Last week it was discussed at length how the investment community would like the public to believe that the shift to low cap and high overage broadband pricing is “inevitable.” We also discussed how cable industry lobbyists would like the public to believe that such a shift isn’t about making more money, it’s about helping the poor. Not only is the metered billing push absolutely about making money, it’s about artificially constricting the pipe to protect uncompetitive carriers and TV revenues from Internet video. But instead, there’s a very concerted effort afoot to portray this shift as necessary, inevitable, and even altruistic.

Most consumers prefer the simplicity of flat rate pricing, and understand that ISPs are perfectly profitable under the flat-rate pricing model. They also understand that this is a pipe dream forged by never-satisfied investors, and once implemented ends with ever soaring per gig fees and ever shrinking usage caps.

The PR campaign continues this week, with Hewlett-Packard’s Joe Weinman claiming at GigaOM that not only is such a pricing shift “inevitable,” but that it’s a shift that actually originates with consumers, not investors or ISP executives. Weinman starts out on the wrong foot immediately, by confusing “pay per use” with low cap and high overage pricing models:

For the record, I like unlimited Internet access just as much as anyone else. However, such plans appear to be on their way out, and here s why. As explored in “The Market for Melons”, pay-per-use is not an evil plot by greedy robber barons, but a natural outcome of independent, rational consumer choice. Consider a town with an all-you-can-eat (flat rate) buffet and an a la carte (pay-per-use) restaurant. Smart shoppers on diets will save money by patronizing the a la carte restaurant, whereas heavy eaters will save money by visiting the buffet…. Bottom line: it is not the proprietors driving this dynamic, but the customers themselves acting out of pure, rational self-interest

Except for the thousandth time, ISP’s are not interested in real pay per use plans because the majority of their users (who simply check e-mail a few times a day) would downgrade to $5 tiers and cost carriers billions. What ISPs are proposing is flat-rate pricing with costly per gigabyte overages (completely detached from any real-world costs, which for ISPs are fixed or dropping) layered on top. Meanwhile, the suggestion this is a consumer driven push is absurd. This is an investor driven push for obvious reasons, and you have to wonder if Weinman saw the consumer reaction when Time Warner Cable proposed charging consumers up to $5 per gigabyte then insisted such pricing was for their own good.

Weinmen offers up a second post in which he hallucinates a laundry list of supposed benefits that will occur from this change in pricing paradigm. Most of them revolve around technology platforms designed to aid this monitoring and metering of usage and billing, which we’ll go out on a crazy limb and guess is precisely what Weinman is selling at HP. Unfortunately, Weinman begins his sales pitch just like the cable industry traditionally has by pretending this is an inevitability consumers want, and that such a pricing shift is financially necessary. Neither are true.

Link to the original article…

An insider recently told Engadget that the company would be ditching unlimited wireless data pricing to shift to a billing model more like AT&T’s as soon as next week. While that wouldn’t be surprising given Verizon’s repeated hints at their interest in such a model, Verizon has also repeatedly said such a change would likely come with the launch of LTE service.

To hear Verizon CFO John Killian tell it, Verizon’s not making any data plan price changes anytime soon. Said Killian on Verizon’s recent conference call:

Our business is continuing to perform extremely well. You have not seen us rush out to make any kind of a change. We will continue to monitor the situation, of course, and look at opportunities that will say what is the best equation for us to drive long-term shareholder value, and we will be very focused on that. I cannot say enough, though, about the opportunity we see ahead given where we are today with smart phone penetration.

Killian then goes on to talk about 4G and note that tiered pricing will, as they’ve consistently said, likely arrive with LTE:

We have indicated in the past, as we move to an LTE world and LTE pricing, we will probably look very hard at tiered pricing, and that continues to be our thinking right now. So more to come on that. By the way, I should say that all of our efforts, all of our plans on getting LTE launched in the fourth quarter are on schedule.

The original Engadget rumor pegged July 29 as the date for the change, so we don’t have long to wait. Verizon LTE isn’t expected to launch anywhere until November 15.

