The current controversy over usage based billing, the CRTC, and
Internet data caps has generated a wide range of commentary and
articles over the past few days. These include:
In addition, I conducted an interview
on UBB with CBC's On the Coast.
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Appeared
in the Toronto Star on February 6, 2011 as The Real Reason We Pay So
Much For Internet
Last week, public concern with Internet bandwidth caps hit a fever
pitch as hundreds of thousands of Canadians signed petitions against
Internet provider practices of “metering” Internet use. The government
responded with a commitment to order the Canadian Radio-television and
Telecommunications Commission to revisit the issue. Hours later,
the CRTC announced that it would delay implementation of the decision
by 60 days and review it with fresh eyes and an open mind.
While addressing the CRTC decision is a good start, Canadians will be
disappointed – some even surprised - to learn that the Internet caps
are unlikely to disappear from their bills anytime soon. The CRTC
usage based billing (UBB) case involves the narrow question of whether
large providers such as Bell can impose UBB rates on small
providers. Even if Bell is blocked from doing so, this would
still only address a tiny segment of the marketplace.
As virtually every Canadian Internet user knows, the Canadian market is
almost uniformly subject to bandwidth caps. The Organization for
Economic Co-operation and Development reports that Canada stands
virtually alone with near universal use of caps and our cap rates are
set lower than those elsewhere. For example, while U.S. giant
Comcast has a 250 GB cap, some Canadian providers have caps as small as
2 GB per month.
The caps are already having a consumer impact as Bell admits that about
10 percent of its subscribers exceed their monthly cap, a figure that
is sure to increase over time. Moreover, the effect extends far
beyond consumers paying more for Internet access. There is a real
negative effect on the Canadian digital economy, harming innovation and
keeping new business models out of the country.
The widespread use of bandwidth caps in Canada is a function of a
highly concentrated market where a handful of ISPs control so much of
the market that they can impose wildly unpopular measures without much
fear of losing customers.
Addressing the bandwidth cap concern involves far more than reversing
the UBB decision, however. There are many steps that could be taken,
but it largely boils down to two main strategies - taking concrete
steps to increase competition so that bandwidth capped service becomes
one of several models available to consumers and preventing the current
dominant ISPs from abusing their position.
Fostering greater competition should include opening the Canadian
market to greater competition by removing foreign investment barriers,
particularly for wireless broadband services that play a key part of
the forthcoming spectrum auction. It would also involve working
with provinces and municipalities to develop community-based broadband
networks that are not reliant on the dominant ISPs as well as working
with Canarie, Canada's research and education high speed network
provider, to link local communities and offer alternatives to the
dominant providers.
The government should also impose open access requirements that
facilitate the entry of competitors into new spectrum allocation and
build open access requirements into new residential developments,
municipal construction, and other initiatives.
Measures to spur greater competition is essential, but it will
realistically take several years before new competitors can make their
mark on the market. In the meantime, it is also crucial to
addressing the potential for abuse.
The Competition Bureau has not been active on this issue, despite the
potential for serious anti-competitive behaviour as the dominant ISPs
could use their position to favour their own content or create economic
incentives that favour services such as their own video-on-demand over
Internet based alternatives. The Bureau should aggressively
investigate abusive behaviour as well as questionable marketing tactics.
Where usage based billing is implemented, there should be measures to
ensure that it is not used for anti-competitive purposes and the CRTC
should be more aggressive in auditing ISPs over their Internet traffic
management practices to know whether current throttling practices are
needed or deployed largely to harm competitors.
While there is great anger with the CRTC and the dominant ISPs, we
should recognize that the current market is a product of years of
regulatory neglect and policy choices that created one of the most
converged communications markets in the world. We are now paying
the price for those choices and it will take a concerted policy effort
to put us back on course.
Michael Geist holds the Canada
Research Chair in Internet and E-commerce Law at the University of
Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online
at www.michaelgeist.ca.
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Appeared
in the Ottawa Citizen on February 4, 2011 as Clearing up the Confusion
over the Caps
Caps on Internet service – referred to as usage based billing (UBB) –
took the political world by storm this week with over 350,000 Canadians
signing a petition calling for an end to the common practice.
