Back in November, I wrote that the fat lady had not yet sung on usage-based billing. Well, don’t worry about getting your earplugs because she hasn’t even finished warming up.
Hot on the heels of an appeal by Shaw, Rogers and Quebecor (PDF links) are now also requesting that the CRTC review and vary its UBB decision. Usage-based billing, you may remember, was one of the hottest technology issues in Canada last year and revolved around large internet service providers trying to charge their wholesale customers more, depending on how much data they used in a given month.
Many large ISPs have for years been shrinking the usage caps of their own retail customers, then charging them extra when they go over. The attempt by Bell Canada to impose this model on smaller wholesale ISPs such as Teksavvy and Distributel, who generally provide large or unlimited usage buckets, kicked off the maelstrom last year that eventually involved the federal government.
The CRTC went back to the drawing board and came up with a new capacity-based billing scheme, where small ISPs would have to buy internet capacity rather than total volume from network owners. It was a nuanced yet important distinction that let the big guys make a little more money, but not enough that the smaller players were forced to scrap their cheaper unlimited services.
One of the clearly evident errors in the regulator’s decision was how such wholesale services were priced. During the whole process, network owners were asked to disclose the true cost of provisioning access and bandwidth. The CRTC then figured out a price that each could charge wholesale customers.
Looking at the huge discrepancies in prices between providers, it’s clear that some cooked their numbers better than others. A 100-megabit capacity block through Rogers, for example, costs only $1,251, or almost half of Bell’s cost. MTS Allstream, meanwhile, charges only $281 for that same capacity. While geography and number of customers certainly affects the price of capacity, surely there can’t be that much variance when it ultimately comes down to transmitting ones and zeros. One ISP’s network just isn’t that much different from another’s.
One insider told me that upon initially learning of the CRTC’s decision back in November, some of the companies who honestly disclosed their true network costs immediately regretted doing so.
Rogers and Videotron are now requesting that their service prices be raised on the grounds that the regulator didn’t consider certain aspects. As Rogers’ application says, the CRTC set prices “without giving Rogers the opportunity to comment on either cost adjustments.”
The result of any of the cable companies succeeding in their requests is obvious: any wholesale ISPs that buy service from them will likely have to raise prices for their own customers.
What’s also likely is that the regulator is going to be flooded with review requests from every network owner in the country, followed perhaps by wholesale ISPs as well, particularly if it does revise prices for any of the cable companies.
If anything, this is proof positive of how uncompetitive the internet access market is. Rather than the cable firms using their mandated lower prices to steal wholesale customers from telephone providers (particularly Bell), they’re instead arguing for a closer equilibrium with such companies. Amazingly, they want higher prices so that they can get fewer customers. Wholesale customers, apparently, are the red-headed stepchildren of the industry that nobody wants.
It would be easy to blame the CRTC for creating yet another bone-headed boondoggle. The regulator probably thought it was cleverly going to spur wholesale competition by setting different rates for different providers, yet when the market is as uncompetitive as it is, such moves inevitably backfire.
It’s not the CRTC’s fault, though. This scenario will unfortunately play itself out over and over again, ad nauseum, until the government steps in and cleans up the mess, which could be done in one of three ways (or a combination thereof). The feds could either eliminate the wholesale regime entirely (something the big ISPs would love to see); scrap foreign-ownership restrictions so that large, well-funded companies can come in and compete with the likes of Bell and Rogers; or move to split networks from retail service providers in a process known as structural separation.
The first and third options are unlikely and many people are getting tired of waiting on the second, which means Canadian internet service providers and users alike must resign themselves to this never-ending game of regulatory chess. And a performance by the fat lady that will never come.