, relates Spaccarelli.

“What does this mean?” Spaccarelli remembers the judge asking.

AT&T's Control Measure for "Heavy Users"

Spaccarelli said he tried it AT&T’s way — switching to a 3GB tiered usage plan to stop the throttling on his “unlimited” plan.

“For one month they switched me to a tiered plan and that month I used the smallest amount of data ever and got the highest bill,” he told KTTV in Los Angeles. “AT&T has not and cannot show that my usage has ever caused damage to their network or caused other people to slow down.”

The AT&T Usage Limbo Dance — Lowering the Bar on Customers With Continuously-Decreasing Usage Allowances

Spaccarelli explained in court his throttling experiences with AT&T have gotten worse over the last several months as part of what he calls AT&T’s “Upside Down Pyramid Scheme.”

“The problem with using the top 5% of data users [as a basis for throttling] is because [customers] are not able to use the services that we would normally use, data usage becomes less and less,” he says. That in turn makes AT&T’s “top 5% usage throttle” engage at perpetually lower and lower usage rates.  Heavy users that used to make the top 5% of data users last fall were consuming a dozen or more gigabytes per month.  Today, AT&T’s “top 5%” consume only 2GB of data.

“When this all started I was getting slowed down after around 10GB of usage, then 8GB and then 5GB,” he says. “[Now] AT&T will admit that 2GB is the average when most people get slowed down.”

“They don’t want my usage to affect other users, which I totally understand,” Spaccarelli says. “But it seems like as long as I pay more they don’t care that my usage might affect other people.”

Spaccarelli pays AT&T around $140 a month for a plan he says AT&T sold him as “unlimited everything.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KTTV Los Angeles ATT Lawsuit Interview 3-1-12.flv[/flv]

KTTV talked with Spaccarelli about why he decided to sue AT&T, what the experience was like, and why consumers should be concerned about usage-limiting Internet plans.  (5 minutes)

A judge was persuaded by Spaccarelli’s argument and awarded him $850 for the value of his effectively-lost “unlimited use” plan.  But Spaccarelli isn’t waiting by his mailbox — AT&T has indicated it intends to appeal the judge’s ruling and has not sent a check.  (Perhaps he could follow in the footsteps of George Kontos, an AT&T customer in Winston-Salem, N.C. who walked into a local AT&T retail store with a Forsyth County Sheriff’s deputy, to seize the store’s merchandise to satisfy Kontos’ $2,000 judgment.)

Lowering the bar on "unlimited use" customers.

That a customer successfully sued AT&T in small claims court is a potential nightmare for the company, which has worked for years to eliminate consumer protection clauses from its contracts.  AT&T already prohibits customers from pursuing class action lawsuits and typically mandates corporate-friendly arbitration in customer-company disputes.  But AT&T has not yet prohibited customers from suing them in small claims court, where damages are limited.

“I’m not a lawyer and I’ve never done something like this before,” Spaccarelli writes on his website. “I did my own research and took my own time to put together this case against AT&T.”

A case that he has begun documenting in an effort to help consumers pursue their own actions against AT&T.  He says filing a small claims case is simple.

“You give the clerk $85 and the court will give you a court date, that’s it,” Spaccarelli told AP.

Now AT&T has backpedaled on its original plan to throttle unlimited customers who use more than 2GB per month.  Instead, they have announced the throttle will kick in after 3GB of usage, the same amount offered by AT&T’s most popular $30 tiered plan.  That gives customers two choices: a speed throttle or overlimit fees for customers who exceed AT&T’s allowance.

AT&T has at least 17 million customers grandfathered on its now-discontinued “unlimited use” plan.  Any of them face the potential of throttling by AT&T, which could lead others to small claims court, with Spaccarelli’s help.  He told the New York Times he’s willing to travel anywhere in the country to appear as an “expert witness” in future court cases, as long as someone covers his travel expenses.

Spaccarelli says he’s not really interested in the $850, he just wants his unlimited use plan to really mean “unlimited use” again.

“I’d give back the money if they stopped slowing my speed down,” he says.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Spaccarelli Calls ATT 3-12.flv[/flv]

Spaccarelli calls AT&T customer service looking for his $850.  (2 minutes)

AT&T to Rural America

While Verizon leverages its 4G LTE wireless network as a rural broadband solution, AT&T shows no signs of sharing Big Red’s enthusiasm (and investment).

In fact, while AT&T celebrates the end of its U-verse fiber-to-the-neighborhood expansion and admits it has no answer to America’s rural broadband problem, the always excellent DSL Prime by Dave Burstein reports AT&T is mulling a sale of its rural DSL operations to a third party provider, essentially letting the new owner(s) deal with the rural broadband problem:

[AT&T] is “doing a rapid tech evaluation” of whether they can upgrade their DSL + wireless to “a competitive broadband product.” But Randall “doesn’t see a solution.” If that’s confirmed, “we’re looking for others who might want the properties.” […] It’s unclear if any of the “rural carriers” – Century, Frontier, Windstream – have the financial ability to make an attractive offer. If operators can’t raise the money, [AT&T] would need to make a financial transaction.

Verizon has sold off its entire “wireline” (landline infrastructure and business) operation in smaller, rural states — often properties it acquired years earlier from GTE — to focus on more lucrative urban markets.  AT&T could either spinoff its broadband operation to a third party to run or follow Verizon and sell off entire rural service areas not already upgraded for AT&T’s more modern U-verse.

Likely buyers include FairPoint Communications, Frontier Communications, CenturyLink, and Windstream — all independent traditional landline operators trying to focus on less-competitive rural markets pitching DSL broadband service.

AT&T has shown little interest investing in rural service areas located primarily in the southern and central United States.  As Karl Bode writes on Broadband Reports, AT&T is on record stating that they can’t find an “economically viable” way to upgrade these users, despite a looming increase in faster and less expensive last mile DSL technologies.

As AT&T has sought to redefine itself as a wireless company, the buildout of its wireless network could bring AT&T to also eventually pitch 4G wireless Internet service to its former DSL customers.  But like Verizon, those plans would likely include severely usage-capped service, while leaving its traditional DSL product starved for investment.