CRTC UBB Hearing, Day 2: What is so undemocratic about allowing a few companies to control the Net?

The second day of the CRTC hearing on usage based billing left the Commission with three fairly divergent views on Canadian networks, traffic management, and the wholesale tariff (coverage from the Globe,, Wire Report). While Bell focused on network congestion in its presentation on the first day, the cable providers and independent ISPs provided a much different perspective, focusing instead on incentives to invest (cable) and competition (independent ISPs).

  While the cable and independent ISPs provided most of the substantive debate, the much-anticipated appearance of Open Media garnered the most fireworks. Open Media (and CIPPIC) were told that much of their submission was outside the scope of the proceeding, since it focused on retail UBB and the Commission had already rejected extending the hearing to cover those issues. Instead, it faced questions about its membership, funding, and self-interest as well as shocking questions from new CRTC Commissioner Tom Pentefountas, who asked “I am trying to find out what is undemocratic about the system we have right now ‘allowing a few companies to control the Internet access market would be irresponsible and undemocratic’.” The question came in the context of questions that suggested independent ISPs were tremendously profitable without needing to invest in networks. While many Commissioners have asked informed, tough questions over the first two days of all sides, that line of questioning is precisely the sort that generates public skepticism about the CRTC.

Once Open Media was done, the floor was open to lengthy sessions with both the cable companies (Rogers, Videotron, and Cogeco) and independent ISPs. The cable companies provided a well organized opening presentation that avoided the focus on network congestion (the word congestion was barely mentioned) and instead emphasized the complexity of networks, the differences between cable networks and Bell’s network, and the need for policies to encourage ongoing investment. 

The discussion included several interesting revelations, including cable’s view that there is no bandwidth crisis (the issue for cable is paying for usage) and the claim that heavy users may be more difficult to manage than light users, since the network can better handle spikes in traffic but slow steady use presents challenges. The cable companies were asked why independent ISPs rarely use their TPIA service and while they responded that it was a function of history with cable primarily focused on residential service, Professor Catherine Middleton provides a far more convincing review of the barriers cable erected to stop independent ISPs from using their networks.

Perhaps the most important issue was cable’s proposal for a bundled wholesale tariff that includes a usage component. The cable companies argued that a usage component would foster greater usage, an argument that clearly did not convince some commissioners (particularly Molnar). The proposal also served as one of the most notable differences between cable and the independent ISPs, who appeared as the Canadian Network Operators Consortium. CNOC argued for a “building block approach” to the wholesale tariff that would allow for maximum innovation and flexibility. They noted that their approach would allow for new service plans (perhaps offering fast speeds and small caps or large caps and slow speeds – combinations not typically found with the incumbent providers) and greater consumer choice.

CNOC also addressed a number of misconceptions about independent ISPs, emphasizing the investment they make in their networks (arguing that greater profits will lead to greater investment, known as the ladder theory), the dangers of an unregulated space that would quickly resort to duopoly market behaviour, and acknowledging how unworkable cable TPIA was for many years.

CNOC also made a point of challenging claims of carrier network costs, arguing that “once a network is built and paid for, there is almost no cost to move Internet and other broadband traffic across it.” While that might sound controversial, it is consistent with a comment from Commissioner Molnar on the first day, who noted “we all, I think, can hopefully agree that there is no marginal cost to using the network when you are not causing augmentation.” (augmentation is a reference to needing to augment the network due to congestion). Bell said it agreed with the statement.

The hearing continues today with Primus, Distributel, Shaw, and the Public Interest Advocacy Centre.

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  1. great summaries
    Thank you Michael for weeding through the tedium and giving us these insightful summaries.

  2. Market Control
    …new CRTC Commissioner Tom Pentefountas, who asked “what is so undemocratic about allowing a few companies to control the Internet?”…

    Well, I don’t know about “undemocratic”, but it is certainly not a capitalist ethic, is it? I mean, we voted for a right-leaning social & economic system. If we wanted a managed market, we would have placed Mr. Layton/Ms. May, in charge. I guess, if Mr. Pentefountas needs a political spin, you might say placing a private interest in complete control of a market niche, is market management without representation.

    To me, it sounds like a bastardization of right-wing economics. In the past, it has been easy pickings for the Conservatives; it was just a matter of saying “too many crown corporations, Canadians want privatization”. Isn’t a market, serving our society, based on competition & consumer demand, what we are working towards? I am not aware of ever hearing any political party state their intention to hand over control of the market to a private collective, during the last campaign.

  3. I don’t like how they seemingly threw Open Media aside. They were there to represent us and now it feels like we don’t matter at all, looking at Globe’s note of “the hearing does not extend to Internet access for low-income Canadians.”

    It’s all business and our lives revolve around bending over to it.

  4. Open Media needs to organize a “few companies” boycott and see how many people would cancell their accounts. Just have a one day mass cancellation and switch to smaller ISP’s.

  5. …new CRTC Commissioner Tom Pentefountas, who asked “what is so undemocratic about allowing a few companies to control the Internet?”…
    I don’t even know how to respond to this. This is inexcusable and outrageous.

    This is not even an issue of democracy except in the sense that an overwhelming number of Canadians DON’T support an internet duopoly.

