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The CRTC's UBB Decision: Bell Loses But Do Consumers Win?

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Tuesday November 15, 2011
The CRTC released its much anticipated decision on usage based billing this afternoon, rejecting the wholesale UBB model that came within weeks of taking effect and Bell's revised Aggregated Volume Pricing model, in favour a capacity-based approach that is closer to that proposed by the independent ISPs and MTS Allstream. The decision is a clear loss for Bell - its hopes to charge based on volume are out (which keeps the door open for independent ISPs to offer unlimited plans) - but the bigger question is whether Canadian consumers are winners.

On the specific decision, the CRTC rejected the UBB model it approved less than a year ago, acknowledging that it was too inflexible and could block independent ISPs from differentiating their services.  The issue then boiled down to Bell's preferred model based on volume and the independent ISPs' approach who preferred capacity based models. The Commission ruled that capacity-based models are a better approach since they are more consistent with how network providers plan their networks and less susceptible to billing disputes.

With Bell's preferred approach out of the way, the Commission was left to choose between two capacity models - the independent providers' "95th percentile" solution and MTS Allstream's capacity model. The Commission chose a variant on the MTS Allstream model that involves both a monthly access fee and a monthly capacity charge that can increase in increments of 100 Mbps. That model is even more flexible than what MTS proposed, suggesting that the Commission was primarily focused on building in as much flexibility for independent providers as possible. In addition to this model (which the Commission calls an approved capacity model), the large ISPs can continue to use flat rate models which provide for unlimited usage.

During last summer's hearing, it became evident that the claims of network congestion simply did not stand up to scrutiny and so Bell's basis for arguing for a volume approach did not make sense. This fight was about competition and the desire of large incumbents such as Bell to turn independent ISPs into resellers unable to differentiate their services. As CRTC Vice-Chair Len Katz noted during the hearing:

I guess I come from the position that we, the Commission, have already recognized there is a need to create competition, more competition in order to protect Canadians, and facilities-based competition is not yet here.  So it's our job to find a vehicle to create that competition and, in the simplest terms, it is to create an environment where broadband would be made available to a third party through a lease arrangement.

It is clear that Katz's approach guided this decision and the CRTC has tried to craft a vehicle to create much-needed competition. That is a good first step. Yet the reality is the overwhelming majority of Canadians will still be left waiting for measures that will address data caps at the retail level. The wholesale UBB fight attracted national attention, but it always was about six percent of the marketplace. That six percent - the current marketshare of independent ISPs - is absolutely necessary to inject some competition into the Canadian broadband market, yet the large players are most responsive to what the other large players are doing.

In a nutshell, solving wholesale UBB was never enough. The retail issues that truly sparked the public outrage have been left largely unchecked. It is the broader competition issues that have left Canadian broadband slower, costlier, and more capped than many other countries that require political attention. Last February, then Industry Minister Tony Clement indicated that the government would intervene if the CRTC did not reverse its UBB decision. The CRTC complied, but this is only step one. Possible future steps include:
  • open 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
  • work with provinces and municipalities to develop community-based broadband networks that are not reliant on the dominant ISPs
  • work with CANARIE, Canada's research and education high speed network, to link local communities and provide alternatives to the dominant providers (I am a Canarie board member)
  • impose open access requirements in new spectrum allocation and build open access requirements into new residential developments, municipal construction, and other initiatives
  • ensure the Competition Bureau becomes active on this file to guard against anti-competitive behaviour
  • pressure the CRTC to tackle the retail UBB issue. This would include stronger enforcement of the net neutrality rules and considering the prospect of Internet Billing Usage Management Guidelines.
The wholesale UBB issue is remarkable story of grassroots activism that stopped a dangerous regulatory ruling in its tracks, but there remains much work to be done.
Comments (25)add comment

Serge said:

