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Metered internet a colossal failure

26 Jan

The final word on usage-based internet billing in Canada came down yesterday and it’s pretty much as everyone expected: so long unlimited internet, it was good knowing you.

The issue, in brief, if you’re not familiar with it: small internet providers lease the networks of big companies such as Bell and Telus to sell their own internet plans. But while the big companies like to set modest usage caps and charge extra for more, the smaller guys have been selling big buckets, if not unlimited. Bell asked our regulator, the CRTC, to allow it to implement those same caps on its smaller wholesale customers and, after much ado, the company got what it wanted. The small guys are therefore going to see their ability to offer unlimited usage buckets severely curtailed.

The CRTC did throw the small ISPs a bone yesterday – it gave them a 15% discount on whatever the big guys want to charge them for usage. By most accounts, that might be enough to keep some of the smaller ISPs in business, but it doesn’t give them much room to differentiate their services or make any actual money.

Interestingly, there was an op/ed in The Globe and Mail yesterday from David Beers, editor of The Tyee website. The headline pretty much said it: “A metered internet is a regulatory failure.”

I’d go a step further and suggest that by allowing this to happen, the CRTC has actually failed to do its job as enforcer of the Telecommunications Act and it has failed to follow the government’s 2006 policy direction.

The policy direction was an unusual set of marching orders that had never been made before because the government and the regulator were supposed to operate within arm’s length of one another. It happened because the industry minister at the time, Maxime Bernier, was a hard-core market purist and he wanted to de-fang the CRTC as much as possible.

Bernier, who I got to know through regular on- and off-the-record chats back in the day, believed there wasn’t a competitive problem that can’t be solved by simply having a free and open market. For the most part I agreed with him except – as I keep belaboring – we don’t have openness in telecommunications services because we have foreign ownership restrictions that act as a major barrier to market entry. Bernier knew that and wanted to change it, but he was shuffled off into a different job before he could make such a move (and then there was that whole disgrace with the biker girlfriend scandal, but that’s neither here nor there).

In any event, the government has stuck with Bernier’s policy direction for more than four years now and the CRTC has referenced it in pretty much every decision it has made since. Indeed, yesterday’s ruling concludes with a statement that usage-based billing is indeed consistent with that policy direction. I beg to differ.

The double failure is very simple, as it comes from the first points in both the policy direction and the Telecommunications Act. The government’s marching orders state the CRTC must “rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives.”

In the first instance, by allowing Bell and Co. to dictate the business models of smaller competitors, the regulator is in effect interfering with market forces.

Furthermore, the Act’s first objective is “to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions.” Its third objective is “to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications.”

The Telecom Act is a long and convoluted piece of legalese, but if we break it down to that first all-important objective, the question inevitably arises: Exactly how is cutting down or limiting Canadians’ internet usage safeguarding, enriching and strengthening the social and economic fabric of Canada?

We can argue ideologically till we’re blue in the face about how to achieve all the other goals of the Telecom Act and the policy direction – i.e. that allowing all comers to access incumbent networks cheaply is the best way, or that shutting the small guys down so the big guys have investment certainty is the best way, etc. – but that just muddies the waters. The first goal is a good one and the most important since it pretty much covers everything else.

In that vein the one point I think everyone, except perhaps the network owners, can agree on is that using the internet more, not less, is the best way to achieve the Act’s most important goal: the strengthening of the social and economic fabric of Canada. Ladies and gentlemen of the court, I therefore submit to you the CRTC’s first objective and policy direction failure.

What about the Act’s third objective? As the wise guys like to say: fuggedaboutit.

According to the Organization for Economic Co-operation and Development, Canada is only one of three member countries (out of 30) where unlimited internet service is practically impossible to find (see table 4G on the OECD’s broadband portal – it’s worth noting the numbers are from 2009, which means Canada is likely to look even worse now that we’ve got usage-based billing). Australia and New Zealand are the other two, and don’t even get me started on those countries. Having lived in New Zealand and covered this issue there, we should actually consider ourselves lucky here in Canada. As for Australia, it’s no surprise the government – at war with Telstra, its own version of Bell Canada – is spending billions on building its own internet access network.

The point is, unlimited or practically unlimited internet is commonplace in almost every other developed nation. Canada doesn’t sound too internationally competitive in that light, now does it? That, my friends, is the CRTC’s second epic failure.

There are many ways to interpret the Telecom Act and the policy direction, but the above two things are clear as mud: we’re being prodded into using the internet less, which is out of whack with what’s going on in other countries.

