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No Cap on UBB Reading: Lots of Coverage of Caps and Competition

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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Solving Canada’s Uncompetitive Internet Will Take More Than CRTC Reversal

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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Clearing Up the Confusion over the Caps

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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