...
The idea of working with provinces and municipalities to develop community-based broadband networks that are not reliant on the dominant ISPs is totally illogical. Just a few years ago, we had alternative broadband networks in most Ontario population centres. They merged to form Atria. Then Rogers bought Atria (and Cogeco bought Toronto Hydro Telecom), and the Competition Bureau approved it. What is the point of re-creating what we already had a few years ago? If it is so important, the Competition Bureau should have simply maintained what already existed.
November 15, 2011

Rob said:

...
It keeps coming back to the CRTC's lack of vision/purpose. Until the government stops protecting the oligopoly (hello!? they laid the twisted pair and coax decades ago! It's been paid for! Stop sheltering them!) We'll be paying an arm and a leg for 15 Gig monthly allocations, deep packet inspection and speed reductions, etc etc
November 15, 2011

Jason K said:

Gamers Welcome CRTC’s UBB Decision But It Falls Short
http://jasonkoblovsky.blogspot...n-but.html

The Canadian Gamers Organization (CGO) welcomes the CRTC’s decision today to scrap data caps on independent ISPs. CGO co-founder Jason Koblovsky says that usage based billing (UBB) schemes have a direct impact on how much media consumers can purchase.

“Many game consoles now offer media services as well as games. Due to these consoles now becoming ‘entertainment’ centers, usage based billing severely limits the consumers buying power. One movie downloaded for rental off the PS3 store, could very well take up a large amount of allocated monthly bandwidth. The online purchase of games can sometimes require three quarters of the amount of bandwidth allocated by Bell and Rogers. ” Koblovsky says.

“It is unfair to put restrictions like this on a marketplace in which most Canadian ISPs are media distributers as well. While we welcome today’s decision, we believe the CRTC has for far too long ignored net neutrality policy surrounding the use of throttling and UBB as a means for these ISPs to control network traffic rather than invest in more capacity. We’re glad the CRTC has taken somewhat of an understanding of that in the wholesale UBB decision. These scheme’s according to CRTC policy are to be used as a last resort.”

Koblovsky added that he was a bit puzzled with the CRTC Chairmen Konrad Von Finckenstein’s remarks on how the retail sector isn’t regulated. “Under net neutrality policy which governs all ISPs in Canada, the CRTC quite clearly has the obligation here to look further into the retail use of UBB especially with the new evidence that was presented to the commission during the wholesale UBB hearings.”

CGO landed Canada’s first net neutrality decision last month, when the CRTC found that Rogers Communications was not abiding by the CRTC’s net neutrality policy by throttling video games. Koblovsky stated that CGO is still awaiting a response from the CRTC on what enforcement measures will be taken.

November 15, 2011

IamME said:

...
I don't know if consumers won anything, but at least they didn't lose anything. As for residential UBB, I sent my ISP yet another scathing e-mail today asking them if they plan to follow the lead of Shaw and Telus and increase bandwidth caps. I never even received a reply the last two times I questioned them on this issue.
November 15, 2011

Gord said:

Utelcos
The companies that laid competitive alternative fibre offerings in Ontario were all owned by Hydro Utilities (Utelcos) and subsequently merged to form Atria which was then bought by Rogers. Toronto Hydro Telecom was purchased by Cogeco. The Utelco's really only offered business services. So the residential offering was minimal at best and virtually non-existent.

The real issue is forcing owners of rights of ways either on poles, ducts, or towers, to be open and accessible for new entrants to set up their own infrastructure and allow side line access into homes via Hydro, Telephone pairs or Cable coax. This has not been dealt with and it's time that we opened up the debate on how we can break up the monopolies and oligopolies to allow for real competition.

