Myths and Fallacies About Usage Based Billing

Bill St. Arnaud has posted a paper on usage based billing that challenges some of the frequently made claims on UBB. St. Arnaud notes that the paper demonstrates three important facts:

  1. Internet video streaming services actually reduce costs for Internet backbone networks operated by telephone and cable companies, even as traffic volume grows;
  2. There is no correlation between volume of Internet consumption and costs for telephone and cable company last mile providers and that congestion, if any, is more of an artifact of design assumptions made by the operators; and
  3. Cable and telephone companies operate competing video streaming services over the same last mile infrastructure used for Internet access services, which generally are not priced based on usage, and yet somehow seem to able to avoid congestion as well as provide the service for fraction a price of what they charge for delivery of the same video content delivered over the Internet.


  1. Speaking of myths and fallacies…
    We need a Geist-caliber evisceration of this article:

    It includes such gems as:
    “Canadian wireline broadband prices compare favourably with those of the digital economies with which we compete. Average prices in Canadian dollars across the range of speeds and bandwidth are lower in Canada than in, for example, the United States, Japan, France and Australia. Moreover, according to the CRTC, the average price per megabyte per second has actually fallen as both consumption and speeds have increased.”

    “So Canadians are paying less and getting more, and getting it faster.”

    Please Mr. Geist, use your clout and significant online presence to debunk this crap.

  2. Scott Elcomb says:

    Clerk of the Pirate Party of Canada
    I’m not sure about one item in fact #3:

    “Cable and telephone companies operate competing video streaming services over the same last mile infrastructure used for Internet access services … seem to able to avoid congestion”

    I get intermittent and sometimes lasting corruption in my digital cable. It can be very annoying; as a technologist the only suggested cause that I’ve heard and make sense is bandwidth congestion.

    Could be that I’m just not educated enough in how these networks operate. Time for a web search I guess. 🙂

  3. Call me cynical says:

    Hmmm, so this paper was commissioned by NetFlix. They aren’t exactly a dissinterested party in this debate and some of the high level conclusions defy basic logic.

    Look at the first epiphany from the study suggesting that video streaming reduces internet backbone costs. Last time I looked, internet backbones don’t get fussed if they are carrying video, VoIP, email, or HTML code for web pages – they just need to be to big enough to carry peak traffic loads.

    The study looks like a lobbying tool to me.

  4. Can’t Complain About The Speed
    @Graham, I don’t complain about the speed of the service. UBB has nothing to do with the speed of service. We are not talking about speed, but rather the amount of time you can use that connection for. I have a 3 MBit connection, but only 25 GB of transfer. So while my connection is fast enough to watch high quality streams on Netflix, watching too many movies (which isn’t really that many movies) would cause me to easily go over my small amount of allowed transfer.

  5. @ Scott Elcomb

    #3 doesn’t make any sense either. “no correlation between volume of Internet consumption and costs for telephone and cable company last mile providers” Obviously the author of the study has never priced out the cost of replacing perfectly good modem/routers and DSLAMs or pulling in fibre to give users higher speeds on the last mile. I guess they didn’t look very hard for costs.

  6. There are plenty of legitimate reasons to be critical of UBB. Sadly the main conclusions of this study are so obviously and poorly “torqued” that they discredit the entire debate.

    Let’s hope the media doesn’t see this study as it will discredit the entire anti-UBB movement and make us look like a bunch of lunatics.

  7. According to Mr. Bibic Canada is a leader in broadband pricing and quality, so why do we still make noise?


  8. Happy to be Canadian says:


    As a country, we have an inferiority complex so we put a lot of effort into convincing ourselves how awful it is to live in here. Sadly, complaining has become a favorite form of recreation for many Canadians.

    Americans envy our healthcare, Asian countries envy our pristine wilderness, African countries envy our economy, middle eastern countries envy our freedom and political stability, Europeans envy our natural resources and energy prices, and the list goes on and on.

    I guess if we didn’t whine about our internet then we would have to find something else to complain about like hockey or winter … but wait, we complain about those too!

  9. Lol Happy,

    So our lousy internet is our Canadian form of penance? Wait, let me get the sackcloth and ashes.

