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Usage Based Billing Around the World: How Canada Stands Alone

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Wednesday March 30, 2011
When the usage based billing controversy grabbed national headlines last month, I posted several long pieces on the issue. My first post attempted to unpack the issue, focusing on the some the misleading claims about the supposed need for UBB at the wholesale level and putting the use of data caps in Canada in context.  Later posts discussed concerns with the CRTC approach on UBB, the claims regarding network congestion, and a piece on what should come next, including what the CRTC should do on wholesale UBB and the broader policy measures on foreign ownership restrictions, fostering greater competition, and addressing the retail UBB concerns. 

Those posts attracted some attention and soon afterward I was asked by Netflix if I was interested in digging deeper into these issues. The company provided some support so that I was able to quickly assemble a great team of students - Keith Rose, Peter Waldkirch, Tyler Nechiporenko, and Rachel Gold - to delve into issues such as congestion claims, comparative UBB approaches, the cost of transferring a GB of data, and some potential solutions. I completed the paper over the weekend and have posted it here. I'll be posting on several elements over the next few days, concluding with my proposal for the establishment of a UBB equivalent for Internet Traffic Management Practices (ITMPs), which I've dubbed Internet Billing Usage Management Practices or IBUMPs.

This first post features a comparative look at usage based billing in other countries.

The OECD has noted that Canada is one of the only jurisdictions in the world where virtually all providers utilize some form of UBB.  For most providers, data caps have been in place for years: Rogers established a monthly cap to some of its plans in 2005 and Bell implemented data caps in 2006. 

While much of the focus has been on the widespread use of UBB in Canada, more instructive is the near-uniform implementation of UBB.  In Canada, UBB invariably means a cap on monthly data use combined with overage charges for all data used that exceeds the cap. The plans do not distinguish between peak and off-peak use, the source of the data, or contemplate other solutions beyond overage charges. 

The near-uniform Canadian approach is notable because other, more competitive countries feature a wider variation in approach, as highlighted in the comparative chart of 18 other countries in Appendix A of my paper (the chart is also available as a standalone document). Countries such as Germany give consumers the ability to select from among unlimited and capped services. Deutsche Telekom, the largest providers, offers unlimited plans, while providers such as 1und1 offer lower cost plans with a 100 GB data cap. The U.S. market similarly features a mix of capped and unlimited plans. Comcast offers a 250 GB cap and AT&T recently announced plans to implement a 150 GB cap. Other leading ISPs such as Cablevision and Verizon offer unlimited plans.

In addition to choice from among unlimited and data capped plans, other countries feature far more variation in approach to UBB. In Australia, data caps are very common, yet exceeding the cap does not result in overage fees. Instead, Australian ISP “rate limit” subscribers that exceed their cap by reducing download speeds for balance of the month. In other words, all plans are effectively unlimited plans but with different speeds once a data threshold is met. The use of rate limiting is a relatively common approach in countries with data caps as it is also found in New Zealand, Germany, and India.  Moreover, in response to competitive pressures, British Telecom recently announced plans to eliminate data caps but retain rate limiting for heavy Internet users.

The Australian market also features another notable variation on UBB. Many ISPs feature two separate data caps each month - one for peak time usage and a second for off-peak usage. For example, Optus offers several broadband plans which each feature separate data caps for peak and off-peak usage. The peak period runs from noon until midnight, while the off-peak period runs from midnight until noon. If a subscriber exceeds the peak or off-peak cap, Optus reverts to a rate-limited service. IiNet offers a similar peak/off-peak data capped service with consumers able to purchase as much as 1 TB of data per month.

Another alternative approach is to distinguish between domestic and international data. For example, Vodaphone Iceland offers a 10 GB capped plan but “all data downloaded domestically is unlimited without any extra cost.” The effort to distinguish between the origin or destination of data reflects different costs – regional data transfers may remain within a single ISP’s network or is subject to a peering arrangement that reduces transfer costs.  By contrast, international data will often require a transit arrangement that increases data transfer costs.