Until we break up the big companies we will not have competition. I can't say how billing for speed will affect current pricing. My gut tells me everyone will raise their pricing moderately.
November 15, 2011

KF said:

Mr.
The big ISPs won't rest until they have as much control over internet access as they currently do over wireless, cable, and satellite delivery of products and services. The biggest problem is that the content producers/providers now have control over the delivery of internet-based services. They're contorting the dumb pipes that ensured the "free" exchange of information and ideas over the internet (not to mention unhindered competition to provide internet-based services) into a means of engineering they're own profits. The big companies won't rest until consumers are paying per e-mail sent and web page viewed and they've priced any competition out of existence. It will be a sad day indeed when Canadian consumers are relegated to propriety networks tightly controlled by "ISPs" and the internet (or World Wide Web) as we had hoped it to be is restricted to an academic ideal.
November 15, 2011

Albin said:

MBPS?
What the heck does charging on the basis of MB mean? The advertised bandwidth is never anything like what is actually delivered, and there is no effective CRTC regulation of that: I recently agreed to pay Bell $10 more a month for "Fibe 12" that moved me from advertised 7M download with actual 4.5M (according to speedtest.net), to Fibe 12's advertised 12M with actual 6M. Moreover, my new contract reduced the monthly cap from 60 to 50 GB. If anything, the slightly increased speed seems to result in somewhat increased usage going toward the monthly cap, though I'm not sure how that works.
November 15, 2011

Keenan said:

infrastructure duplication
@Gord: I don't see right-of-way access as being a solution. All that leads to is having multiple wires, owned by multiple organizations where one wire would do. There's no reason for a new provider to have to actually build out all the infrastructure just to access their customers, and I don't think it's a financially viable option, outside of urban cores (where in Vancouver, for example, Novus has done just that). It's a needless waste of resources to do so, and creates a huge barrier to entry for new entrants.

I am really not sure how the logistics could ever work out, but I'm convinced the solution is a utility styled after our hydro or gas utilities. Independent of any end-user services, they would simply provide transit for the traffic from the ISP to the customer at a tariff rate. This style of delivery should lead to much healthier competition and many more innovative services around convergence.

If it takes billions of dollars and a government entity going out and constructing a FTTH network from scratch, I'm all for that. But really I'd rather see control of the existing infrastructure wrested from the incumbents so that it serves the people. It's critical infrastructure that provides an essential service, it should be controlled by the public.
November 15, 2011

Harry Johnston said:

UBB an economic necessity?
Unless the actual cost of providing internet bandwidth is much lower than I suspect is the case, some form of UBB is almost certainly necessary. The important question is "how much would it cost to provide an end-user with (say) 5Mbs of uncontested, 24/7 bandwidth"? If this figure is too high for customers to pay, then you have to find some way of sharing out the capacity between your customers.

In the old days, this wasn't a problem, because almost nobody used any significant fraction of their capacity, even at peak times. Factors like internet TV have changed that. (There is still some leeway: if some of the costs are based on data rather than bandwidth it is probably still safe to assume that most folks won't be running their connections at 100% 24/7, but at peak times you need to be able to provide that 5Mbs for almost everyone simultaneously, without too much congestion.)

Perhaps you're in a position to actually answer this question, or know someone who can. I note that the new ruling provides a lower bound of just under $125 per month for Bell-based customers, because this is how much the ISP will have to pay Bell.
November 15, 2011

Pandora said:

...
I'm happy Bell lost this fight. Altho, I'm part of the 95% whose internet is being capped and throttled, but I'm not being capped and throttled by Bell which makes the pill a little less bitter to swallow.
November 15, 2011

Trev H said:

"removing foreign investment barriers" - Bang on!
I like how you brought up removing foreign investment barriers. This is something that sparked issues over Wind Mobile and how it was financed when it began trying to build its network and establish it's service. Now that it and other carriers are bringing competition to the incumbents, its starting to make an impact on cellphone bills. Part of it thanks to allowing one company financed by foreign investment to begin constructing a nationwide network to rival the incumbents.