  10. Happy to be Canadian says:

    @ Crocket

    Last week I tuned in a radio talk show where the host had all the callers revved up about a proposal to ban pop machines in the city – only milk, soy and vegetable drinks allowed! The phone lines were going wild with people calling in for a chance to spout-off. Yup, we Canadians will jump at the chance to complain about anything – I guess for some people it’s a form of fun. Even more interesting is that an entire industry has evolved to facilitate it!

  11. Shame on Bill St. Arnaud for being a paid shill for NetFlix. I thought this forum was for thoughtful and independent debate, not paid propaganda and lobbyists. Shame.

  12. Nothing to see here …
    Oh yes, poor Bell getting picked on for just telling the truth via their Mr. Bibic. No shameful shill here … move along folks.

  13. Angry In Toronto says:

    We Need Legislation to Protect the Publc!
    I totally agree with Netflix guy! Bell & Rogers are identifying and eliminating the competition and are using the RIAA approach to eventually gain a monopoly. There are no nice guys at this level.

    I would like to see legislation which clearly identifies and mandates Internet Usage Measuring Devices. A current concern of mine is that when I download via torrent a linux distro or a ROIO i get DOS’d by my ISP (Bell). That generates extra traffic from me to ask for resends and obviously increases the traffic from me and to me.. should I be billed for that traffic?

    I think that right now I am being billed for traffic that does not reach me. We need to fix this now, not 6 months from now, we need to make this an election issue.

  14. Well this is an inconvenient fact.
    Why don’t they just charge everybody 10$ more and give us all we can eat. This elaborate dance about screwing internet customers for what is typical usage is getting tiresome.

  15. @Happy
    So we should settle for mediocrity because others have it worse? Why should Canadians be happy about sub-par service at luxury-level pricing? I’m not a fan of the “it’s worse elsewhere, so shut up and eat it with a smile” mentality.

    I used to be a proud Canadian when I was a kid (and I’m not ashamed now), and yes there are far worse places to live (also better ones). Now I’m cynical and paranoid and I don’t know if it’s because things are getting worse at a faster rate than ever before or if it’s just because I started paying attention.

  16. Happy to be Canadian says:

    @ Scott

    What right do we have to expect to have the fastest internet for the lowest price in the world? Our economy is based primarily on what we can pull out of the ground and sell to other countries. We aren’t self-sufficient on food, clothing or even the basic technologies we take for granted everyday like cell phones, TV, or computers. I look around my home and office and vitually everything here was manufactured in another country. Our per capital GDP is about average for an industrialized country so we don’t stand out as a productivity leader in the world either.

    Despite all that we still manage to enjoy a very good standard of living that is the envy of many countries around the world. On the broadband front we have roughly 80% household penetration compared to Japan at 56%. That’s not bad.

    Maybe if Canadians had a bias for action instead of a bias for complaining we would see more entrepreneurs out there trying to build a better internet instead of complaining about the networks we have. The CRTC has made it super easy and low risk for anybody to get into the ISP business but few if any of the indie ISPs are willing to build their own networks and prefer to just resell from Bell. Why is that?

  17. @Happy to be Canadian

    Well you can say the same thing re the US as most electronics are made in China. The broadband penetration in Canada is close to 70% per and despite what you say about Canadians complaining, Canadians are well known to be friendly and easy going around the world. As for independent ISPs building their own network you do realize that some of the existing backbone is built with taxpayers money.

    I was wondering how you have determined that it was super easy and low risk to get into the ISP business. Have you built an ISP and wade through the mountains of paperwork that the CRTC has built up over the years along with the up front capital needed to hire network engineers, support personnel and the networking equipment before you have any customer base?

  18. Happy to be Canadian says:


    Comscore says 80% penetration and CRTC says 75% per The report also ranks Canada cheaper than the US, Australia, France, and Japan per

    I never said Canadians weren’t friendly, we just like to complain a lot. Look at all the whining about how expensive internet services are in Canada when we actually enjoy cheaper prices and greater availability than many other industrialized countries. Comscore also ranked Canadians number one in the world for video downloads and social media usage – there is no way we could achieve that ranking if our internet sucked and it wasn’t widely available. The hard data says we are doing pretty good but most on this forum still found something negative to complain about.