There are tens of thousands of Canadians who are fed up with this situation and their numbers are only going to grow as 2011 continues. Sooner or later, the government is going to have to sit up and take notice that the market, such as it is, is failing those Canadians badly.

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27 Comments

Posted by on January 26, 2011 in crtc, government, internet, telecommunications

 

27 responses to “Metered internet a colossal failure

  1. Mo Jangda

    January 26, 2011 at 10:50 am

    Thanks for the great write-up, Pete.

    UBB is completely illogical when you consider that Canada is really priming itself to become a “digital economy”. Tough to make that happen when Canadians have to spend more time worrying about the bytes they create/consume rather than actually creating/consuming freely.

     
  2. Eric

    January 26, 2011 at 11:51 am

    There’s nothing inherently wrong with having a metered Internet – most of our infrastructure services (water, natural gas, electricity) are billed this way. The colossal failure in this case is that the rates are not even close to being cost-based. The per-GB charges are hundreds if not thousands of times higher than the telcos’ costs, so even with the 15% wholesale discount, the Internet overage charges are almost pure profit. Worse, that profit goes right to Bell’s bottom line even if you are a customer of an independent ISP that gets wholesale access to your house via Bell’s lines.

    If the telcos wanted people to pay for the amount of Internet service they actually used and had cost-based prices, an Internet connection would have a base rate of $10-15/month and include a few GB of usage, then extra usage would be a few cents per GB, not $1-2.

    This CRTC decision is the Internet equivalent of paying anywhere from $10 to $100 per kWh for electricity or $100 – $1000 for a litre of gasoline.

     
    • petenowak2000

      January 26, 2011 at 12:15 pm

      Good examples. You’re very right – it’s not really usage-based billing because if it was, the big ISPs would lose zillions. It would be more appropriate to call it extra-revenue-based billing or video-competition-prevention-based billing.

       
      • RobertMano

        January 26, 2011 at 12:55 pm

        I like the last option: “Video-competition-prevention-based-billing” That one speaks volumes!

         
      • Eric

        January 26, 2011 at 1:41 pm

        I wouldn’t phrase it to say they’d “lose zillions” since they’d still make profits – after all, they need to make enough money to maintain the last-mile infrastructure (in which they have a monopoly/duopoly or a de-facto one) and continue to invest in new technologies.

        We don’t want anyone feeling sorry for big telecom, thinking they’re somehow getting taken to the cleaners by the independent ISP.

        They’d just make substantially less than under the current financially perverted scheme, so they “lose” only in that sense.

        I wish my investments could guarantee me a 15% return, let alone 100%-1000%

         
      • Dave

        January 27, 2011 at 12:16 pm

        Good examples if Bell was just an ISP and the wholesale was run by an independent private or Crown corporation. But Bell is wholesaler and seller and there is an obvious conflict of interest.

        This country needs a national backbone that is independent of ANY ISP.

        Canadians need to be rid of these anti-competitive oligopolies that control government and the people.

        Welcome to the new tyranny – iTyranny.

        Canada – sucks to be you.

         
    • David

      January 27, 2011 at 12:40 pm

      Are you ready to pay for an air you are breathing measured by litres? Why not? There are some similar people for whom this is an obvious thing as well.

      Instead of arguing with such choice, I would like to offer you to look outside Canada and to notice that this business can be running differently – no meters. Why do you preefer the worst scenario?

       
    • John

      February 2, 2011 at 8:43 am

      *There’s nothing inherently wrong with having a metered Internet – most of our infrastructure services (water, natural gas, electricity) are billed this way. *

      This is the line of crap that the telco’s are hoping you will buy into. This may be a utility, but it is NOT a finite resource. Would you also think it would be fair to be billed on your oxygen useage? honestly, it’s just ludicrous.

      BANDWIDTH, is RATE OF TRANSFER. It is NOT total data transfered. They already do bill for higher bandwidths. And they charge more then anywhere else on the planet. Period.

      Bell and the other telcos are used to running their own market, because the crtc is composed of ex telco employees and they can do whatever the hell they want. Their network is aging and archaic, they don’t want to upgrade it, but they don’t want to seem behind the times. So they just sell more and more BANDWIDTH (this term is key in their misinformation campaign) until they’ve oversold their old piece of crap network 10 times over, and try to just bill more and more and more when it gets congested (due to their own negligence)

      Competition isn’t even allowed to lay competitive lines where theirs is lain, thanks to the crtc (won’t let them) Bell and the other ANTI CANADIAN telcos and cable companies are lying to everybody in this debate.