Link to the original article…

Last year it was noted how Netflix was planning to offer stand-alone broadband video streaming in certain unspecified countries, as long as you’re not spelled with the letters U, S and A where Netflix oddly claims there “isn’t a demand” for this kind of service. The mystery country Netflix mentioned last year appears to be Canada where Netflix is launching their broadband streaming service without tying it to DVD rentals (in fact they’re not offering DVD rentals at all). Netflix says the service officially launches this fall:

In addition to representing its inaugural international market, Canada will also mark the first streaming-only service promoted by Netflix. At the time of launch, the Netflix Canadian service will be available in English only, but the company said it expects to add French language capability over time. Canadians interested in Netflix can go to www.netflix.ca and sign up to receive an email from the company when the service launches in Canada this fall.

The press covering this announcement seem to have forgotten Canadian broadband users face some of the most restrictive cap and overage penalties anywhere, with companies like Cogeco and Rogers charging up to $5 per extra gigabyte of usage, despite paying pennies for bandwidth, plummeting hardware costs, and being perfectly profitable under the flat-rate model.

Heavy Netflix HD streaming potentially eats bandwidth like popcorn shrimp, so you can do your own math.

Of course the result will be more timid usage of the new service as an alternative to cable and greater revenues for cable and phone companies… which is exactly why low caps and high overages are imposed in the first place.

Link to the original article…

It was noted how AT&T’s Microcell femtocell service was already a dubious value proposition given the device, intended to improve in-home cell coverage by routing voice and data calls over broadband, involves users paying AT&T to help ease congestion on local towers. Not only does routing calls over your broadband service result in you eating your minutes, but it also now appears that using 3G at home eats away at your caps.

That’s absurd, given that both voice and 3G over the device uses the user’s bandwidth – and not precious backhaul resources.

AT&T’s been making the rounds trying to give an explanation for why they made the decision to make their Microcell service an even worse value, but the explanations so far aren’t making sense.

“3G MicroCell is primarily intended to enhance the voice call quality experience in your home,” AT&T’s Seth Bloom tells us. “While it can carry mobile data traffic, that’s not the primary solution it provides,” he says. “Wi-Fi is the optimal solution for home mobile data use. We encourage people to take advantage of Wi-Fi capabilities – that’s why all of our smartphones include Wi-Fi radios, and usage on Wi-Fi doesn’t count against your mobile data usage bucket.”

Customers will probably decide to use their Wi-Fi connection when in the home. That still doesn’t explain why AT&T lets the service eat 3G bandwidth caps should they use 3G. In that case, the traffic’s being routed over the exact same broadband connection as Wi-Fi. Whether users should use 3G over the Microcell in the home when Wi-Fi’s available isn’t the point. The service still shouldn’t be eating your wireless caps just like femtocells shouldn’t eat your voice minutes.

Bloom goes on to insist that the Microcell “uses our core wireless network just like a call placed while driving down the highway uses the core wireless network.” “The only difference is how that data or call gets there via a MicroCell connected to a wired broadband connection instead of a cell tower.”

Again though, you’re not using AT&T’s tower or their backhaul, you’re using your own already-paid-for bandwidth. AT&T’s entire justification for their new low caps and overages is backhaul and tower congestion (though even that’s dubious – simple profit is the more likely motivation) – and congestion’s not an issue here. Sure, there’s costs involved, but they’re minor compared to the costs of traditional wireless connectivity.

Consider these are users shelling out for a home broadband connection, a wireless 3G and data connection, possibly an added landline connection, the upfront cost of hardware and an additional $20 if they want unlimited voice that doesn’t eat away at their minutes. Just how much are we expecting the average consumer to pay per month for simple, regular-use voice and data connectivity?

Either AT&T’s gunning to make an additional few million annually in revenue off of those incapable of differentiating between 3G and Wi-Fi, or they’re incapable of getting the Wi-Fi/3G femtocell billing straightened out and don’t want to admit it.

Some might think this is all rather nerdy semantics, but these are important questions when exploring how carriers seem to be sucking all the value out of the femtocell with absurd pricing decisions and other penalties – especially when the femtocell helps the carrier more than it does you.

Link to the original article…

After years of hinting at looming wireless data pricing changes, AT&T has finally buckled to recommendations by stock jocks like Sanford Bernstein’s Craig Moffett and killed their unlimited 3G iPhone pricing plan. In an announcement that insists they’re introducing “new lower-priced wireless data plans,” the company says the unlimited data plan will be replaced by two new data plans for new users: “DataPlus” and “DataPro.”

