Netflix on Canadian Data Caps

Netflix on the use of data caps by Canadian ISPs:

data caps are actually a very poor way to manage demand and limit Internet congestion. All of the costs of supplying residential broadband are for supporting the peak loads, typically Sunday  nights for residential customers.  Bandwidth consumed off-peak is completely free; it literally has no marginal costs. If ISPs really wanted to limit their costs and congestion, they would limit speeds at peak times.  But if their goal is instead to increase revenue, then making consumers pay $1 or more per gigabyte is an excellent strategy.

When we state the marginal costs of residential wired gigabyte are below one penny, but are not zero, that is because we are making the appropriate costing assumption that some of an average gigabyte is transferred at costly peak times. 

Canadian consumers have been outspoken against the excessive charges they face, and hopefully Canadian ISPs will listen to them by raising the caps or abandoning them altogether.


  1. Misplaced hope
    Canadian ISPs have no reason to do ANYTHING with this bloody duopoly they profit from

  2. Don’t look for hope from Harper…
    He’s looking for stronger data monitoring rather than rational consumer pricing.
    Cons may lower taxes but doing so while dumping crud onto your lawn is acceptable? I’d probably vote Conservative on general principles but Harper’s policies beyond taxes stink.

  3. does anyone believe the “congestion management theatre” any more?
    Surely not a single person believes any of this “congestion management theatre” any more right? Everyone knows that UBB is about nothing more than gouging more money for already way over-priced services because they know there are no alternatives in price-collusion oligopoly-land.

  4. Bill MacEachern says:

    How naive of Netflix
    The guy who owns the pipes should not be allowed to own content creation companies or else there is an inherent conflict of interest. As has been noted before, Rogers On Demand movies don’t count towards your monthly cap. Anticompetitive, much?

  5. Over 77 million users of the playstation network had their information and credit card numbers exposed, and Giest still hasn’t reported on it. One of the biggest security breaches in history, with a tremendous amount of impact on Canadian consumers and we’re still talking UBB on this blog, which is a dead issue and all political parties are behind ending it. Interesting.

  6. ScytheNoire says:

    CPC aren’t against UBB
    I think Jason is speaking too soon. The Conservatives could have ended UBB for good, but they didn’t. They still haven’t said what their internet plans are. This is because, as usual, the Conservatives are pro-corporation, anti-consumer. So if they get elected again, then they’ll allow their company buddies to do whatever they want, once again. UBB isn’t a dead issue, and neither is the issue of Canadian ISP problems. Sony’s network breach only affects those who own a PS3, and without internet, that isn’t an issue. So Canadian internet trumps the Sony story.

  7. Phillipsjk says:

    Careful what you wish for.
    I decided not to vote NDP because they want to ban *all* UBB practices. This will discourage ISPs from investing in infrastructure upgrades.

    IMO, Usage-based billing is OK as long as it is really usage based and not punative. If the connection charge was $10, and the per-GB charge was $0.02: I don’t think many people would be complaining. Especially if you can still get the $40/mo flat-rate plan (2 TB or transfer included, minus 10% for ATM overhead.)

    Note: I think bandwidth costs in Canada may be 10X higher than in they are in the states: the reduced population is paying for equipment that costs about the same. So Canadian bandwidth may be worth $0.10/GB, meaning the hypothetical $40/mo plan only nets 200GB. (Shaw charges $300/mo for their “server connect” package offering that much bandwidth).

    @ScytheNoire: I think you mean, “Only people paying a one-time rental fee for a PS3 are affected.” Of course, If you never got a PSN subscription, they wouldn’t have your credit information.

  8. Un-Trusted Computing says:

    @Jason K
    For what it’s worth Jason, PSN is not a “Canadian” issue, it affect Canadians of course, but I think it may be a bit beyond the reach of this blog.

    That’s my theory anyways…

    The dsl/broadband reports has been covering the topic extensively as has “Anonymous” who shares some insight as to why the attack took place.

    Good to see you around again.

  9. @Un-Trusted Computing
    The privacy of Canadians online, and security of their credit card information is a very Canadian issue, especially with the Canadian Privacy Commissioner now looking into here in Canada. Just wondering why this got the back seat to UBB that’s all. Usually e-commerce issues are front and center on this blog. UBB is more political right now. Where are we with laws protecting Canadians information in the cloud? What applies here with respect to law. UBB is important, protection of financial information to me anyway by far outweighs any importance UBB may have politically right now.

  10. Geist is also the leading expert in Canada on e-commerce law. I’m pretty sure Canadian consumers affected by this PSN breach would very much appreciate any advice, help on how to deal with their financial information being exposed. Currently Sony is only listing agencies in the US that assist with stuff like this.

  11. I agree 100% Any Caps should be tied to prime time. I suspect this will be what the CRTC will say too.

  12. Guys… listen carefully to what the big three are planning
    Netflix might not want to bite the hands that deliver their goods, hence their comment on ubb and pricing. UBB/caps should be unacceptable in any instance/form. How about opening up the markets to international competition, especially if the CRTC is not going to regulate it… wait a minute.

