Competition, Not Congestion Driving Internet Data Cap Debate

The Canadian Radio-television and Telecommunications Commission has struggled for years to deal with an issue that lies at the heart of Internet services in Canada: how can it foster greater competition from independent Internet providers while also addressing telecom and cable company concerns about network congestion.

My weekly technology law column (Toronto Star version, homepage version) notes that in 2009, the CRTC believed it found the right solution. It established Internet traffic management guidelines (often referred to as net neutrality rules) that created limits on how Internet providers could throttle or limit download speeds and encouraged providers to use “economic measures” such as data caps to manage demand by making it costlier to consume large amounts of data.

While the net neutrality rules applied to all Internet providers, the CRTC was particularly concerned that the dominant incumbent providers would apply their throttling practices at the wholesale level, making it more difficult for independent ISPs, who rely on the incumbents to connect to residential customers, to differentiate their services. If independent ISPs were forced to provide throttled services, their competitive position would be undermined.

Just two years later, the CRTC finds itself facing a similar dilemma, this time involving the very data caps it once promoted. Some dominant incumbent providers want to apply data caps at the wholesale level, which would similarly make it difficult for independent ISPs to differentiate their services. The rules associated with wholesale data caps – better known as usage based billing or UBB – was the subject of another CRTC hearing last week.

While the arguments about network congestion from dominant providers such as Bell remained much the same, as the week wore on it appeared the commission was beginning to realize that congestion claims may be overstated and being used to mask fears of competition from the independent ISPs (the rebuttal phase of the hearing runs on Monday and Tuesday).

Bell argued that it faces serious network congestion issues and therefore needs regulatory rules that would require independent providers to pay by volume (ie. the amount of data consumed). This represents a modest shift away from its earlier usage based billing proposal, but still rests on shaky ground.

CRTC Chair Konrad von Finckenstein asked why if Bell faces network congestion, its sister company Bell Aliant has not implemented usage based billing. Bell argued that Bell Aliant “supported” the concept, but acknowledged that competitive forces and marketplace conditions in Atlantic Canada were such that it is currently not needed. In fact, Bell offers different data caps in Ontario and Quebec, also a function of marketplace competition. In other words, the same “congested” network features different data caps in three markets, responding to the competitive environment.

Further testimony made it clear that Bell’s congestion concerns place it in the minority of Internet providers. Rogers told the commission there is no bandwidth crisis and that it works hard so there is no congestion. Telus indicated that it does not employ usage based billing for its wholesale customers, since its network investments have allowed it to manage congestion without the need for such measures. Shaw noted that it recently raised its speed and data caps so that it offers plans far larger than those available from Bell.

The CRTC commissioners appear to have recognized that proposals based on limiting the volume of Internet use are not only bad policy – discouraging Internet use benefits no one – but are ineffective in dealing with network congestion.  The reason is that the amount of data consumed has very little to do with whether the network is congested.

Consider a four-lane highway that can comfortably accommodate 24,000 vehicles per day. If the vehicles are spread evenly at 1,000 per hour throughout the day, there is no traffic congestion. But if 20,000 of the vehicles attempt to use the highway over a four-hour period, the highway becomes very congested during that time frame. The aggregate volume of traffic may be the same, yet the congestion implications are very different.

The same is true of networks, which can be used to capacity without congestion concerns. It is only when there is simultaneous demand – called peak periods – that there is the prospect of congestion and the need to augment the network. Pricing to peak periods is precisely what the independent ISPs have proposed, noting that volume pricing hurts their competitive flexibility and does little to address congestion.

After years of debate, that message may finally have resonated. In her questioning of Bell, CRTC Commissioner Candice Molnar said “we all, I think, can hopefully agree that there is no marginal cost to using the network when you are not causing augmentation.” Bell agreed and it now falls to the CRTC to take that admission to heart by crafting rules focused on competition, not congestion.


  1. Solve the root problem, or stop wasting our time.
    “The reason is that the amount of data consumed has very little to do with whether the network is congested.”

    This is what we need to be focusing on going forward. Measuring network by data used over a billing period offers no insight into network strain.

