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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 or online at

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