  13. Un-Trusted Computing says:

    FWIW: My account never had a proper name and address but my credit card was on there intermittently and I did cancel it even though there wasn’t any mystery charges on there ~7 days after the network was compromised.

    I would advise fellow Canadians like myself to do the following:

    If your CC was *ever* on PSN (mine wasn’t at the time PSN was compromised) cancel it and change the number.

    Change all passwords you have identical to the one you used on PSN

    The rest would be standard due diligence, I’m not diminishing this by any stretch but I don’t think MGs not covering this on his blog counts as neglect on his part.

    99.9% of PSN users are aware of this now.

  14. If it only works like that…
    @Phillipsjk Alas, this will never happen – it will never be $0.02/GB or $0.10/GB. As we saw from UBB they want to charge $5.00/GB which is outrageous. And to add insult to injury the base price wont change. The reason why there is no infrastructure commitment by the ISPs is because they got nothing to loose if they don’t do it. I say align business practices to match what we want, and businesses will change its way – for example allow competition at government set prices per GB ($0.05-0.10) for broadcasters and soon you will see cheaper, or at least more bandwidth… Until then corporations will do what anyone else will do – try to get maximum ROI

  15. Kepp your voices raised
    The only way to keep this issue alive is to continue to make a big stink about it. This issue has legs only because 1) it affects so many people & 2) It’s easy for people to understand. Unlike the more complex issues of copyright, which is still affects many but not as obvious.

  16. @Un-Trusted Computing
    This blog has become way too politically motivated rather than a source for useful information. From the looks at the diminished comments on this blog lately, I’m sure I’m not the only one making that observation. Also one of the reasons why I rarely post on here anymore.

    It’s MG’s blog and domain, that I’m not disputing. Just curious as to why privacy and cloud security (which MG has treated as a priority in the past) somehow take a back seat to politically motivated ideology on an issue that has been shut down by all political parties.

  17. Un-Trusted Computing says:

    @Jason K –Fair enough
    Your point is well taken, although I’m certainly guilty of it there’s a bit too much proselytizing going on here and surrounding UBB generally.

    Some well thought out reporting on other issues would certainly give back the edge this blog once had.

  18. @Un-Trusted Computing
    “Some well thought out reporting on other issues would certainly give back the edge this blog once had.”
    I completely agree with you. It’s not just the PSN issue, some major news around Amazon’s cloud service last week didn’t even make air time on this blog either. If we are going to be talking UBB here, a follow up to some major news on the Cloud in general over the past week should be addressed as well. UBB effects the price of digital product, but more importantly the news around Amazon and the PSN over the past 7 days puts into question whether or not there will be a viable digital marketplace in the near future, for the effects of UBB to really take any hold.

    Do we have current laws that protect business and the consumer in a digital cloud environment? Should we not be taking events over the past week seriously to discuss e-commerce law, and digital policy as it relates to the cloud? This is where a lot of discussion has been globally over the past week, except in Canada with our politicians and e-commerce experts. Many are concerned with Canadian laws, and what do we need or have in place already? I think that consumers and businesses need reassurance right now. I’m an educated IT journalist, but I don’t have a law degree. Many in the past have relied on MG to provide some legal insight on e-commerce. It can be sometimes hard to snap back to that when you have been in the political policy trenches for a while.

  19. This blog has become way too politically motivated rather than a source for useful information.

    Hmm, could it be because there is an election on?

    Also, the parties platforms and policies are what will determine how we use the technology we all care about.

    I don’t see a problem.

  20. @Crocket
    “Also, the parties platforms and policies are what will determine how we use the technology we all care about.”
    None of the political parties have commented on any of the events over the past week or so with Amazon nor the PSN. None of the political parties offer anything in their platforms to protect Canadians from digital identity theft, nor protection for businesses on cloud services. In order to spell out how we use technology we care about, policies around what’s happened over the past 7 days with Amazon and the PSN are essential to that argument. There’s a hell of a lot of policy missing, and a hell of a lot of Canadian information missing on this as well during an election. That’s extremely disturbing, considering the importance and roll digital policy will take in the next 2 – 5 years on our economy, and the trust people are now questioning on our digital marketplace. A lot will be riding on how we handel the past weeks events on policy and law.

  21. @Crocket
    “I don’t see a problem.”

    I’m usually the last person to say or admit this, but the big problem is brain drain to the US. We have to have a competitive digital infrastructure here to gain any economic benefit from the future digital economy. Tech companies in the states right now are on a major hiring boom. The US is light years ahead of consumer credit and digital identity theft policies compared to Canada.

    Outside of the ideological debate on digital policy in Canada we have yet to decide really a future path for digital economic growth. The Liberals, NDP and Greens haven’t really put forth solid policies around that. The Conservatives are MIA on almost anything related to digital economic policy, which is appalling considering the digital economic consultations they have been holding for over a year now. If the experts don’t get a move on here within a few months and decide out digital economic future, we might as well shut the doors on Canadian innovation. We won’t be able to compete with everyone else. That’s the reality of the situation, and has been since Obama’s last state of the union address.