Yet another approach is to distinguish between upstream and downstream traffic. Data caps are still relatively rare in Japan, but those ISPs with data caps limit their application to upstream traffic. Moreover, the caps are so high - 900 GB of upstream traffic per month is standard - as not constitute caps in comparison with the policies in Canada.

What makes these UBB approaches noteworthy when viewed from a Canadian perspective is that there is sufficient competition such that consumers in other countries can typically choose between unlimited and capped plans. Moreover, the capped plans elsewhere bear a more direct relationship to cost and congestion concerns. In contrast, Canadian UBB bears little relation to actual cost, but is instead largely a function of market dynamics and the lack of competitiveness.  I'll focus on those market dynamics issues in tomorrow's post.
Comments (38)add comment

Anarchist Philanthropist said:

Why at all??
"my proposal for the establishment of a UBB equivalent for Internet Traffic Management Practices (ITMPs), which I've dubbed Internet Billing Usage Management Practices or IBUMPs."

@Dr. Giest

My request is simple and I will state it at the end. Why? Why does anyone need to make laws about the internet at all. Everything has been working fine up to this point, and the internet and all it's technologies that it's producing have been growing at a fantastic rate.

Why do people need to work so hard to try and not only control the internet but to make a profit from it? This is getting to the point it's absolutely retarded!

Here's my suggestion. Everyone everywhere needs to back the fk off and let the internet progress as it needs to. Right now all these new laws and regulations are only meant to one thing. Put money into some jack@$$'s pockets, and really i'm getting sick and tired of it!

Not all of us make 250k a year and it's getting stupid disgusting just to try and live let alone these people that just feel the need to rip everyone off!!

Keep your laws out of our internet!!!
March 30, 2011

Anarchist Philanthropist said:

Just stop!
Not all of us make 250k a year! Some of us just want to have our lives and be left alone!

Keep your greedy laws out of our internet!
March 30, 2011

Un-Trusted Computing said:

...
Anarchist Philanthropist:

Like you I don't believe there should be laws surrounding the Internet... just guaranteed access to infrastructure that the Internet is delivered to you, in order to provide a healthy competitive sector. ;)

March 30, 2011

K said:

Too much greed!
Who is CRTC really working for - Bell and Rogers or Canadians? Both of these conglomerates - Bell and Rogers are ripping off consumers. Both of these are signing contracts with their subscribers at a fixed rate and then 2 or 3 months later raising their prices - claiming that it is the CRTC decisions. It is a sad state of affairs when those we elect to be our servants - not our masters, just serve the corporate welfare bums.
March 30, 2011

Napalm said:

...
@Anarchyst:

I guess you're against this one too?

http://en.wikipedia.org/wiki/Competition_law

Nap.
March 30, 2011

Napalm said:

...
@Michael:

The paper gets an F grade. It conveniently fails to analyze how Sasktel stands in the picture.

Nap.
March 30, 2011

Tammy Flores said:

...
I have written this before. There’s lots of colorful ideology floating around about UBB… Canada’s cornered… government supporting UBB causes a dilema… let’s try something different shall we.

Let’s call a spade a spade. I am not an annalyst or a reporter, but I can read between the lines and understand what the real issue is here. There has been a pushing and a shoving to merge Broadcast & Telecom for some time now and what’s happening in Telecom is that ugly head raising itself and refusing to die.

I love the imagery that words like “data hogs” paints a picture of in the mind. But I just remember what it was like growing up with a father that had the TV on 24/7 and I just don’t buy into that.

This wouldn’t have anything to do with the fact that people are watching NetFlix, ect… and uploading their own content to share and someone else is getting the ad revenues. NOOOOOOO not at all. The cable companies that supply “the pipe” wouldn’t be upset about that at all now would they?
March 30, 2011

Un-Trusted Computing said:

@Tammy
"This wouldn’t have anything to do with the fact that people are watching NetFlix, ect… and uploading their own content to share and someone else is getting the ad revenues. NOOOOOOO not at all. The cable companies that supply “the pipe” wouldn’t be upset about that at all now would they?"

