Questions about network costs are notoriously difficult to pin down. Earlier this year, I published a report that attempted to estimate the cost of a gigabyte of data and others have tried to do the same. The data relied upon by the CRTC is all subject to confidentiality and there have been concerns raised about its validity by both the independent ISPs and the incumbents (groups such as CIPPIC asked the CRTC to reconsider the issue of pricing in one of its interventions but the Commission declined). We should be clear – the lack of transparency associated with the numbers is a significant problem and must be addressed.
That said, I fear that part of the problem stems from years of limited Canadian competition with little innovation in the variety of broadband plans and services.
If the independent ISPs really want to grow to ten or 20 percent of the market, they need flexibility to differentiate their services and the freedom to compete, not offer more of the same. That is exactly what the CRTC just provided with a capacity based model, cost-based pricing, wholesale competition between cable and DSL, and an access fee structure that prices 25 Mbps service at roughly the same price as 6 Mbps (plus capacity). The independent ISPs were at pains to explain to the CRTC that capacity – not consumption – drives costs, yet in the immediate aftermath of the decision many are focused on how growing consumption leads to increased costs.
Rather than fretting about costs to existing plans, I suspect ISPs will start thinking about new innovative plans that will allow for real product differentiation and better network management so that they maximize their capacity. Some may involve differentiating based on speed and price. But hopefully there will be some real innovation. Perhaps:
- Peak timing plans that offer unlimited for much of the day and a reasonable cap during peak periods.
- Rate limited plans that offer hundreds of GB per month at full speed and then slow down for the rest of the month if the customer exceeds the cap (with customer profiles broadly distributed throughout the 30 day cycle to better manage the network)
- Plans that allow users to rollover unused data the following month (particularly for use during off-peak times)
- Skinny basic broadband plans that take advantage of $14.00 access to give a segment of the public relatively cheap, no-frills broadband
- Plans targeted to specific communities, such as Freedom 65 broadband plan for older demographics that may have different usage patterns from younger demographics
The point of these kinds of plans is to bring innovation into the marketplace by offering new ways to price broadband services and find new customers along the way. While some might succeed and others fail, that’s what an innovative marketplace looks like. It is decidedly not what the Canadian market has looked like with providers limited to roughly the same plans and prices. The public has shown limited interest in these me-too plans and with the newfound freedom to innovate, so should the independent ISPs.