After the government indicated that it would order the Canadian
Radio-television and Telecommunications Commission to reconsider its
decision to allow large Internet providers such as Bell to implement
UBB when it sells wholesale access to smaller ISPs, CRTC Chair Konrad
von Finckenstein told a House of Commons committee yesterday that it
would delay implementing the decision for at least 60 days and review
the decision on the merits.
Despite the obvious anger over the issue, there remains a considerable
amount of misinformation about what has happened and uncertainty about
just what to do about it. Much of the public anger has been
pointed toward the CRTC. Indeed, anyone taking the time to read
its decisions will likely arrive at the conclusion that Canada’s
telecom regulator simply does not know what to do about the issue.
In recent months, it has issued several decisions on essentially the
same question - can (and under what conditions) Bell impose UBB on the
regulated Gateway Access Service (GAS) that is used by independent
ISPs? The Commission has ping-ponged back and forth with no clear
idea of what it is trying to achieve. The recent decisions have
been almost completely devoid of policy analysis or linkages to the
frameworks that are supposed to guide the CRTC, leaving the sense that
the Commission is making it up as it goes along (the latest decision
involves no analysis of why its approach is consistent with the policy
direction, only a flat statement that is).
While the controversy associated with UBB is new, its use is not. The
CRTC approved its implementation by cable providers over ten years ago.
The original reasoning - that cable Internet is shared by hundreds of
people and that measures may be needed to address network congestion -
may have been reasonable in light of the particular time and
technology. However, the current UBB regulatory fight involves a much
different set of circumstances.
First, the regulated GAS is not an Internet service but rather a
connection between end users and the independent ISP. The actual
provision of Internet services comes from the independent ISP, not from
Bell. Independent ISPs need the GAS in order to reach the end users
themselves, since only telecommunications and cable companies have the
"last mile" connection to the customer. Many countries require
some form of open access to this last mile in order to enhance
competition among Internet providers.
Second, while the independent ISPs are independent operators, the
recent regulatory history makes it clear that Bell would like to turn
them into little more than resellers of Bell's residential Internet
services. By imposing UBB at the wholesale level, Bell ensures
that independent ISPs cannot significantly distinguish their services
from Bell's - both will face identical caps, limitations, and deep
packet inspection. This would greatly undermine the competitive
environment among independent ISPs, who already face enormous
challenges competing with companies that can offer deep discounts on
Internet services by bundling a wide range of additional services
(local phone, long distance, TV, and wireless).
Third, while Bell claims that network congestion is to blame for usage
based billing, there is ample reason for skepticism about these
claims. It should be noted that there is no particular reason for
Internet congestion to occur on the Bell network due to the independent
ISP's customers, since their access to the Internet comes after they
have been connected to the independent ISP. While Bell would
undoubtedly respond that GAS is an aggregated service (meaning the
independent ISP customers and its own customers are aggregated over
part of the network), there are mechanisms to address this issue
without imposing UBB. For example, Bell could offer independent
ISPs a bulk wholesale service that would allow them to allocate the
bandwidth as they saw fit - same overall bandwidth usage but without
the UBB.
Fourth, arguments in support of UBB are frequently accompanied by the
claim that the approach is like any other service - you pay for what
you use. Yet Bell's UBB plan approved by the CRTC does not function
like this at all. Its plan features a 60 GB cap with an overage
charge for the next 20 GB. After 80 GB, there is no further cap until
the user hits 300 GB. In other words, using 80 GB and 300 GB costs the
same thing. This suggests that the plan has nothing to do with
pay-what-you-use but is rather designed to compete with similar cable
ISP bandwidth caps. In fact, Primus has gone further, stating "it's an
economic disincentive for internet use. It's not meant to recover
costs. In fact these charges that Bell has levied are many, many, many
times what it costs to actually deliver it."
The right thing would have been for the CRTC to focus primarily on how
it can foster greater competition in the ISP marketplace since its
decisions threaten to make it very difficult for independent ISPs to
compete using the GAS service. Delaying the decision is a step in
the right decision but the question remains whether the competition
concerns will be fully addressed in a follow-up ruling.
Michael Geist holds the Canada
Research Chair in Internet and E-commerce Law at the University of
Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online
at www.michaelgeist.ca.
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