That's exactly what this is about. If they weren't making higher margins on TV, they wouldn't have a vested interest in making the Internet more expensive.
March 30, 2011

Crockett said:

Check the label ...
The decision for the ISP companies to buy and integrate the broadcast sector into their business plans was predicated on the CRTC playing along. We all know the CRTC is stacked with people who either worked for these same companies or who will land a fat job there when their tenure is up.

Someone in the boardroom should have spoken up and said .. "Umm ... with social media today it's getting harder to fleece over the flock". But that would require the suits to have a mindset not past it's due date.
March 30, 2011

Anon-K said:

@Tammy
To a point, I think you are correct, especially for landline high speed Internet access. For the most part there is only a few companies that do content delivery (provide the wires to the residence) compared to the resellers, and many of the delivery companies are either also, or have associations with, content providers (such as TV networks, etc).

However, let's not forget that small ISPs that provide generally wireless access also have caps. Where I live theoretically I can get access to two such providers.

Storm Internet provides, for $40/month, a 3Mbps access with a 50 GB cap (overages at $1/GB).

Xplornet wireless, for the same speed and price, does not indicate on their website if they have a cap. Apparently they are implementing caps of 1GB daily and 40GB monthly on this plan according to one document that I've seen although this may be old.

So, UBB could be about trying provide an incentive for their customers to not exceed a certain amount of data (this would prolong the life of their existing equipment or to put off purchases to expand the service), or it could be about increasing the profits. I subscribe to the idea that both are applicable. They are businesses. They are there to turn a profit. In the free market the company charges what the customers are willing to pay, this has no relation to the cost to produce, so long as the company's costs are covered.

Note that I said willing to pay, not want to pay. If the company starts to lose customers because of the changes, then this means that the customers are unwilling to pay that amount for what they are getting; the company will be forced to either increase the service provided for the price or reduce the price for that service. We vote on a company's pricing policies with our pocketbooks.
March 30, 2011

qwerty said:

@Anon-K
I believe a comparison to wireless services is not proper because - correct me if I'm wrong - there are real limiting factors for wireless bandwidth, it doesn't compare to wired...
March 30, 2011

Mike Joa said:

...
@Anon-K
While it's true that we vote on a companies pricing policies with our pocketbooks, the company itself votes on it's pricing policies (for something that is quickly becoming an essential service mind you) with theirs by lobbying the government and regulatory bodies. Who has deeper pockets?

The model of free market self regulating might work in a fair and perfect world but we don't live there. Government exists due to our species attempts to compensate for this. If you think that poeple will just turn off their internet because it costs too much you are sadly mistaken. They will pay more and use less and innovation and compettition will continue to suffer.

Yes, we all must vote with our dollars but we also must lobby the governments with what power we have as citizens. Vote, write letters to your MPs and MLAs on what you are passionate about and support advocates and groups such as Dr Geist and Open media who are attempting to temper greed with reason. To rely soley on the power of dollars is to hand the control to the person with the most of them.
March 30, 2011

Nick said:

...
I think part of the bigger solution is to open up that last mile so the big telecoms don't have full control over it. Whether that means it should be owned by the government and run as a not-for-profit corporation I don't know, but something has to change.

It all comes back to the telecoms owning and operating everything from TV (content), Internet, phone they see the Internet (video streaming and phone) as a threat to their high margin TV/phone products and don't want those services to take hold. While we are at it let's get some competition in the TV market having basically just Rogers and Bell doesn't do anything to foster competition they proved it time after time in the wireless market that they don't want to compete they just want to drive up the rates to Canadians so the other company can follow suit and raise their rates.

Telecommunications has become very pitiful in Canada and the CRTC keeps showing that they don't care about Canadians every time you turn around they approve a rate increase. How is it that technology continues to get cheaper and cheaper yet anything technology based in Canada continues to increase?
March 30, 2011

We're not in Kansas anymore said:

...
Do I have this correct?