•DataPlus: Provides 200 megabytes (MB) of data for per month. If customers exceed 200 MB in a monthly billing cycle, they will receive an additional 200 MB of data usage for for use in the cycle. AT&T insists that 65 percent of AT&T smartphone customers use less than 200 MB of data per month on average.

•DataPro: Provides 2 gigabytes (GB) of data for per month. If a customer exceed 2 GB during a billing cycle, they will receive an additional 1 GB of data for for use in the cycle. AT&T insists that 98 percent of their smartphone customers use less than 2 GB of data a month on average.

AT&T says they’ll send text messages to users as they reach 65 percent, 90 percent and 100 percent of their monthly cap. AT&T also says they’re finally going to allow tethering for the iPhone, allowing users who subscribe to the DataPro data package to tether for an additional a month.

The pricing changes of course arrive ahead of the announcement of a new, more HD video-centric iPhone next week. While most users currently use far less than 2 GB of data – AT&T knows that’s going to change quickly. The company has long wanted to impose more expensive caps that would please investors by placing a premium on mobile data in the face of declining voice revenues.

Most iPhone users will very soon use considerably more than 200 MB a month, and will naturally trend toward the more expensive tier. But now, instead of unlimited data for , they pay for 2GB and for each additional gigabyte. As we’ve long noted – AT&T’s dream pricing model isn’t about fairness or usage-based pricing – it’s about shoving most of their users toward a higher monthly wireless data bill.

Update: It looks like existing iPhone customers will be able to upgrade to the new iPhone next week and grandfather their unlimited pricing plan, but they won’t be able to add tethering if they do.

Link to the original article…

While Verizon’s LTE plans have gotten a lot of press, specific details (especially pricing) on the service have been limited – outside of the fact the service will launch in 25-30 markets sometime this year, at speeds somewhere between 5-12 Mbps downstream. But like AT&T – Verizon does continue to hint at new pricing that moves beyond the concept of unlimited bytes. Speaking at an investor’s conference this week, Verizon Wireless CEO Lowell McAdam suggested that the company would offer one plan (or one bucket of bytes) that would connect multiple devices. “I think this concern over unlimited megabytes on a smartphone will go away as we bring new devices and new applications onboard,” insists McAdam.

Link to the original article…

Zach Epstein over at Know Your Cell sits down with an iPad and a hankerin’ for data gluttony to truly see if AT&T’s promise of unlimited 3G connectivity ($30 a month) for the device is real. It’s a fair question, given the wireless industry has a long and sordid history with pretending the word “unlimited” actually means limited. Epstein downloads more than 30 GB of data on the iPad without interruption, but he does note that the usage-tracking software on the device doesn’t seem entirely accurate

In fact, actual data usage is likely a bit higher than the figure shown above, as the iPad seems to have some trouble tracking cellular data usage accurately. I haven’t yet fully investigated the issue, but I did observe at least one instance where the cellular data received counter actually dropped as I used it. To clarify: the received counter was at 28.3 gigabytes and after using the iPad for another hour, the counter was at 26.1 gigabytes.

For whatever reason, Epstein responds to user requests for clarity on how he hit that much usage (porn? P2P? The Ralph Macchio filmography?) by saying he’ll “happily share my methods” – and then proceeding not to. He then just discontinues testing which is unfortunate – given that some ISPs only slap user wrists for “excessive” data usage after they’ve done so for several consecutive months.

Still, it’s refreshing to see that AT&T’s no contract unlimited iPad 3G plan actually is (barring some change) unlimited. Perhaps somebody bought wireless industry executives a dictionary.

Link to the original article…

It seems like roughly once a week now that AT&T executives inform everyone that there needs to be a change in wireless broadband pricing – and by change they really mean you’ll soon be paying more money for wireless data. Carrier executives and investors want all users paying more for data as smartphones and open networks erode VoIP and voice minute revenues, though the carrier likes to pretend the changes are necessary because current (very profitable) pricing isn’t sustainable. Speaking on the company’s earnings conference call yesterday, CFO Richard Lidner again hinted at the looming change:

…you’re dealing with a situation where when you look at your customer base, even customers that are using similar devices, there s huge disparity in the amount of data that they use and the amount of capacity they consume. And so when you look at all of those things as an industry I think it will influence how in the future the pricing models develop.