    As for getting into the ISP business, how many businesses can you start up in Canada where the government forces your competitors to sell you everything you need at a discount to their retail price? Not only that, the government requires them to sell you their latest new products at a discount as well. You can’t lose unless your are really lazy and incompetent.

  19. Happiness via mediocacy
    Happy your are welcome to your opinion. I find it amusing though that you are complaining about Canadians being complainers.

    The figures you (and coincidently the Big ISPs) use to show Canada as a ‘low cost’ internet country fails to take into account the high retail UBB overcharges above the low capped bandwidth. Grandma checking her email once a week may be happy but the ever growing base of new media users are not.

    Finally, those poor businesses that are forced to share the government subsidized taxpayer funded backbone must be so unhappy with their multi million dollar PROFITS.

    The same companies that charge $27,000 in cell phone roaming charges have proven to be actually costing them less than $50.

    It’s these guys we should be content with? Don’t worry be HAPPY I suppose?


  20. @Crocket: “The same companies that charge $27,000 in cell phone roaming charges have proven to be actually costing them less than $50. ”

    Mhhh the recent examples were of:

    – a lady doing data roaming in Egypt, with Telus repeatedly warning her and cutting the service, while the lady was calling them back asking to restore the service

    – the guy featured on CBC that was data roaming with his Bell iPhone in Russia

    C’mon. They were both doing something pretty dumb and got slapped with huge bills. If I go run my car into the closest tree should I whine on CBC how much the repairs would cost.


  21. @Crocket:

    As for the UBB discussion, I personally “use” about 20GB per month, so I would fit with about any plan except the absolutely lowest tier.

    What I want from my residential Internet connection is that it’s always on and fast, so I can do things like remote desktop in a civilized manner. And I also want polite, courteous customer support would I need it at some time.

    If my neighbors are entertained with placing 2 TB worth of files in an unattended download queue and let it run while they are drinking beer in the backyard, making my life miserable in the process, then they’d rather be prepared to foot the bill.

    As for Netflix. What do we have here. An US company whining of the difficulties to distribute B series movies via Internet to Canadian customers. Funny how Michael always sides with the US guys. “increased competition” blah blah. Say Michael, can you comment on the increased competition resulting from AT&T buying T-mobile?


  22. Happy to be Canadian says:

    @ Crocket

    You do realize that Canada’s internet was built using private equity and was not subsidized by taxpayers in any way don’t you? Sure the feds kicked in $225 million last year (for the first time in history) to help help fund broadband expansion into remote communities where the business case will never make sense. And then the Alberta government built their “SuperNet” but it is really just a network for government agencies and doesn’t serve retail consumers or business at all.

    It’s probably a good thing our government never got involved or the costs would have spiralled out of site just like the infamous gun registry and we’d be paying $7,000 per month like they do in Turkmenistan

    Yup, you caught me – I complain as well – what can I say, I’m Canadian 😉

  23. @Napalm
    They shouldn’t be affecting your Internet unless Bell oversold their backbone. The last mile through DSL (and now cable) is not shared, so there’s no way there would be congestion caused there.

    Not exactly sure what your point is. UBB is fine, but the way they are doing it is completely wrong and pretty much anti-competitive. People should be able to complain about it if they want to. Not complaining about it is not going to fix anything.

  24. @Happy “It’s probably a good thing our government never got involved”

    $7000 per month? This is obviously not a technological issue, in no way would infrastructure costs be that high anywhere. I have traveled the world extensively and what makes things really expensive for the common folk is corruption, which is probably the case here. So yes, in one regard, ‘government’ involvement can lead to higher prices if that government is not accountable. Unfortunately greed, the seed of corruption, is not limited to governments which is why accountability and oversight is needed to anyone with a large advantage.

    Sure, people should pay up for knowingly doing stupid things. That is the nature of determent, it’s the scale that is at issue here. But if the next time you drive over the speed limit you are OK with a $5000 fine, good on you.

  25. @Crockett: “Sure, people should pay up for knowingly doing stupid things. That is the nature of determent, it’s the scale that is at issue here. But if the next time you drive over the speed limit you are OK with a $5000 fine, good on you. ”

    If you really overdo it in Ontario, you can get your license immediately suspended, fined $10,000 and the vehicle impounded for seven days.