We're mad as hell that the companies that provide internet service in Canada charge too much for too little service. The ISPs are making too much profit!

But ... without more profit, the ISPs aren't going to have the money to build a bigger, better, faster internet.

Sounds like we want champagne on a beer budget.

And before anyone tells me to read the Berkman study to see just how bad we have it in Canada - I have already read it, it's a piece of excrement. Let's not forget that it paints an equally bleak picture of the US which many on this forum are holding up as vastly superior to Canada.

March 30, 2011

oldguy said:

@Nap`
..."The paper gets an F grade. It conveniently fails to analyze how Sasktel stands in the picture."

Can you expand on this? What is there about the sasktel picture that changes the suggestions and conclusions of the paper so much?

March 30, 2011

qzjul said:

@We're not in Kansas anymore
It's not profit if they're spending it on infrastructure... then it's just revenue but actually invested again; if the telcos & cablecos actually invested all their current "profits/income", we'd probably have the slickest internet out there..
March 30, 2011

Chuck said:

@We're not in Kansas anymore
"But ... without more profit, the ISPs aren't going to have the money to build a bigger, better, faster internet."

I think you meant revenue because in 2009 4th quarter, BCE still profitted over $400M despite the billions of dollars they spent. That was up 25% from the previous year.

I don't think anyone can dispute that Canada doesn't rank very high for internet services when compared to the rest of the world.
March 30, 2011

We're not in Kansas anymore said:

...
@gzjul

Profits are the monies that are left over after a company pays all it's expenses. Publicly traded companies in technology industries generally reinvest 50-70% of their profits back into the income generating assets of the company. The remaining 30% generally gets paid out in dividends to the shareholders.

If these companies don't make a profit they aren't able to reinvest money in their networks - and their networks just become obsolete. The telecom industry is one of the most capital intensive industries in the world due to need for frequent technology upgrades.

The internet we use today is light years ahead of the dial-up internet world of 10 years ago.

Anyone out there still have a 486 PC runnning Windows 98 like to offer an opinion on how that compares to a PC with a 3.4 GHz i7 Core processor runing Vista?
March 30, 2011

Napalm said:

...
@oldguy: "Can you expand on this? What is there about the sasktel picture that changes the suggestions and conclusions of the paper so much? "

No monthly caps, no throttle and better prices than Bell. If that can be achieved then why do we beat the Bell dead horse.

Nap.



March 30, 2011

Ponerology said:

what real competition would do
Right.. in the mean time this is what exists in the rest of the world where there is real competition:

UK, Orange, 20Mbps , Unlimited, $23.48 CAD.
France, Orange, 8Mbps, Unlimited, 28.42 CAD.
France, SFR, 20Mbps, Unlimited, 21.68 CAD.
Romania, Adnet telecom, 10Mbps, Unlimited, 29.13 CAD.
Italy, Libero, 7 MMbps, unlimited, 26.99 CAD.
Japan, OCN, 12Mbs, Unlimited, 25.22 CAD.
Russia, AKADO-Stolitsa JSC), 20Mbps, Unlimited, 25.00 CAD.
Netherlands, Online, 4Mbps, Unlimited, $24,04 CAD.
Netherlands, Online, 20Mbps, Unlimited, $30.88 CAD.
Netherlands, KPN, 8Mbps, Unlimited, $34.33 CAD.
Netherlands, XS4ALL, 8Mbps, Unlimited, $41.13 CAD.
Romania 50 Mbps, Unlimited, $9.56 100 Mbps, Unlimited, $12.86 (incl. VAT) CAD
March 30, 2011

Anarchist Philanthropist said:

...
They have "Don't Buy Gas on This Day" I wonder what companies would do if everyone decided to cancel all thier services on a certain day.

Anyone else think this is worth trying?
March 30, 2011

We're not in Kansas anymore said:

...
@chuck

Don't forget that Bell also invested $3B in capital upgrades to its networks last year. The telecom industry is very capital intensive so most carriers also borrow a lot of money to invest in their networks while also reinvesting profits - but in order to get keep their cost of capital down they have to keep their debt to equity ratio below 1.0 otherwise their borrowing costs go up which hurts profitability and drives the share price down. It's a balancing act.