And as an industry what the industry has to do is develop models that are understandable by customers, that customers you know can understand and live with, and at the same time is fair to customers in terms of the amount of a somewhat limited resource that they’re consuming. And so that’s kind of the whole thing on data pricing and it will I suspect evolve as we go forward in the industry and it ll evolve as applications and devices continue to evolve and data traffic continues to grow.

Again, while AT&T continues to hint at the fact they’d like some kind of pure per-byte billing model (which many people would be fine with), what carriers actually wind up implementing are pricing models where all users are funneled toward higher prices. If AT&T introduced pricing that really was based on usage – the vast majority of their subscribers would wind up with lower bills, which of course they don’t want. At this point we wish AT&T would stop talking about it and introduce their dream pricing model so we can see exactly what the hell they keep hinting at (and prepare to take out that second mortgage if necessary).

Link to the original article…

AT&T is once again dropping hints that the carrier wants to change (read: increase) wireless data pricing. Many investors have been pressuring the company to ditch the $30 unlimited iPhone data plan and instead replace it with some kind of metered billing model. That’s largely because as carriers begin to open their networks to push IM clients and mobile VoIP, they’ll be losing a lot of money on voice and SMS. The only way to counter those losses will be to charge more money for mobile data. Enter AT&T CEO Randall Stephenson, who this week tells Reuters the changes will be coming soon:

Stephenson expects changes in how the wireless industry prices its mobile data services going forward, with heavy data users being charged more. Smartphone users currently pay a monthly fee of about $30 for unlimited data. “For the industry, we’ll progressively move toward more of what I call variable pricing so the heavy (use) consumers will pay more than the lower consumers,” Stephenson said.

What Stephenson calls “variable pricing” is confused by many to mean per-byte billing. While the idea of only paying for what you use sounds great to those not paying attention, the plans AT&T and Verizon actually wind up implementing are very carefully crafted to drive most user bills ever higher. Verizon for instance now offers users the option of paying either $9.95 for a phone data plan with a 25MB cap (20 cents per additional MB, 125 MB maximum), or $30 for “unlimited” (which actually means 5 GB a month) service. This is in addition to SMS, voice, and other monthly fees.

These plans really aren’t about making “heavy users” pay more, they’re about getting everybody to pay more. Since most users consume much more than 25 MB per month, they’ll all wind up upgrading to the more expensive plan in the belief it offers a better consumer value. But suddenly, here you are paying more than $100 a month for voice, data and SMS plan when you’re really not a particularly heavy user. Most users are somewhere around 200 MB a month, though you’ll note the absence of a $20, 300 MB plan.

Meanwhile, you’ve got AT&T and Verizon also now requiring that everybody have an SMS and data plan on their phone — whether they actually use data or not. What’s designed to look like value and choice is in most cases the exact opposite. When thinking of 3G pricing, picture a giant invisible funnel that propels users toward one inevitable outcome: paying more money.

Whatever pricing emerges, eventually users will realize they want to connect multiple devices to these 3G and 4G networks without having to pay a subscription fee for each and every device. While some people think the $15 for 250 MB a month or $30 for “unlimited” 3G pricing of the iPad is a “great” deal, most people simply aren’t going to want to pay yet another monthly fee just for iPad bandwidth after shelling out for both home and wireless connections. Amazingly enough AT&T agrees, Stephenson saying he sees the iPad as a largely Wi-Fi device as a result

“My expectation is that there’s not going to be a lot of people out there looking for another subscription,” he said during a webcast of an investor conference, adding that the device would be a mainly “Wi-Fi driven product.”

Even the company that’s providing the iPad’s 3G functionality doesn’t think you’re willing to pony up the extra cash, which is saying something. Whatever changes AT&T has in store for their bandwidth pricing, make absolutely no mistake that the end result is going to be you paying more money for mobile bandwidth, regardless of whether you use 100 MB a month, or four gigabytes a month. It’s absolutely essential to carrier execs and investors eager to compensate for lost voice and SMS revenues. Anybody claiming otherwise is either selling you something or not reading the fine print.

Link to the original article…

Fierce Wireless asks a number of vendors who make a living off of billing systems their thoughts on metered billing in the wireless space, and unsurprisingly is told by each one that a shift to metered billing is “inevitable” in wireless.