    We don’t have to regulate the service providers except where there is a monopoly. What we need to recognize is that there is a second issue unrelated to any discussion on regulatory involvement.
    It’s to do with preventing network services from being a scam. A cap or billing system based on data transmitted is unfair to consumers and should be outlawed. Canada has failed to devise and enforce a badly needed national standard for the measurement of network resource consumption. Much the same how we’re strict about measuring several other things to ensure fairness when doing business.

    Imagine paying for your produce by the phase of the moon.

    That’s UBB.

  2. You are correct … except …
    As always, you get right to the heart of the matter but you have missed two very significant points.

    If you raise the speed limit on the “road” then more data can go through during the same time (eliminating the congestion). This isn’t particularly difficult or expensive for Bell, Rogers, et. al.

    In addition, if you build more “roads” then you can again eliminate the congestion. And there is practically $0 incremental cost if those “roads” (aka “dark fiber”) are already built and simply need to be turned on.

  3. UBB is dead …
    So now everyone can agree that UBB on aggregate volume is a money grab rather than a technical measure to control traffic. It is now apparent that UBB was instead being used as a competitive (or anti-competitive) market control.

    This still leaves the problem of peak period congestion and there seems to me two ways to deal with it. The obvious way as mentioned above is to build (or turn on) more ‘roads’. This of course may require more capital but will also increase peak capacity allowing for more customers.

    The other method is to apply speed control during the peak periods, but this may be both logistically and contractually difficult as they are selling different speed tiers. This would also be antithesis to the goal of increased innovative services (a goal at least of consumers).

    So really we have a need of increased network peak capacity and some way to pay for it. An increase in subscription (and wholesale) prices is an obvious choice but we are already paying much higher fees than many of our peers around the world.

    Another is for the incumbents to use a greater share of their very high profits to reinvest in infrastructure rather than being sent to shareholders and executive bonuses, and the method to force this is by opening up competition.

    Finally there could be direct investment from the government such as being done in Australia. This would come from taxpayers and thus could cause a certain amount of consternation, but our taxes build physical roads so why not digital ones?

    It’s now up to the CRTC and the industry minister to decide the best way to build our digital future, for the good of our economy, our country and its people.

  4. Dorothy Corbeil says:

    I really appreciate your being involved in this process, and how you comment on it in an understandable (to me) way.

    Thank you.

  5. You appear to be learning.

    Soon you will understand that moving bits is like moving electrons. There is a cost of transmission and a cost of delivery. Given the death of distance, the cost of tramsission is indeed very small but that is only part of the picture.

    In your analogy think about super highways and think about on ramps. For each of those cars on the highway there needs to be a separate on ramp. In the current world, each on ramp is built by the owner of the highway and they need to recover the cost. Or think about the fellow who puts a train of juggernaughts onto the road in front of you causing the road to be congested. Or think of the guy who builds a parking lot and because of his favorable position of access releases all of his cars onto the highway all at once.

  6. Rural folks still on the wrong side of the divide
    I read this stuff about UBB, caps and overage charges with a detached view. I live in rural BC and we’re on one of the govt. sponsored wifi ISPs. We get 6gig then pay $2/gig for overages. On good days we get 1.5mps down.

    The sad part of this is that we’d love to increase speeds and caps … but we’re married to Telus who refuse to give us more bandwidth at ANY PRICE.

    Guess having the CRTC look into this is something that will happen soon. Right.

  7. John Lange says:

    The cost of networks
    Despite what a lot of commentators say, it is very expensive to build data networks. If networks were cheap the entire wholesale UBB debate would be irrelevant since the small independent ISPs would have built their own networks.

    However, what is true is that the incremental cost of putting data over those networks once they exist is negligible.

    Usage based billing is actually just about the best model for providing most any service (think tap-water, electricity, natural gas, gasoline, etc). The problem in this case is that the big internet providers are already charging us based on an “unlimited” pricing model, and now want to tack a usage based model on top of that PLUS charge a massively inflated per-Gigabyte charge as well.