    His insinuation that there is nothing wrong with having a duopoly is the problem here. He is either incredibly slow, or completely corrupt.

  6. what is so undemocratic about allowing a few companies to control the Internet?

    The concept of democracy is that the group it represents can decide and define it. You can take it in two ways when it comes to the internet: Either ISP’s as a whole or Consumers of ISP’s

    Either way, allowing 2 or 3 companies to decide their service level (speed, bandwidth, caps, etc…) and being able to force that on their competitors, is incredibly un-democratic. Its autocratic.

    It seems to me the CRTC is ensuring it avoids dealing with the real issues while giving a semblance of listening to competitors and consumers to appease them.

  7. There isn’t anything wrong with a duopoly, or even a monopoly as long as it is acting within the specified laws, and the laws are fair and sound…

  8. dtangomike says:

    Definition of “undemocratic”
    Yes, the CRTC bears watching, but the question about what is undemocratic is valid, and not necessarily indicative of any bias by the questioner. I personally would like an explanation of what’s ‘undemocratic’ about UBB.

  9. James Plotkin says:

    UBB and democracy
    I don’t understand why the commissioner used that word. Frankly, I think everyone is freaking out over a small verbal misstep. Business isn’t supposed to be democratic. I agree however, that in this right leaning social economic construct we have going on in Canada, competition is a good thing and is commensurate with the values of our political leaders. In that respect, a duopoly goes against what our democratically elected government stands for.

    This doesn’t make UBB undemocratic…We don’t elect the Bell board of directors…their voting shareholders do. That process is democratic and should be the end of the use of that word in a business context.

    making reference to the democratic (or undemocratic) nature of UBB is silly.

  10. The democracy is your dollar, each one is like a vote. A few companies usually control most industries is probably what he meant. There are only a few national banks, airlines, dishwasher makers, etc.

    Open Media is a joke. They didn’t even understand the scope of the hearing.

    The bottom line is speed and price and quality, why isn’t Canada the best in the world?

  11. So far all I’ve seen are weak arguments from both side and a lot of conjecture. We’re so $cr3w3d!!! The BIG providers already know they have the CRTC in their pocket so, really, this is nothing more than a farce. The Open Media presentation was very disappointing as was the one from PIAC. Perhaps the consumer groups will be more compelling.

  12. Democratic again
    OpenMedia seems to be the party that first used the word “undemocratic”. It is perfectly fair to ask what it is supposed to mean in this context. In most democratic countries, telephone service was a monopoly until a couple of decades ago. We have moved on since then, introducing an element of competition, but that does not make us more democratic than Canadians were in 1980.

    As pointed out by Crockett, the usual term to use is “anti-competitive”. So the question becomes, why would OpenMedia write “undemocratic” when they mean “anti-competitive”? Does it stick in their craw to use “anti-competitive” as a term of disapproval? If so, what does that say about their claim of political neutrality?

    At long last, the commissioners seem to understand what is wrong with UBB and why it should not be imposed on us all. CNOC has a good chance of getting its point across. If you are opposed to UBB, you should be glad to see a clear discussion of the substantive issues, without distraction from anyone’s political circus.

  13. Thanks to Michael for this summary and also to Crockett for correcting what was in fact a misnomer. I would expect from Tom Pentefountas that he be true to a speech he gave in Banff last June, where he said: “It is our duty to weigh the evidence, without any predetermined outcome in mind, and to clearly explain how we have arrived at a decision.” We shall see…

  14. Who makes the Law? says:

    ALEC Exposed
    At an extravagant hotel gilded just before the Great Depression, corporate executives from the tobacco giant R.J. Reynolds, State Farm Insurance, and other corporations were joined by their “task force” co-chairs — all Republican state legislators — to approve “model” legislation. They jointly head task forces of what is called the “American Legislative Exchange Council” (ALEC).

    There, as the Center for Media and Democracy has learned, these corporate-politician committees secretly voted on bills to rewrite numerous state laws. — Center for Media and Democracy —

  15. I’m not convinced undemocratic was a misnomer
    While I can’t be sure because I lack both transcripts and context, it would not be surprising for the concept of democracy to be introduced in this discussion. The idea of “democracy in media” or “(un)democratic media” are common in discussions of control of traditional media e.g. newspapers and television. And Pentefountas’ question could originate from the stretching of the word “democracy” in these situations; no-one votes for newspapers, television, or ISPs, so what do they really mean? How is only having 2 ISPs per market “undemocratic”? Would having more ISPs to not vote for make it more democratic?

    My experience here is that when people say “undemocratic” what they really mean is they can’t get what they want. They can’t get news coverage that isn’t pro-government or pro-elite, can they can’t get an ISP that is cheap, net neutral, and without bandwidth caps. It could conceivably mean that they are having their Internet terms dictated by corporate rather than democratic government agencies, but that isn’t dependent on the number of ISPs, and, well, the CRTC is the commission of a democratically-elected government.

  16. Presentation by Claude Hénault to The CRTC Public Consultation on Review of billing practices for wholesale residential high-speed access services. July, 2011

  17. Devil's Advocate says:

    Re: Claude Hénault
    Excellent, down-to-earth presentation!

    We need more such cases put before the CRTC.