The CRTC and UBB

2011-02-08

in Canada, Economics, Geek stuff, Internet matters, Law, Politics, Rants

Regarding all the furor about usage based billing, I don’t think that basic concept is really so objectionable. Someone who uses 100 times more bandwidth than someone else should probably pay more for it.

What I object to is the rate at which the big telecommunication companies are being allowed to charge for bandwidth: $1.90 a gigabyte (GB), above a low limit. Movies, especially, are rather large. One ordinary definition movie from iTunes is about 1.5 GB – 2.0 GB. High definition movies are even more. The cost of actual providing the bandwidth is much lower, and letting the big firms charge such a high amount risks choking off promising new uses for the internet, such as increased videoconferencing. My relatively modest internet use in December (67 GB, well below my previous 200 GB cap) would have resulted in an added charge of nearly $80 to my monthly bill.

It would be fine to have an internet pricing regime that included some variability, it’s just important that it be set up in a way that allows upstart firms to challenge monopoly providers, lowering costs for consumers and improving service. Letting the big companies squeeze their competitors to death with hefty overuse fees doesn’t serve the best interests of Canadians.

[Update: 11:24pm] Michael Geist has a good piece about all of this: Fixing Canada’s Uncompetitive Internet.

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{ 5 comments… read them below or add one }

coyote February 9, 2011 at 7:49 am

Connected with the big telecoms’ propensity to keep stage-managing new, higher CRTC-mandated charges for the same (or worse) service is their equally cozy instinct to set those cash cows in concrete for, oh, years. Reason be damned. Just because they can.

I hardly need point out that, decades after touch tone became universal, Ma Bell still charges every residential user $2.80 a month for the “service”. Because, you know, it’s brand-new technology, and they have to pay for all that new-fangled infrastructure to make it work….

. February 9, 2011 at 5:52 pm

The issue of usage-based billing is a little tricky because such systems are not inherently evil. When you think about it, we usually pay for things on a usage basis. Gasoline, electricity and even doughnuts are generally billed based on how much you use. And the fact that usage-based billing sounds reasonable in theory is surely why the Canadian Radio-television and Telecommunications Commission approved the new rules.

But take a closer look and something far more insidious is going on. If bandwidth were actually billed like electricity or water, that might be fine. But what the CRTC approved is something different. Claiming that its profit and consumer welfare are exactly the same thing, Bell wants to remake Internet billing. It wants to make use of the most lucrative tricks from the mobile and credit-card industries by preying on consumer error to make money. And this ought not be tolerated.

Any rule that asks the consumer to guess at usage, and punishes you if you’re wrong, is abusive. Imagine being asked to guess how much electric power you need every month, with a penalty for mistakes. Yes, that’s what cellphone companies do – or get away with – but that hardly makes it a model. It’s a system of profit premised on human error, and this begins to explain Bell’s deeper interest in usage-based billing. Bell wants to make the horrors of mobile billing part of the life of Internet users. And that’s a problem.

Banksy February 9, 2011 at 10:02 pm

You are right Milan in the fact that usage based charges are not the issue. I am with Rogers and thus have a limit on usage. But the big boys cannot be allowed to stop the smallers companies that decide to allow for unlimited usage to do so. That is uncompetitive and bad for consumers and the market as a whole.

BuddyRich February 10, 2011 at 8:41 pm

I think it is erroneous to think of it like a commodity at all.

Bandwidth is not a finite resource that is “used up” like gas or water and so it should not be treated or priced as such (and outside of attempts by ISPs to do so at the retail level, it is not traditionally sold as a commodity to business and data centres but rather on a peak utilization percentile basis on the throughput).

The issue with UBB is that delivering more data over time is not the cause of contention (which it is supposed to prevent), nor does the cost of the infrastructure become higher depending on how much or how little it is used. It is constant. Cost is driven by maximum throughput. Contention is created by selling higher maximum throughput without having the network available to handle it.

I am not naive enough to think that ISPs don’t work on an over-subscription model (ie. selling more maximum throughput than they can actually provide at once, banking on the fact that not everyone will use it at the same time), they do so at a 20:1 ratio thereabouts. However, upgrades should be a cost of doing business and encouraged. Limiting usage through economic penalization, especially where that penalty goes to the network operator to prevent network congestion actually acts as a disincentive to upgrade the network at all, if additional profits can be made by keeping the network artificially scarce by not upgrading (and hence continuing to require UBB).

If anything, I could get behind Time of Use pricing, where using bandwidth during “peak” times costs more, but other times it costs little or is free (ie. overnight) as there is no congestion at that time to smooth out usage. However, unlike electricity, there is not a substantial (about 0.01/GB) cost to providing more bandwidth outside of initial fixed capital costs for hardware and fibre. Which our base monthly charge should pay for. Of course the times when the network is nowhere near full utilization it should be free.

The other problem is that while utilization might be high in Calgary or Toronto, the network is not stressed in Montreal at the same time. It is not one monolithic “network” but capacity and use varies on a neighbourhood by neighbourhood basis and on a moment to moment basis. That Bell has only provided their congestion stats to the CRTC without any external audit makes it hard to believe there is any congestion at all. They already employ technical traffic management practices to prevent over-saturation of their network. The infamous DPI throttling devices.

To think about it another way, you don’t think someone who watches TV 12 hours a week should pay more in service costs per month than someone who only watches 2 hours, or a couple with a baby should pay more for the same apartment than single person, because they will use it more, why do so for the internet?

. November 19, 2011 at 6:09 pm

In a somewhat surprising end to the ongoing fight between large ISPs (a duopoly in Canada), and independent ISPs, the CRTC has ruled in favor of the small ISPs. This means that independent ISPs can continue to have unlimited plans offered to customers. From the article: ‘Under the CRTC’s new capacity-based approach, large telephone and cable companies will sell wholesale bandwidth to independent ISPs on a monthly basis. Independent ISPs will have to determine in advance the amount they need to serve their retail customers and then manage network capacity until they are able to purchase more. Alternatively, large companies can continue to charge independent ISPs a flat monthly fee for wholesale access, regardless of how much bandwidth their customers use. Both billing options give independent ISPs the ability to design service plans and charge their own customers as they see fit.’ Score one for the citizens.”

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