  26. Happy to be Canadian
    I think Happy For Canadian is getting paid by Rogers/Bell to input his “opinion”…

  27. Happy to be Canadian says:

    @ mike

    I can assure you that I am not on Bell’s or Roger’s payroll but I admit that I have a very low tolerance for intentional misrepresentation of basic factual and technical data. Are we to assume that you are being paid by OpenMedia for your “opinion”?

  28. Canada government investment in Canadian Telecom going back to 2003
    @Happy “Canada’s internet was built using private equity and was not subsidized by taxpayers in any way … Sure the feds kicked in $225 million last year (for the first time in history)”

    Oh, that pesky basic factual and technical data …

    I live just 20KM from a major population center yet High speed [non satellite] internet did not arrive till 2007. My connection and all the ones in the area were 50% SUBSIDIZED BY THE GOVERNMENT and I still had to pay $450. Funny enough we still don’t have cell service.

    I get it that telecom is a for profit business, but the internet has become as essential a service as land phone lines as a means of communication and infrastructure. It is time, in my opinion, for a combination of cost regulation, government direction and an opening up of foreign investment rules to foster competition. This method has worked well for the countries that enjoy faster and more affordable internet than we have. At the start of the Internet revolution Canada was at the forefront, now we are dogging the middle.

    Will this cost some jobs, possibly .. or it may create more. Oh, it may impact the balance sheets of Bell & Shaw. The Shaw brothers may have to tone down their $16,000 per DAY pensions (YIKES!!) …

    Sure, some stock owners may loose a bit, all the while the Canadian public and our digital economy flourishes. Yes there needs to be a balance, but right now one side of the scale is scraping the table.

  29. Happy to be Canadian says:

    @ Crocket

    All the articles you have referenced demonstrate that the government funded broadband projects in rural and remote communities where it would be impossible to build a business case that would justify private investment.

    Since those rural and remote networks were built with taxpayer dollars I agree that we should force those network operators to open up the access to more competition in those communities. Not sure what that will do for the other 25 million Canadians who get their service from networks built with private equity but hey, you made your point, as irrelevant as it was.

  30. So there is a case for rural Canadians to have faster and better internet fostered by competition but those poor city dwellers need to suffer?

    That sounds rather grumpy.

    I see no reason why networks built by private equity, mostly garnered by fees from the people who use them, should be shielded from competition in an effective duopoly. There is anti competitive legislation and rulings in many of our economic sectors, telecom should be no different.

    The bottom line is the level of profits enjoyed by the telcos compared to the quality of service they deliver to Canadians is way out of whack. If that’s complaining .. fine, expect more and more of the same until the situation is rectified.

  31. Happy to be Canadian says:


    Why focus just on the Internet? Why don’t we look at the massive inequities on a broader scale. For example, many city dwellers have to pay for parking while rural Canadians don’t. I pay almost $400 a month to park my car near my office but my cousin in Fort Vermillion pays absolutely nothing. How is that fair? Sure I only pay $37 a month for my internet while he pays $60 for a satellite based service but I’m out of pocket far more than he is just on the differential parking costs. He also gets a tax break from the Northern living allowance while I get nothing. Sure it’s only a few thousand dollars a year but it adds up.

    I’m not sure what city you live in but when I look around Edmonton I have a choice of at least 10 different broadband service providers – I’m sure I could find a few more if I looked in the phone book. Where is this duopoly stuff coming from because I don’t see it out west?

  32. @ Happy

    You raise a very good point. Most urban Canadians have a choice of more than a dozen service providers for their broadband service, yet like Crocket they seem to be either unaware or unwilling to switch to another service provider when they are dissatisfied. Rural options are more limited but still not that bad when you consider satellite, WiMax and the plethora of wireless carriers selling aircard – they do tend to be more expensive than the cable or telco broadband but then rural Canadians do have lower costs for housing, property taxes, parking, etc. With that many options for consumers I see no reason for the government to get involved.

  33. Switch?
    I have a choice between my current service provider and … well nothing. There is no one else, I had to chuckle at your dozens of choices. It sounds like you are somewhere in central Canada where you are all tripping over each other, their is a world beyond Toronto. I don’t even have cell service.

    Now since you brought it up, the old rural/city costs comparison is a fun one. I know you don’t like to complain Happy, but whining about having to park your car is a good one. Take a bus, or light rapid transit, cycle in that bike only lane. I have none of those choices. And as everything such as shopping, school, work is further away from my residence my monthly fuel bill is higher than your parking.