More than that, it's the principle of the thing. Erecting barriers against foreign investment is a bad thing! Why do we not want other countries to invest their money into the Canadian economy? It's a form of protectionism that hurts consumers. If we allow more foreign investment in our mobile phone and internet systems, its a win-win situation.
November 15, 2011

Lucas W said:

Not sure Bell lost
I'm not sure Bell lost at all, the rate they are given is approximately equivalent to a $0.07/GB AVP. That's assuming the IISP can saturate the link 24/7, if not then the price per GB goes up.
November 15, 2011

Joel said:

Last mile
The last mile should be owned by municipalities. Many Isp's have their own infrastructure up until the last mile, and that's where they need to piggy back on the company that owns the lines to our houses. The worst part is that most of that line was put in during the construction of most of our houses and paied for by you and i. Yet, they're technicly the property to off whomever.

If the municipalities owned the last leg, then they could rent it out to the isp's and use the funds to re-invest in the infrastructure. I.E., one fibre line instead of one coax and one telephone.
November 15, 2011

Steve Cole said:

This is a disaster.
You do realize that for most ISPs, this means a monthly increase in fees of at *least* $50,000 per month. Very few independent ISPs have less than two gigabit connections for their DSL pools, and suddenly those costs have gone from about $10,000 per month to about $60,000 per month for those connections.

In other words, for a service that is going *down* in price everywhere in the world, Bell is suddenly jacking the cost up by a factor of six. That's right.

And the worst of it is, they have *NO VALIDATION FOR DOING SO*. All of their equipment is either being replaced now, or is due for replacement soon, and will support 10 or even 100 times more capacity using the *SAME FIBRE STRANDS*. In other words, they're about to have a dramatic amount of new capacity available to them....... and charge six times the cost for it.

And to make it better, unlike UBB, they have to pay those costs right up front. For the same product that they've had for 10 years at a six the cost (potentially).

Better, they now have to split their traffic between two authentication, accounting and provisional systems because Bell is saying that they will differentiate between "legacy" and "fibre to the node" at the authentication level - though there is no driving need to do this, nor is "legacy" really any different than their fibre to the node product.

Bell must be laughing huge, shaking belly laughs right now. I sure hope they don't spill their martinis on their nice silk shirts. They didn't get what they want... it's worse.

And by the way, Bell is selling Internet transit through their ICS product at half the price they want for bare ethernet traffic to the DSL customers. Actually it's far less than half the cost once you factor in the DSL access pricing. So as a big company I can buy 1Gbps of bandwidth from Bell including Internet transit at guaranteed data rates for around $9,500 a month........................... or I can get bare ethernet and local loop pricing of about $60,000 through their wholesale program, with no content on it. What a joke!
November 15, 2011

Steve Cole said:

correction...
... although ISPs would usually use two 1Gbps circuits for failover, buying just one and using it flat out would be $30,000 under the new "wholesale" plan versus their ICS product at guaranteed data rates at around $9,500.

So the ISP will pay more than three times the money for a product that does not include any Internet transit and is a best-effort service anyways (DSL speed is not guaranteed).

In any sane world, would your biggest customers pay the most money per unit?
November 15, 2011

Crockett said:

Well, Yay for our team!
With that little bit of enthusiasm out of the way I can say at least that the CRTC listened (and how could they not with an axe hanging over their heads), and they even did it in a fairly level reasoned way in response to the evidence presented.

How Refreshing.

Of course, this is a battle won, not the war and there is still much to do to drag Canada onto the competitive stage of the world digital economy.

Keep up the good work Dr. Geist, Open media and everyone who made their voice heard.
November 15, 2011

Misa said:

But good enough for now
This is a mostly-a-win. For end users, not much will change.

UBB should never have even been tried because it's a flawed billing mechanism designed to bilk the end user out via "overcharge" It could only work if the carriers were going to implement "rollover" type of data or bank it somehow for months they would go over.