The other benediciaries of Bell's profits are the shareholders. Even though I don't own any Bell shares I still want them to pay dividends because yours and my parents pensions depend on it. Most every pension plan including the CPP holds shares of BCE so if they don't pay dividends then we have to make up the shortfall through taxes.
March 30, 2011

Napalm said:

...
@We're not in Kansas anymore:

Unfortunately we're not.

http://money.cnn.com/2011/03/3...n&hpt=Sbin

Nap.
March 30, 2011

W. Atkinson said:

...
@Napalm

Very cool. I wonder if any Canadian cities applied. I also wonder if Google has any plans to serve smaller communities or whether they are just going to focus on a couple of big cities.
March 30, 2011

Disillusioned said:

Yes Bell may have stated they invested $3Billion
We're not in Kansas anymore said:

"Don't forget that Bell also invested $3B in capital upgrades to its networks last year."


Excerpt from page 17 if Bell's 2010 Annual report:

"In 2010, BCE invested approximately $3 billion of capital, $2.5 billion at Bell Canada and $485 million at Bell Aliant, a 3.7% increase from 2009. These investments in network speed and capacity are enabling significant customer growth on broadband services such as Fibe TV, Fibe Internet and Bell wireless."

Questions that need answering are, what portion of the $3Billion was spent on the IPTV rollout; and due to new player(s) in the market, increasing competition on the wireless/cell platforms. What was actually spent on naked broadband wireline upgrades? How much was invested in Fib(e) Next Generation Network, as compared to the legacy ATM GAS network?

$3Billion sounds good, but if we could delve deeper into the breakdown of the number, I think it would be quite telling.

When the incumbent access provider (who controls the last mile access to the home) has it's hand in so many other service and content delivery businesses, it is quite obvious that control of the pipe is a major concern. We need an open access last mile for any competitive reality to occur.
March 30, 2011

Snowie said:

...
In my opinion UBB main purpose is to fight the piracy and lower the network usage. But in todays word, a lot of legal and important data is being transfered by the web. Let's look at all the services providing digital copies of various programs, games, movies and such. If the UBB comes into life, digital copies will become less popular, why would I pay for the game, and then pay extra for the download of let's say 11GB?! That's just pure crazy.

Btw, here in Poland, we had UBB with low download caps (like 25gb per month) but the biggest isp decided to lift those caps in 2008. Sooo Canada, you don't want to be behind Poland, do you? :)
March 31, 2011

Anon-K said:

...
@qwerty: Since we are talking about cable here, the issues are very similar, although not necessarily of the same source. First of all, customer access on a cable system (as I understand the tech in use) is a shared medium to the subscriber, just like wireless. Secondly, you have signal attenuation as a function of distance. In the case of wireless this is a function of frequency and light of sight distance, in the case of cable, leakage at connections primarily. Thirdly you have signal degradation issues. In the case of wireless this is weather (frequency dependent) and topology (terrain and trees, including if the trees have leaves on them at some frequencies), in the case of cable connections and reflections from poor connections and damaged lines (water seeping into the lines).

Some of these also affect Bell, for instance signal degradation for them is similar to cable and for the same reason. I have first hand experience with crappy phone service due to water in the switch (like no phone service).

@Mike Joa: I do understand where you are coming from, but have to disagree in that I don't consider internet access to be an essential service... It is a desirable service, certainly. I generally don't consider something an "essential" service unless someone is in danger of being hurt or dying as a result of not having it... being inconvenienced, to me, is not a justification. I just can't convince myself to consider it as necessary as fire, ambulance or police services. Before anyone adds in comments about telecommuting, I work in high tech... I'd love to be able to telecommute but my employer discourages it (part of it is the nature of the work); it would save me over an hour of commuting and about 95km of driving each day.
March 31, 2011

trismos said:

Fiber Optic
as Bell is in the eve of rolling out its fiber optics, it will cost even less to transfer a Gb of data. So way more than a 100,000% mark up in cost per Gb, but they are going to be the guardian of the gate? Who at the CTRC is getting paid off? RCMP need to investigate.
March 31, 2011

W. Atkinson said:

...
@ Disillusioned

We actually do have open access for the last mile. Incumbent telcos (ILECs) were required to unbundle local loops years ago so that CLECs can purchase them for resale.

