Why Net Neutrality and Usage Based Billing Are Two Sides of the Same Coin

The CRTC hearing on usage based billing opens this morning with two of the big players – Bell and Open Media – both slated to appear. Since the CRTC refused to extend the hearing to retail usage based billing issues, I suspect the outcome will be anti-climatic. There may be some new rules for wholesale UBB (which will only serve to demonstrate how badly the CRTC has bungled this issue), but the broader data cap issues will remain unchanged for now.

The UBB hearing comes immediately on the heels of my report last week on two years of failed enforcement of the net neutrality guidelines, known as Internet Traffic Management practices. My report has received wide media coverage (Montreal Gazette, CBC, Wire Report, GeekTown) as well as responses from both the NDP and Liberal parties. While net neutrality and UBB are ostensibly separate issues, it is important to recognize the clear linkage between them. As the title of this post suggest, they are two sides of the same coin. 

The numerous violations of net neutrality (and make no mistake, over one complaint per month when the burden is exclusively on the shoulders of individual Canadians is significant) and the near-universal use of UBB are both a function of the lack of competition within the Canadian market and the inability (or unwillingness) of the CRTC to play a more proactive regulatory function in the absence of robust competition. For the dominant ISPs, they jointly provide the means to erect barriers to competitive services by rendering such services either unusable (throttling speeds) or more costly (data caps).

The net neutrality complaint against Barrett Xplore, which throttled Internet telephony services so badly they could not be used, while offering customers their own telephony services, provides a perfect example of how violations of net neutrality can be used to anti-competitive effect. In the realm of UBB, the reduction of data caps that greeted the entry of Netflix last year demonstrated how the UBB can be used to hurt the competitiveness of online video services and the wholesale UBB plans were clearly a mechanism to undermine independent ISPs.

Given the similar competitive effects and the lack of broadband competition in Canada, both net neutrality and UBB require a strong regulatory response. The experience with net neutrality places the spotlight on the limits of guidelines without enforcement and screams out for enforcement transparency with full disclosure of all complaints and resolutions, penalties for violations, and audits of leading ISPs.

As for UBB, I argued earlier this year that the CRTC made a critical mistake in establishing traffic management guidelines for technical measures (ie. throttling) but leaving so-called economic measures (caps) untouched.  Instead, I argued that guidelines are also needed for economic measures, which I called iBUMPs – Internet Billing Usage Management Practices. They featured both transparency and disclosure requirements as well as a reasonableness standard. Without real enforcement, however, all the guidelines in the world will make little difference for net neutrality or uncompetitive data caps.


  1. I want my Internet from a large ISP. They are better connected and have Support staff. I just don’t want to be ripped off by them. I want them improving speed every year or so and lowering prices.

  2. @Sylvain
    This is how it should be. Basically like it is in the rest of the world. We’re a$$ backwards here though. As time goes on, we pay more and get less. I’m paying substantially more than I was back on 2001, my connection is slower, primarily due to throttling and now there are usage caps which were much less common back then.

    Isn’t this the opposite of how market dynamics should work? Look at England, the US, Australia, anywhere in the Nordic countries and most other places. Internet has become cheaper and faster in most places. What we pay top dollar for in Canada would be considered an unacceptable, sub-standard, entry-level services in most of the developed world. We’re simply being gouged!! All of out vertically integrated major players should be collectively brought up on anti-trust charges.

  3. I expect nothing to come out of this that would make it so that Bell and the rest will actually have to really compete. Because if there’s one thing the CRTC is good, at, it’s protecting the big guy and not the little guy. Mainly due to their 1) lack of understanding of the technology they are trying to regulate and 2) their blind faith at taking the big guys numbers rather then getting independent verification.

  4. Brass Tacks
    Lets be frank … The issue here is an economic one.

    Even if there are technical issues such as congestion, and the degree of that is questionable, these are solvable by technical measures paid for by plain old cash. The real question is how much of that cash, which is earned from subscribers, goes toward infrastructure improvements or towards shareholder (and CEO) benefits.

    Now accepting that an ISP is a business, whose purpose is to make profit, there is an argument that it is also a public service akin to the telephone system. Some would even say that as a information and communication system it has surpassed the telephone in both usage and importance.

    With this in mind it is reasonable to say that operating the Canadian Internet backbone is both a business and an essential infrastructure service. Therefore a balance is needed between regulation and market forces and that is where we are seeing the battle today.

    It seems that the ruling powers at Bell (and the other ISPs to varying degrees) are more interested in the profit side of the equation than improving their service to their paying customers. It is incumbent on the government then to counter with regulation and intervention to bring back some balance.

    The CRTC has proven with their recent decisions to be ineffective in protecting the consumer from ISP anti-competitive business practices, which I would argue is their main mandate. Their earlier easy passage of vertical integration was obviously flawed, which has compounded the problems we face today.

    I see a need for a rethink of the CRTC mandate and a reconsideration of its makeup, both in staffing and scope. I would also like to see some greater government legislative guidance and even investment towards improving out digital infrastructure and competitiveness.

  5. Doug Webb says:

    It’s time to change paradigm
    It’s time to change how this service is delivered. Cities and district governments should own the local internet infrastructure and these companies should compete to manage it. That would put power back in the hands of consumers.

  6. Deintegration…functional separation of content/delivery/telecom such as in the UK. Worked well there, why not here?

  7. It’s all about Speed.
    Throttling anything is a complete BS. If you sell a damned pipe and I want to use all of it with skype then so be it. It doesn’t matter if there are times where network gets congested, you sold it, you provide me the freaking service. Or do like power companies and offer cheaper data prices on peak times. But then you can’t have a cap, you need to charge for usage and I decide how much I’ll use and if I’ll venture at peak times.

    It’s all about selling a damn service to the maximum number of users the physical structure supports. Not the maximum number of users that can give you money.

  8. Here is a good article about the CRTC.

    I particularly like the closing statement.

    “The CRTC “has had a gun put to its head” to lay off the hugely profitable big telcos and broadcasters, but at the same time the Conservative government says, “‘What’s the matter with you? We don’t have a competitive market for consumers,” said Janigan.”

  9. Again how blind and out of tuch do you have to be that you can’t see that broadcasting companies should not be in the business of providing internet access since its been shown that they can’t deal with the conflict of interest that arises when new media companies pop up and deliver services to Canadians through the broadcasters internet network.

  10. @End User “Again how blind and out of tuch do you have to be that you can’t see that broadcasting companies should not be in the business of providing internet access”

    There are many forms of ‘blindness’, from myopia to the kind caused rose coloured glasses, but in this case it is unfortunately the garden variety ‘blind eye’.

  11. Retail rates must be reviewed as a result
    If wholesale rates are called into question, why aren’t retail? This doesn’t make any sense. Canada won’t be free from the constraints imposed by this baseless billing scheme until it’s dead and buried.

  12. I like the way Doug Web thinks
    These companies should not own the local infrastructures, UBB forced on wholesalers is abusing the responsibility Canadians entrusted them with when allowing them to build and paying them to do so.

    They take the handouts like a charity and then sell what they make from it.