Over the Limit: The battle against Usage-Based Billing

The Canadian Radio-television and Telecommunications Commission (CRTC) announced last week that despite pressure from industry critics and Federal politicians, it would not expand the probe into Internet pricing, and may stand by the principle of usage-based billing (UBB).

"The CRTC must expand the scope of their study to lay the foundation for an open, competitive and affordable Internet in Canada."

This would affect Bell Canada’s third-party wholesale Internet Service Provider (ISP) customers, such as TekSavvy. Bell retail customers are already subject to usage-based billing.

Marc Garneau, Liberal MP for the riding of Westmount-Ville-Marie, says that the root of the issue needs to be examined in order to make a proper decision.

“The CRTC must expand the scope of their study to lay the foundation for an open, competitive and affordable Internet in Canada,” Garneau told the Financial Post in an article published Mar. 7. Garneau is taking action in addition to his claims.  As of Mar. 15, he had 21,365 signatures to his submission to the CRTC, asking it to expand its study and possibly reverse its decision.  There are also 465,000 signatures on a petition at StopTheMeter.ca.

Calls to Garneau’s office for response to the CRTC’s latest decision were not returned.

Garneau, the opposition Industry, Science and Technology critic, was supported by Charlie Angus, New Democratic Party MP for the riding of Timmins-James Bay and digital affairs critic who says a cap on Internet usage would be a step back for Canada.

“We all have a stake in ensuring that UBB caps do not constrain the full innovative potential for all Canadian citizens,” he told the Financial Post. “The New Democratic Party believes a metered Internet will lead to Canada becoming a digital backwater.”

Technically Speaking

Some large ISPs, like Bell Canada, have stated that caps and charges are necessary to manage network congestion, which the CRTC has implicitly recognized.  However, critics have argued that no public evidence has ever been presented that congestion even exists.

Benoit Felten, a Paris-based analyst at DiffractionAnalysis.com, calls the current system an “egalitarian protocol.”  He explains the issue of congestion from a technical standpoint.

Some Canadians don't know what they'll be paying for their connections.

“The network gets congested when everyone’s using a network at the same time,” he says. “This is a flow problem, not a resource problem. Congestion doesn’t come from the fact that some people use it more than others.”

This supports the claims made by large ISPs that charges for usage would help improve service, as lowering the length of time and amount of data people download over the network would lower congestion as well.

The online service Netflix, which allows consumers to stream on-demand movies and television shows over the Internet, has a stake in this as well. A cap in Internet downloading could damage small business and prevent consumers from purchasing their services. In its recent quarterly report, the American corporation stated that there is “no reason that pay-per-gigabyte is economically necessary.”

The report explains that ISPs have large fixed costs for building and maintaining what is called a last-mile network, which is residential cable and fibre.

The ISPs’ costs to deliver a marginal gigabyte (roughly one hour of viewing) from a regional interchange point to the customer is “less than a penny, and falling.” Some networks charge more than two dollars for this, which the Netflix report describes as “grossly overpriced.”
    
However, Mark Goldberg, an industry analyst and principal at Thornhill, Ont.-based Mark H. Goldberg & Associates says the cost an ISP charges is “100 per cent irrelevant to the price” for consumers.  He argues that this is the case in most economic practices, and that corporations set prices in order to maximize revenue.

An Alternative Angle

Goldberg also analyzed the biggest misconception about this issue—that the new volume-based cap system for small ISPs is going to affect everyone overnight.

“The reality is that that ruling is going to have an impact, but not on everybody,” he says. “I’m on record saying that I think the CRTC’s ruling had an error. With [a] small change, the usage based billing has no impact on any consumer whatsoever.”

In his blog, Goldberg explains what he thinks is an easy change the CRTC can make to its proposal.  His suggestion is to set the tiers for Internet usage on a per-user basis, but calculate overage charges (costs for going over downloading cap) on an aggregate basis.  Essentially this will allow ISPs to have some users who don’t come anywhere near the download limit, but help support those who exceed it.  This in turn will give the ISPs increased flexibility to manage their price plans, and continue to offer unlimited service. They can appeal to users who are both heavy and light in bandwidth consumption.

The CRTC has until Apr. 29 to review the decision.

UBB: Who's billing who, for what?