The cable companies were also required to file tariffs for wholesale access to their last mile coax networks.

I think you will find that very few companies actually want to own the last mile networks anymore because they are such as hassle. You have to pay "rents" to local municipal goivernments, you have to move or repair the cables when there is road construction, and every spring water leaks into older cables which then need to be dug up and replaced. And then you have the endless whining from CLECs or ISPs who want access to the cables at or below cost but they don't want the hassles of maintaining them.

The cable and phone companies are als required to provide wholesale access to their DSL and DOCSIS networks so resellers can get into the ISP business without risking any capital.

The CRTC has bent over backwards to make it easy and low risk for CLECs and reseller ISPs to get into the business with very little cost or risking their own capital.

Don't forget that during the last recession the government pulled money out of the telecom industry to bail out the auto industry to the tune of $4.3 billion. You and I eventually pay that money back through whatever fees the cable and phone companies charge us. I agree, there is a lot to be dissillusioned about.
March 31, 2011

Napalm said:

...
@Anon-K: "I do understand where you are coming from, but have to disagree in that I don't consider internet access to be an essential service... It is a desirable service, certainly. I generally don't consider something an "essential" service unless someone is in danger of being hurt or dying as a result of not having it... "

Would you put it on the same level as phone service? Or electrical power? Tap water? You don't get hurt but not having them either, eh?

Nap.
March 31, 2011

W. Atkinson said:

...
@ Napalm

I have to agree with Anon-K on this one. Internet is on the nice-to-have list and is way ahead of food, water, and shelter.

Don't get me wrong, I love having internet access on my smartphone, at my office and in my home - it helps me be more productive and improves my quality of life but so does my car, when I know that public transit or a bicycle will also do the job.
March 31, 2011

Napalm said:

...
So which are the "essential" services? I can't see any. Should we go back living in the woods? Heat with wood, drink source water, hunt around... we wouldn't need no steenkin' "services".... healthy lifestyle....

Nap.
March 31, 2011

ScytheNoire said:

...
Because there are monopolies, there is no true competition, thus, they can charge high prices without ever improving the system. If you look around the world, the countries with the best internet have no caps, have a much more open market, don't have monopolies, and have fair competition. But because the government is so corrupted with lapdogs for Bell/Rogers/etc, we are being screwed over as Canadians and falling further and further behind. When countries like Romania and Russia are kicking your butt, you know you have problems. It's time to look at South Korea, see what they are doing, and do that. The path we are currently on is a dead end, and it will be Canadians and the Canadian job market that suffers, not the corporate monopolies.
March 31, 2011

Napalm said:

...
@ScytheNoire: "When countries like Romania and Russia are kicking your butt, you know you have problems. "

Isn't Russia the only country left that still can fly astronauts to the space station?

Nap.
March 31, 2011

Learn English Online said:

...
Yes, you are right. I should amend it to say "the insincere capitalists" or "the really greedy motherfuckers".
April 01, 2011

Learn English Online said:

...
...
Yes, you are right. I should amend it to say "the insincere capitalists" or "the really greedy motherfuckers".

Thank You
__________
April 01, 2011

sdfsdfd said:

sdfdf
Because there are monopolies, there is no true competition, thus, they can charge high prices without ever improving the system.http://www.suprashoesfootwear.co.uk
If you look around the world, the countries with the best internet have no caps,
April 08, 2011

Tyciol said:

Tomorrow's post
Please link to it, I would like to read it. I am unsure where to go when reading archives.

This was very informative and easily written that I understood it well and I think I could help others understand while using it.
September 26, 2011

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