Capacity based usage is the most fair for the independent ISP's and end-users. Pay for the size of the pipe that you need, and use it all you please. Shaw somehow had a crystal ball into this:

Unlimited 250(mbps) - 119(bundle price) = Unlimited
Broadband 250(mbps) - 99(bundle price) = 1TB.
Broadband 100(mbps) - 69(bundle price) = 500GB
Broadband 100+(mbps - 79(bundle price) = 750GB
Unlimited 100(mbps) - 119(bundle price) = Unlimited
Unlimited Lite (1mbbs) - 59(bundle price) = Unlimited
High Speed Lite (1mbps) - 29(bundle) = 30GB.
(Unbundled prices here: http://www.shaw.ca/Internet/Compare-Plans/ )

So if Shaw can offer Unlimited plans with the assumption that the user is going to use more than the datacap plans, then clearly data is cheap enough to do this. The HS Lite is around 1$/GB, the BB100 is about 14cents, BB250 is around 10cents.

If you look at the bigger picture, Telus doesn't offer anything over 25Mbits/250GB cap.
Teksavvy offers a 25Mbit/54$ plan that's unlimited on Cable that is 8$ cheaper (unbundled) than the same speed but capped plan from Shaw.

So clearly there is room for independent ISP's as well. There's not much overlap in offerings.

IMO shaw might lack the lower speed options due to provisioning capacity, eg there's only so many channels that can be used per cable modem, so it costs shaw the same amount to give a customer 1Mbit or 38Mbits connection (DOCSIS 3 is done with channel bonding, so it's possible for Shaw to dynamically re-provision channels as bandwidth is consumed or underutilized) but adds little at the headend in terms of capacity usage.

As more people use Netflix and play MMO's (20GB patch files, yikes) the more legitimacy is placed on high bandwidth usage, and ISP's can no longer justify throttling or capping traffic.
November 16, 2011

Gord said:

@Keenan - ROW
Good points. There is a ton of excess unused fibre that is already up on the poles and run through conduits. Perhaps a combination of forcing ROW owners to provide space for new entrants and forcing Telcos' and Cablecos to provide dark fibre (existing facilities) to entrants is the answer. New entrants could chose what ever best works for them. Also the ROW owners may see fit to sell dark fibre to the new entrants in a wholesale arrangement.

Alternatively, breaking up the duopoly into two units 1) physical plant owners and 2) marketing sales would also allow for fairer competition.

We have yet to see these alternatives addressed. I'm afraid without real competition we will never get innovation and we will never have the urban/rural divide solved.
November 16, 2011

Chris C. said:

They're not pulling the wool over my eyes!
"The CRTC released its much anticipated decision on usage based billing this afternoon, rejecting the wholesale UBB model [...] in favour [of] a capacity-based approach that is closer to that proposed by the independent ISPs [...] The decision [...] keeps the door open for independent ISPs to offer unlimited plans - but the bigger question is whether Canadian consumers are winners."

The problem with the CRTC approach as I see it, is that will automatically penalize the independents, who typically serve heavier users, with the direct result of raising fees across the board, without affecting the fees of the incumbents' retail customers in any significant manner (have you ever seen Bell reduce its fees? Come on!).

If that is not outright playing into the incumbents' hands and insuring the short term disappearance of the independents, I don't know what is. I call upon Mr Koblovsky of the Canadian Gamers Association and other naive folks to re-examine the facts and the inevitable consequences that will have for its members at the retail level: Steve Cole explains it very well in his post.

Once again, the CRTC shows how out of touch with reality it is. The commissioners showed us first hand last spring how ignorant of the technicalities, now they show us how ignorant of market forces they are.

In other words, at the best they are useless. Or perhaps they were indeed playing into the incumbents' strategy to eliminate competition all along, like the facts seem to indicate and many of us have been decrying since the beginning.
November 16, 2011

Kevin R. said:

Bandwidth theft
This is not just about wireless theft. And where there's wireless security, there are hacks around it anyhow. The wireless node kiddy scripts and router hacks will become much more prevalent.