    The unlimited pricing model is based on over-charging the average user to cover the cost of the few heavy users. It’s actually bad for the vast majority of users since they overpay (but has the advantage of a predictable bill that does not fluctuate every month).

    Unfortunately the debate has centered on “defeating” usage based billing rather than focusing on potential relief methods such as price controls.

    I for one would much rather pay small fee per-month + an appropriate charge for usage (lets say 5c/Gig?) rather than an inflated price per-month for unlimited which I barely use.

    The big ISPs are making massive profits on internet service which they are poring into buying up ever bigger slices of media. The monopolies keep growing and the competition keeps dwindling.

    We are going in the wrong direction.

  8. Customers .. shmustomers.
    “The big ISPs are making massive profits on internet service which they are poring into buying up ever bigger slices of media.”

    Which is why they are doing everything they can to shut out Netflix that does it better and cheaper.

    Build their media empires on our overinflated Internet access fees, then charge us again to buy more, all the while cutting us off for more cost effective competing services.

    Sounds like a great business plan .. for them.

  9. I am old enough to have been around when the Internet started. It has revolutionized the world in the last 25 years. For TV and even for most phone services, you pay a monthly fee and use them as much as you want. It should no longer be any different for use of the Internet. The world can no longer go back; it has become completely online. Bandwidth caps and speed throttling should no longer be tolerated.

  10. @John Lange
    “Despite what a lot of commentators say, it is very expensive to build data networks. If networks were cheap the entire wholesale UBB debate would be irrelevant since the small independent ISPs would have built their own networks.”

    I would agree with this if it wasn’t for the fact that much of the existing networks which the big-4 own were built using tax dollars long before they were handed over.

    “Usage based billing is actually just about the best model for providing most any service (think tap-water, electricity, natural gas, gasoline, etc). The problem in this case is that the big internet providers are already charging us based on an “unlimited” pricing model, and now want to tack a usage based model on top of that PLUS charge a massively inflated per-Gigabyte charge as well.”

    Agreed, to a point, but these models are based on somewhat pure UBB, even if the rates might be considered high. Altagas, for instance, lets you get on a flat-rate monthly plan, but come summer-time, when you’re not using as much, they actually give you a rebate. So, overall, you’re ONLY charged for what you use. I think a revealing point uncovered during the recent UBB debate, but largely glossed over, was that Bell wanted to charge independents just over 17 cents per gigabyte and this was considered way too much since it was over 10x what delivery actually costs. Why is it tolerated at the consumer level to allow them to charge us well in excess of 100x what it actually costs, PLUS charge us an exorbitantly high base access rate. Keep in mind MANY people, especially those outside major centers, haven’t seen real upgrades in many years.

    Personally, I think if they want to use UBB billing, they should be fully regulated and forced to go all the way, using a utility-based model where they can only charge fair rates and only for what people use, no more. Even this would make us the laughing stock of the Internet world, but it’s better than we have.

    In reality, the giants need to be broken up. The big telco and cable companies have been allowed to have their cake and eat it for far too long and now have a mentality much like that of a typical school yard bully. The government needs to take regulation back and actually start working for the people, but that will never happen while pro-big-business-Harper is in office.

  11. lol
    so basically it took this long to figure out that bell was full of sh!t.

    Priceless, seriously priceless.

  12. Jim Keenan says:

    Networks are designed to transport huge amounts of data, however monopolists decide to limit speeds, in order to acquire more money for the little bit higher traffic rates. But we should be grateful there are data services at a decent price.
    choose your moving company

  13. John Franklin says:

    article after article
    Here you go, another professor that takes the easy track and simply likes to talk about things. Another informative, yet useless article to tell Canadians how corrupt our system is and all you can do is “teach” about it in your normal passive manner.

    Why don’t you get off of your soapbox and try to tell Canadians how they can affect change and do something about the various problems you speak of. You should be doing this with every article. If no change can happen, why are you writing about them? Another fine example of the old rule “those that cannot do, teach” or “those that cannot do, sit on a board”.

    You have this voice and the power of the press, why are you such a passive and meek writer? Canadians are so very passive and cannot drive change, you need to step up or retire and let someone else take your wasted editorial space.

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