The article is full of the kind of talking points we’re used to from an industry that desperately wants to foist higher per megabyte fees on consumers. All major talking points are represented, from the “inevitability” of higher prices and the idea that consumers using your product is a bad thing, to the idea that heavy users “subsidize” lighter users:

“I think that it is inevitable for the industry to move toward this, otherwise the business model is not sustainable,” said Rafi Kretchmer product marketing manager for revenue management at billing systems vendor Amdocs. He noted that low-volume data users are essentially subsidizing heavy data customers. “In order to address this conflict, they realize that to not leave money on the table, they must differentiate the pricing.”

Ignoring for a moment that the wireless sector is already metered (which the article tries to) this idea that a shift from flat-rate to metered billing is inevitable because of either capacity or financial reasons is one of the broadband industry’s favorite, repeated mantras. Unfortunately, it’s also not true. Harold Feld found himself annoyed by the Fierce Wireless report and offered up a counterpoint of his own, with points usually not brought up in trade magazine reports that are frequently busy telling carriers what they want to hear, but not necessarily telling the truth:

The cost structure of building and maintaining the network is marked by high fixed cost and low marginal cost. That is to say, the vast majority of cost comes from building the network itself, regardless of how many customers use it. Once the network is built, the actual marginal cost of each customer is fairly low. Even an intense user does not consume very much of the network resources (the supposed bandwidth hog is a problem only because network capacity is ridiculously oversold). The argument that the majority of subscribers subsidizes the few bandwidth hogs is simply rubbish. The question is simply how obscenely high a rate of return can the network operator squeeze out of each customer.

And in wireless, the rate of return is rather obscene, when you figure Verizon recently decided that caps as low as 25 MB make sense in 2010. Of course all the talk about protecting the poor, “subsidizing” light users in nonsense. If you examine Verizon Wireless’s plan the ideal carrier pricing model isn’t about pure pay-per-use, it’s all about relentlessly pushing all users toward higher prices no matter how much they use. Not too surprisingly, ISPs, ISP investors, and the billing and support companies who’ll make a killing off of these reality-challenged pricing models think that’s just a peachy idea…

Link to the original article…

The other day it was noted that AT&T was getting ready to raise prices on U-Verse broadband, TV and VoIP customers (see the fine print on this U-Verse pricing page). Judging from some leaked AT&T talking points posted to BroadbandReports.com forums, AT&T is getting ready to hit regular DSL customers with some price hikes as well.

According to the leaked memo, AT&T says they’re making some “modest price adjustments” to both U-Verse and DSL pricing soon, and that users should be notified by mail of the changes. AT&T is currently offering “DSL Xtreme 6.0″ (6 Mbps), “DSL Xtreme” (3 Mbps) and “DSL Ultra” (1.5 Mbps) tiers – for the same price. Users who sign up now are given any one of the tiers for $24.95 for twelve months, after which the pricing reverts to $42.95, $37.95, or $32.95, respectively. Keep in mind of course that AT&T continues to test low caps and high per gig overages in two markets and may or may not expand those ambitions in 2010 as well.

Update: AT&T reached out to us to note that there will be a few price reductions on their higher end U-Verse tiers, and they’ll be eliminating their slowest U-verse tier:

On the U-verse High Speed Internet side, there are some changes for new customers, starting with decreasing the price of our higher-speed packages – Max (up to 12 Mbps) and Max Plus (up to 18 Mbps) – by a month across all of our 22-states. The Express (up to 1.5 Mbps) service will no longer be offered to new U-verse customers as of Feb. 21.

AT&T tells us the changes “reflect the greater demand and interest we’re seeing for higher bandwidth packages among our U-verse customers.”

Too bad “greater demand” is met only with “greater prices” and not “greater service”.

Link to the original article…

Time Warner Cable was successfully spun off from Time Warner early in 2008 in order to give both companies “greater operational, financial and strategic flexibility,” according to Time Warner CEO Jeff Bewkes. Now an insider tells Dow Jones the company has launched “Project Mercury” – an effort to rename itself sometime during 2010.

Given the spinoff the rebranding is an obvious move, though it may also help distance the company from last year’s public relations implosion when the company attempted to impose low usage caps and unreasonably high overage fees on their customers.

Good luck with that, Time Warner Cable.

Link to the original article…