Last week, the Canadian Radio-television and Telecommunications Commission released its much-anticipated usage based billing decision
. While the ruling only focused on the use of data caps (or UBB) as between Internet providers, the issue garnered national attention with over 500,000 Canadians signing a petition against Internet data caps and the government providing clear signals that it would overrule the Commission if it maintained its support for the practice.
My weekly technology law column (Toronto Star version, homepage version) notes the resulting decision seemed to cause considerable confusion as some headlines trumpeted a “Canadian compromise,” while others insisted that the CRTC had renewed support for UBB. Those headlines were wrong. The decision does not support UBB at the wholesale level (the retail market is another story) and the CRTC did not strike a compromise. Rather, it sided with the independent Internet providers by developing the framework the independents had long claimed was absent – one based on the freedom to compete.
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Earlier this year, I wrote a report
and a blog post
that attempted to estimate the cost for Canadian ISPs to transport a gigabyte of data. While there is nothing magical about a gigabyte, since overage charges typically levy by the gigabyte, it is useful to link actual costs with consumer costs that can reach as much as $10 per gigabyte. In fact, this data is likely to become increasingly important as the wholesale usage based billing battle has shifted toward a cost-based approach.
Unfortunately, there is little reliable information on actual costs with ISPs typically claiming that such information is a trade secret that should be kept confidential. My report noted that there are two elements to the actual costs. One is the Internet-facing data costs, which arise once a user’s traffic travels onto the public Internet. This cost is very low, estimated in the report at about one cent per GB and falling. This is consistent with public transit arrangement pricing and is likely even cheaper for large ISPs that use peering arrangements to cover off most actual costs.
The more difficult calculation involves the internal ISP network leading to the public Internet. As CRTC Commissioner Candice Molnar noted during the usage based billing hearing, “we all, I think, can hopefully agree that there is no marginal cost to using the network when you are not causing augmentation.” While there are no marginal costs, there is a capital cost of building the network and ongoing maintenance and augmentation costs when congestion arises due to traffic growth. My report used Bell’s data in the deferral account case (one of the only ones to put information on the public record) to estimate that seven cents per gigabyte (for a total of eight cents) was a best guess among a range of possibilities.
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The CRTC’s usage based billing oral hearing concluded yesterday with a final decision expected some time in the fall. This long post focuses on the shift in CRTC thinking on the state of broadband competition in Canada but wonders whether it comes too late to make a difference. For many years, the CRTC has steadfastly maintained that the Canadian ISP market is competitive. For example, in the net neutrality decision
from October 2009 it stated:
Consistent with the current regulatory approach, under which the Commission has granted forbearance for retail Internet services, primary ISPs may continue to apply ITMPs to retail Internet services as they consider appropriate, with no requirement for prior Commission approval. This approach remains valid due in part to the large number of existing ISPs. A change in the approach would amount to interference with market forces and would result in inefficient regulation, which is contrary to the Policy Direction.
The current CRTC FAQ says much the same thing:
A retail customer is the end user who purchases access to the Internet. The CRTC does not regulate rates, quality of service issues or business practices of Internet service providers as they relate to retail customers. This is because there is enough competition in the market that retail customers can shop around for service packages.
The view that the Canadian Internet services market is competitive has shaped virtually every recent important CRTC decision on broadband regulation. Given its longstanding view that the market was competitive, the frustration felt by independent ISPs, businesses, and consumers simply didn’t resonate with the commission. That led to a decade of decisions on TPIA (the cable access for independent ISPs) that rendered the market practically unusable for independent ISPs. It led to years of delay on speed matching, which effectively left independent ISPs with slower, uncompetitive speeds to offer potential customers. It led to the decision to block ADSL-CO, which would have allowed independent ISPs to co-locate closer to the residential customers. It led to the net neutrality decision, which encouraged ISPs to use “economic ITMPs” such as usage based billing without restriction. Finally, it led to the approval of wholesale usage based billing, which came within days of implementation before the public outcry ground it to a halt.
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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.
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Appeared in the Toronto Star on July 17, 2011 as Competitive conditions prompt Web 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 […]
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