The point being, the increased costs of bandwidth is very likely going to see a huge increase in both wireless AND wired broadband theft...
November 16, 2011

Bill H. said:

Break up the ISP monopoly/duopoly
Perhaps the only solution is to break up the telecommunication monopolies into internet infrastructure managers/owners(IIMs) and [ISPs/cable and satellite TV providers/content creators/phone companies/wireless providers]. The new IIMs could manage the networks and rent out network access and capacity at cost + 3% to the major ISPs and the independent ISPs without distinction.

It would be interesting to hear Bell and Cogeco's new estimates of the cost of network bandwidth if this happened. Would they still think that they need to charge $2,213 or $2,695 for 100 mbps of capacity respectively, or will they find MTS Allstream's estimated cost of $281 for the same capacity more reasonable? Are Bell's and Cogeco's estimated costs really 8 or 10 times higher than MTS Allstream's, or are they hopelessly inefficient and/or using their monopolies to gouge the independent ISPs?

If the CRTC cannot do its job, it's time for the Competition Bureau to step in.

Your idea to "work with provinces and municipalities to develop community-based broadband networks that are not reliant on the dominant ISPs" would be another solution. Why not municipal-owned and administered networks? Municipalities already own the land, roads and infrastructure like telephone poles. At $50/month to install and administer the network- that's $600/year, every year, from a majority of households to provide internet connectivity.
November 16, 2011

Skyspy247 said:

...
All was lost when the telcos/cablecos bull-shitted the CRTC into believing that 'data volume' (that goes toward any cap) had value.

Simple.

Period.

Now this ...

Unbe-frickin-lievable !
November 18, 2011

Skyspy247 said:

Ask the TELCOs this !!!
Hey Bibic !!

If Cisco came to you and said ...

"Thanks for buying our network gear. In addition to charging you $XXX.XX per Gigabit port (speed) on each switch/router we'll now be charging you for each GigaByte of data (volume) that flows through each those ports."

There's a very good reason that Cisco doesn't do it. There is simply no value to any volume of data. It's only about the speed.

The CRTC and internet users everywhere have been scammed.

Period.

Wicked pissed off, Man ... Wicked pissed off.
November 18, 2011

Harry Johnston said:

Data and speed *are* related
@spyspy247: measuring data allows a fixed pipe (at the bottlenecks) to be shared fairly by multiple people without having to limit user's maximum speeds.

If you've got two thousand people sharing a 100Mbs pipe, you can either say "OK, you each get 50kbs" or "OK, you each get 5GB" or "OK, we're going to have to charge you ten times as much as we do now". For most consumers, a 5GB limit is going to be the best option.
November 20, 2011

Ray Soucy said:

Ask for a Separation of Powers
Step 1 is to treat the physical infrastructure (Dark Fiber) as a public utility. Create a utility company responsible for maintaining the infrastructure, but forbid them to provide services over it, and fine them for downtime.

Step 2 is to allow any service provide to make use of the infrastructure at a low, fair, market price (for example 3 CAD/km). Require the Dark Fiber utility to maintain ring topologies to meet service availability requirements.

You reduce the barrier to entry by not asking providers to make investments in costly build-outs of fiber, especially for rural areas.

You lower the cost of providing broadband by not forcing providers to build identical infrastructure over identical paths.

You lower the cost of Government and Education by allowing them to make free use of some of the Dark Fiber (Free 100G CANARIE anyone? Yes please).

In the US, Maine has started to do this. Maine Fiber Company is a Dark Fiber Public Utility and is using stimulus funds to build up high capacity, open access, low cost, "middle mile" fiber. In about 2 years it should be 100% complete.

The next step for Maine will be applying this model for "last mile" fiber to the home, allowing the state to move to the model described above.

The idea came out of the University of Maine and its research and education network: MaineREN.

(Full Disclaimer: I am a network engineer for MaineREN who has Canadian dual-citizenship and grew up on the US side of Edmundston, NB)
November 22, 2011

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