      Time to call them on it.

       
  3. RobertMano

    January 26, 2011 at 12:53 pm

    Thank you for being a hero in this fight against METERED BILLING. You always post well written, thought provoking articles, and are obviously on the side of the Canadian public. Unlike the CRTC.

    “UBB” (Usage Based Billing) – Otherwise known as METERED BILLING.  The CRTC is allowing ISPs to put a METER on your internet access, so you PAY BY THE BYTE!

    Matt Stein, Vice-President of Network Services for Primus, calls UBB overage fees:

    “an economic disincentive for internet use” since the charges levied by Bell Canada are “many, many, many times what it costs to actually deliver it.”

    The CEO of Teksavvy ISP said:

    “UBB is pure profit. IP transport of internet data is somewhere between $3 and $10/Mbps for companies like ours…. So doing basic math we’re talking of $3-$10 per 300GB of data… So 1 to 3 pennies per gig of downloading on the Internet transit side.”

    Shaw uses misleading information, and tells customers that their limits are generous, and overstates the cost of bandwidth. In fact, bandwidth is 1-3 PENNIES per GB, but Shaw is charging $2 PER GB!

    Did you know that just as Shaw began charging for “overuse of the internet”, they also (quietly) reduced all of their usage caps by 30% without telling customers? 

    Funny part is, the infrastructure most of these ISPs use was FUNDED BY CANADIANS!  Now they are charging us massive overage fees for using it.

    Shaw, and other Canadian ISPs are using UBB as a method to control access to their TV competitors, ie: Netflix, Hulu, etc.  It is clearly a conflict of interest to allow a TV Broadcaster who is also an ISP, to limit our access to their competition.  

    With these massive new overage fees, once you are over your recently lowered “usage cap” with Shaw, every HD Netflix movie will cost you an extra $8!

    If you want to contact your local MP, and ask them what THEY are doing to prevent the destruction of the Canadian internet, please send them a FAX or written letter.  You can find out who your local representative is here:
    http://howdtheyvote.ca/findmember.php

    Fight back!  Visit Open Media’s facebook page, and join the fight – Thousands of Canadians working together to put an END to metered billing!
    http://www.facebook.com/openmedia.ca

    Please sign the petition!  Forward it to your friends, family, and co-workers. We need to act on this, or every single Windows update, web page, and email will cost you money.
    http://openmedia.ca/meter

     
  4. Sam Davies

    January 26, 2011 at 2:47 pm

    As always – you raise some very good points Mr. Nowak.
    Quite the shame you have left the CBC, as mainstream media really needs journalists who dig deeper and discuss the issues on broader levels.

    Given that Bernier was the man behind bringing about this laissez faire approach of the CRTC, I’d be curious to hear what he thinks about where things are going. Would he be willing to honestly comment on this, or would he be muzzled by the party (or muzzle himself)? I’d love to hear him honestly answer how he believes this ruling is good for regular Canadians.

    I’m almost ashamed to admit it (as I have subscribed to your RSS feed for quite some time), but I’m finally in the process of reading SB&B. As expected, I am enjoying. Just finished WWII influences on food – looking forward to reading about porn!

     
    • petenowak2000

      January 27, 2011 at 11:39 am

      Thanks for the kind words Sam! I suspect Bernier wouldn’t comment on this stuff, at least publicly, because it’s Tony Clement’s row to hoe now. Of course, such niceties haven’t really stopped him before, so you never know. I’ll be sure to ask him if I ever run into him again. Hope you enjoy the rest of the book!

       
  5. Frederic

    January 27, 2011 at 2:36 pm

    Absolutely love the fresh look. I really liked the content. Many thanks for the fantastic posting.

     
  6. Louis

    January 28, 2011 at 12:02 am

    Thanks for the great article. This buzz is only outside Quebec. I never heard on CTV Montreal with this news but I am quite confident that Bell’s greedy acts would not penetrate the Quebec market as we have a local company Videotron that will counter them. In fact, Videotron is offering a UNLIMITED inter-provincial calls in their mobile phone service. Try to compare the internet service in Bell’s Quebec region compared to other provinces and you will see the BIG difference.