    UBB is small potatoes compared to what we face on the policy front right now.

  22. re: jason and ubb
    Yes, the PSN hack is big news right now, however UBB is far from dead. Shaw fully intends to roll it out before this summer which makes it a very not dead issue.

  23. Netflix: “Bandwidth consumed off-peak is completely free”

    Huh??? Using that logic the airlines should give away unsold seats for free to anybody who wants them, since they would fly away empty otherwise.

    Their understanding of business is just a surreal …

  24. …”Using that logic the airlines should give away unsold seats for free to anybody who wants them”

    Check seat sales against retail prices.. Then factor in the weight, paperwork, security checks, crew, etc..

    They almost do “give them away”. Surreal as it may sound.

  25. UBB/Data Caps are only a cash grab
    When I make a local call on a land line I can talk for as long as I desire without any penalty charges. I can also make any number of calls during the month. I can watch my TV connected to cable or satellite for as long as I want without any penalty charge or being called a hog.

    I should be able to use my Internet connection in the same manner. There should be no penalty fees for utilizing the network.

    Rogers, Bell and Shaw have overpriced their cable/satellite product and people are finding other sources. Now they will try to do the same to their Internet offerings. They have outdated business models and they are looking for ways to generate revenue. They may control their cable/satellite systems but the Internet exists in a different manner and will not fit the same controls.

    Why should Netflix have to compress their service in Canada to help customers from going over their service caps. Once again the customer is paying for an inferior product thanks to these monopolies.

  26. @oldguy

    Agree the airlines discount their seats but they aren’t free. Are you suggesting that the ISP’s should charge a premium for downloading during primetime? I’m not sure I like that model but that is the way many other businesses price their products (airlines, movie theaters, electricity, etc.) Although that sort of pricing approach would solve the issue of how to fund the construction of extra network capacity for peak periods.

  27. @Michael

    As I said, check into the “overhead” involved for a single additional passenger on a flight that isn’t full. Then look at the prices they charge. They are very close to giving that flight away after those overhead costs, maybe even end up with a slight loss. They do this for a very simple reason, customer loyalty and new customer attraction. For someone with flexibility in flight scheduling, they get new customers to “sample” them and give loyal customers a break – at a price that effectively costs the airline nothing. Surreal, but still true.

    Given the hard choice between a flat monthly UBB scheme and a “peak period usage premium”, I’d take the later. It more accurately addresses the real problem the ISP’s are facing for network provisioning.

    UBB does not address the “problem”, even though they might use the extra profit to expand their network capability. A flat rate increase for everyone would also generate the additional profit to expand network capability – and they would end up with upset customers in droves. UBB is simply a sneaky way to charge *some* customers more. They could be just as “accurate” by charging every customer that has a odd ending phone number 50% more. But there is a veneer of justifiability in smearing some of their customers as “bandwidth hogs” based on total monthly data transfer. They can “sell” that idea to the uninformed.

    Do the math. If a customer downloads 3GB over a 2 hour peak period every night, and another customer has a trickle 35KB/sec flow all month long, who will get hit with a bigger UBB bill? But who is causing the peak period congestion that the ISP is attempting to address? On a full network usage graph, can you even see that trickle during peak periods? Do the same math on a 50KB/sec or 100KB/sec steady trickle flow. Neither of these are noticeable during peak periods either, but on a monthly UBB basis they add up very fast. It’s that 3GB during the peak period that is causing the “problem”, yet they won’t be the ones paying the big bucks under monthly UBB.

    Honestly, under monthly UBB there is no incentive for me to schedule or batch my database mirror updates. In fact it will be an incentive for me to reverse the scheduling and batch everything to happen during peak periods – adding to problem. After all, if I’m gonna pay for it anyway, I might as well make it hurt the ISP (and the other customers) exactly where/when it will hurt the most.

  28. Sorry, I don’t agree with UBB at all, whether it be peak period or monthly. The entire concept is way too easy to abuse. We ultimately pay more and more for a service that gets cheaper and cheaper to provide. The only scheme I could possibly agree with is peak period throttling with no monthly caps. Sure, throttle EVERYONE down to say 480kbps down and perhaps as low as 240kbps up at peak times, but open it up the rest of the time and those peak periods should be well defined and mandated by the CRTC. None of this loosy-goosy carp we see today.

  29. Mr
    I’m sick of paying for TV that I don’t watch much.So I want to just watch my TV off the Internet.With UBB that plan is nixed. Maybe that was the “Monopolies” plan, to make Internet too expensive to watch TV on. It will stop Internet TV from taking off and threatening their service model. Could work if there was UBB on all services like cable and satellite too. That way the playing field would be more level.
    Bill has a great comment (The guy who owns the pipes should not be allowed to own content creation companies or else there is an inherent conflict of interest. As has been noted before, Rogers On Demand movies don’t count towards your monthly cap. Anticompetitive, much? )
    All for naught for me anyway as I can’t even watch You Tube with the so called Hi-Speed we have since moving to Northumberland County.