    Now lets look at income and services. Urban and city dwellers earn more on average than rural dwellers, yes they pay more taxes but they enjoy more services. My son’s High school has no sports teams, Band or Drama and few elective choices. There is no fire hall or hydrants so my home fire insurance is twice yours, and in the sad event of a fire say goodbye to your house and all your belongings. I have access to one broadcast TV station and it’s very fuzzy. I must plow my own 2KM road to my house with a tractor. Last year I had to dig a new water well at a cost of $15000, you turn on your tap. The nearest hospital is one hour away.

    Welcome to the idyllic life of the rural dweller. I lived in Vancouver for 25 years so I know what both sides of the fence are like. I choose to live here so I’m not complaining, but I had to call out the victim city dwellers lament.

  34. @ Crockett

    I live in Saskatoon. At my home I have a choice of 1 cable company, 1 telephone company, 3 Wimax companies, 1 satellite company, 3 ISP resellers and at least 6 cell phone companies – they are sprouting up all over the place lately so it is hard to keep track. Sorry to hear that you are pretty isolated and your choices are limited but it sounds like you understood the tradeoffs and made the choice that was right for you.

  35. Actually Moria I did not chose to live here, but I am looking after ailing parents and I accept the limitations that puts on my family & I. Thank you for your sympathy, but I am quite happy with my provider really.

    Yet back to the original issue at hand, there are half a million Canadians and growing who are concerned with the business practices of the telecom companies. We are at a disadvantage globally, I am pleased though that the issues of access, copyright and fair use are starting to get the attention and awareness they deserve.

  36. @Moira: “At my home I have a choice of 1 cable company, 1 telephone company, 3 Wimax companies, 1 satellite company, 3 ISP resellers and at least 6 cell phone companies – they are sprouting up all over the place lately so it is hard to keep track.”

    It all sounds good on paper until you try to use something like Remote Desktop over them. Just for laughs, you should try it once over satellite.

    Then you realize that if you’re interested in a little bit more than the odd e-mail or Internet shopping, your real choice is between 1 phone company and 1 cable company. That is if you’re lucky enough to have both available at your location.

    And please let’s not mention the ISP resellers. Don’t start me on those or you’ll deeply regret it 🙂


  37. Part 1
    Lots of passionate noise here, not enough analysis. It’s interesting looking at the various positions.. Let me try and simplify some the points around this discussion.

    For the most part an ISP can be considered a single “network” with one or more ingress/egress connection points to other “networks”. These connection points are not measured or billed by usage, they are measured in “speed” with the assumption that you can use all that “speed” 100% of the time. “Overusing” such a connection is flatly impossible. Backbone providers supply these connections between networks at a flat rate billing that works out to far, far less than 1 cent per GB/month. ISPs must contract for a “speed” that meets their peak capacity times, and most times the connections are using a small percentage of capacity. The less of that capacity they use, the more “per GB” it costs them. Peering arrangements, where ISP’s connect directly between their networks are harder to cost, but logically they will be even less than a backbone interconnect.
    The key point here, is that ISP’s don’t generally don’t pay for “usage” at this level, they pay for contracted “speed”. That “speed” is available 100% of the time, used or not. Per client usage doesn’t enter into the picture here, but congestion (peak usage times) certainly does.

    Drill down a layer, and you get into the ISP’s internal network backbone structure. This is essentially a mirror of the ISP interconnect structure, with similar or even cheaper associated costs. I will include remote DSLAM and Cable distribution centers in at this point in the structure, it is still part of what I consider “backbone network provisioning”, although many of the ISP’s might chose to break this down even further. Again, usage doesn’t enter into the costs picture, but they still have to provision for peak congestion periods.