     
    • Jean D

      January 31, 2011 at 11:08 am

      I’m sorry but I just checked Videotron’s and Bell’s websites and I don’t see how they’re cheaper than Bell. First, you don’t hear from them about metered internet because they never had any flat priced unlimited service, they metered it from the start, and to get a 100Go monthly usage with Videotron, it costs 67$/month while at Bell, the same will cost you 52$/month. None of these can quite compete with my actual unlimited service at 29$/month with a small provider reselling Bell’s ADSL bandwith. (I rounded the .98 cents to a dollar, t’fools no one nowadays, hey?)

      Yes, when you combine multiple services at Videotron, it may get cheaper, but as I use the net mainly to watch TV at my convenience, paying for cable resumes itself at paying twice for the same service. I still don’t see how it’s cheaper. Especially since I got off cable in the 80s, long before internet got out of the universities’ servers. More channels = More of the same to me.

      I just think honnestly that dealing bandwith is becoming more profitable than dealing drugs, and it’s legal on top of that! Got that, Vito?

       
  7. Jean-François Mezei

    January 28, 2011 at 6:20 pm

    You should submit your article to support my petition 🙂 🙂 🙂

    I think the underlying story here is that the CRTC sees the “light regulatory touch” philosophy as one where they must say “YES” to Bell. So they interpret the “YES” decisions in a way that fits the Policy Direction.

    Actually, they don’t even do that. They just state that their decision to eliminate competition is competitively neutral because all competitors are killed the same way.

     
  8. Rick McKnight

    January 30, 2011 at 7:34 am

    We also think that a Metered Internet for Canada is a BAD Idea, and hope you’ll get involved and spread awareness by joining us at:
    “Oppose Canada’s Metered Internet Billing (UBB)”
    http://www.causes.com/causes/570449-oppose-canada-s-metered-internet-billing-ubb?m=01b46cf8&recruiter_id=164886996

     
  9. Velcro2

    January 30, 2011 at 5:45 pm

    “It happened because the industry minister at the time, Maxime Bernier, was a hard-core market purist and he wanted to de-fang the CRTC as much as possible.”

    Frankly that’s BS. Neoconservatives claim to be “market purists”, but it’s been obvious to me since the day, back in the late ’90s, when Premier Harris forcibly cartelized Ontario’s medical testing industry in grand Il Duce style, shutting down a successful immigrant-founded startup and forcing it to HAND BACK the revenue it had “stolen” by undercutting his price-gouging cronies, that if you scratch away the veneer of classical liberal rhetoric you’ll find they’re nothing more than a bunch of fascistic thugs.

     
  10. jim dandy

    January 31, 2011 at 11:00 pm

    Just one step closer to wiping out the middle class.You will really like the fully cencored new internet coming right up.Yes carbon taxes are co2 related to exhaling,so hold your breath or scammer Al Gore will get you.Where does that money go?not to clean up the air,thats for sure.Total scam pulled off by the globalist Gorden Campbell in bc. Its all about control over the masses by breaking that back of the joe through taxation,regulation.Period.Those of you that like paying paying paying are prop bloggers or drinking the cool aid.I think you just like using big words and bickering about technical issues while the government bends you over a little more.Wake up at infowars.com

     
  11. Martin Levac

    February 2, 2011 at 8:49 pm

    Tell you what, I offer to pay twice the actual cost. It’s a fair offer. Who in their right mind would turn down a 100% profit margin? At 10Mbps continuous use, total bit cap cost is about $30/month. I’m offering to pay $60. What, it’s not enough? OK, I’m offering to pay exactly what I pay now for exactly what I get now which is unlimited dual dry DSL 10M/1600K. My bill is $85.52/month all taxes included. I consume more than 200GB/month. I know a guy who consumes more than 500GB/month and pays $105/month.

    So what’s my point? We already pay more:

    http://www.xcrew.net/content/the_cost_of_bandwidth_canada_versus_the_world.html

    For instance, I pay $0.42/GB. My buddy pays $0.21/GB. You with your future High Speed Lite service will pay $24.95 for the single lonely puny tiny GB included with the base price. You with the future 25GB/month cap will pay $1.60/GB for the base price service. And you in Quebec with the future 60GB/month cap will pay $0.66/GB. That’s not all, if you want to use more, you’ll have to pay more.

    So everybody who says users should pay more should rethink the whole shebang. This ain’t about heavy users, this is about every single user. Yes, even you the guy who complains about the heavy users who use up all the bandwidth.

    Forget about my previous offer. I take it back. I now offer to pay a maximum of $40.00/month for dual dry loop DSL, unlimited bit cap, no throttling. What, you wouldn’t like to pay just $20.00/month for that 5Mb DSL line?

     
 
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