    Drill down another layer, and you come into the “last mile” to the customer premises. Here the differences between DSL and Cable technologies starts to diverge.
    DSL is essentially a dedicated connection to the DSLAM. Whatever speed that link is capable of, is all a customer can get. For the most part, the closer a premise is to a DSLAM, the faster the technology is capable of. Add a customer to a DSLAM, or increase their speed, and you need to “provision” more backbone speed to that DSLAM.
    Cable is a “shared” connection between many premises and the distribution center. Add a customer or increase their speed, and you potentially take away from everyone else. But cable technology is inherently capable of much higher speeds than DSL, in theory there is a RAW rate of 70Mbits per channel (and over 120 channels) available on your cable connection. It is much more expensive to add a distribution center (and split a neighborhood), but the added capability is much higher in doing so. Unfortunately, a lot of that RAW bandwidth is still taken up by TV channels.
    Even at this level, the ISP’s are pricing based on “speed”, not usage.

  38. Part 2

    So where does usage come into this whole picture? Statistics. Not every premise uses 100% of their speed all the time. Say you have 1000 customers each paying for a “speed” of 10Mb. By the numbers, you should need a 10Gb backbone to support them. But if you average their “usage”, you find those customers generally use their “speed” less than 10% of the time. So you provision (and price) based on those statistics, and only provision 1Gb of backbone. Map that percentage all the way up the layers. Sounds like a good business plan, the ISP makes more money and the customer gets a good price. Then throw in 2 wrenches into that mix, customers start using that speed more often, some even more than your estimated 10%, *and* they all start using it at the same peak time periods. On top of that, your highest “usage” customers are demanding even more “speed”. Your “business plan” just went out the window. It was based on buying and selling “speed” averaged over a statistical usage of less than x%. Not only is the percentage of “usage” growing, but the more customers you add, the bigger the differential is between “peak usage” (congestion) and the statistical average.
    In reality, the “usage” problem isn’t how many data bytes you are “using”, it is your “usage” of the speed they sold you and the time of the day you are using it, compared to the statistics based business plan the ISP’s built.

    A person “using” a trickle of 40KB/sec all month long doesn’t affect the ISP statistics all that much, but someone that downloads 3GB over 2 hours every night during peak periods upsets it plenty. Guess who uses more “data”?

    The “problem” is that end customer pricing is based on an ISP business plan that assumes certain statistical usage (of your speed). It doesn’t really map into data usage directly, but it is the handle they have chosen to apply. UBB, as proposed, isn’t the right answer. It might work if they can “map” that usage billing into peak congestion periods only.

  39. @ Napalm

    Agree with you completely. The public internet as we know it has no standard for QoS (Quality of Service). The client on your PC that is managing your IP connection can set QoS high but we know that all of the networks ignore that bit so nobody gets priority traffic management (Shaw tried offering a QoS option a couple of years ago but not sure if they still offer it). The only way you can get a higher quality service is to purchase a managed service from your ISP and it is a lot more expensive than the consumer grade stuff most of us use.

    IP networks, by design, are great for bursty traffic but when you want to run an application like VoIP, video conferencing or Remote Desktop that have a low tolerance for latency you are taking your chances, especially during peak traffic periods on the network (e.g. from 4 pm through 10 pm).

  40. @Moira
    Moira, you don’t need to go all that far outside of the major centres to get very restricted service. I live about 40 km outside of Ottawa, and have done so for about 20 years at the same house.

    Like Crockett, for me availability of highspeed is very limited. In theory, there is one wireless provider and I can get 3G, if you look at the converage maps. Trying to put that into practice, on the other hand… the wireless company can’t get a decent signal at my house, and my phone can’t get a 3G signal. Of course, I can’t discount the effects of the 250 kW doppler weather radar (about a mile away) on the interference I see, nor the 100 kW FM radio transmitter.

    I want to add to Crockett’s comment on a well; what a lot of people on municipal water tend to forget is that without electricity a rural person may not have water. Why? To use a well you need to have a pump. For instance, during the power outage as a result of the 1998 ice storm, I was without power, and therefore water, for 13 days, and I wasn’t the worst affected. Makes it pretty hard to shower or use a toilet. This also tends to colour what I consider to be an essential service. Thank God I’ve never had to have my septic bed dug up like one of my neighbours.

    Until about 10 years ago, I had a hard time getting 12 kbps on dialup; the line was too bad. Now I can get 26,400 bps pretty reliably. Of course, I paid an extra $76.80 per year for my phone line for the extra distance charge for about 12 years.

  41. @ Anon-K

    And people complain about the potential health effects of a 5o milliwatt cell phone when you can see a 250 KW radar and 100 KW FM tower from your home …