Canada’s Usage Based Billing Hearings Kicks Off

In a way, it’s surprising that Canada is still talking about Usage Based Billing. Yet, here we are today with the CRTC (Canada’s regulator for industries like this) holding hearings on ISPs pushing to make sure Usage Based Billing is permitted in the marketplace.

Note: This is an article I wrote that was published elsewhere first. It has been republished here for archival purposes

Usage Based Billing, as far as Canadians are concerned, is effectively a method to make consumers pay twice for the same service. First, there’s the connection fee which everyone is all too familiar with. Then, what is being proposed, is that consumers pay again based on how much traffic they generate. In short, it’s ISPs trying to double dip while taking advantage of the fact that competition is pretty much non-existent in Canada given that there really is only three main ISPs available.

The debate itself over whether or not ISPs should be allowed to put this in place has been around a long time in Canada. In fact, there was a surge in interest for network neutrality clear back in 2008 when Bell Canada wanted to throttle Canadian internet connection speeds. Canadian ISPs were borrowing a lot from the debate in the US at the time which included the most famous myths – the data “exaflood”

This term was used to describe how data use would exponentially increase because more and more users were using sites like YouTube. Record labels even jumped in to say that it’s almost exclusively piracy that is causing this congestion. In their theory, the flood of internet use would tie up the internet and cause traffic to slow to a grinding halt, destroying the internet forever should nothing happen to stop it. Heroically, ISPs would come to the rescue and ask for simple permission to throttle all these so-called “bandwidth hogs” and save the internet from complete destruction. Unfortunately, for ISPs, that was about the peak of the credibility of their arguments.

Canadians were very familiar with the debate going on in the US and how supporters of ISPs were going about selling their message. There were two very famous examples that really led to further doubt of the ISPs position of this exaflood of traffic. The first was the ever famous speech by Ted Stevens talking about how the internet is a “series of tubes” which can be found on YouTube:

Suffice to say, the description did nothing to further the case that traffic needs to be throttled to deal with the impending “exaflood”

In addition to the speech, there was also a well-known video floating around at the time. It was apparently a TV advertisement that said how bad network neutrality was. The argument was that anything people said to support network neutrality was just “mumbo jumbo” The ad probably did little more than point to the extreme absurdities the debate climbed to – particularly for the anti-net neutrality position.

Suffice to say, it did prompt many Canadians to ask interesting questions for Canadian ISPs like, if there was going to be an impending exaflood of data, and ISPs are unable to cope, then why not invest more in infrastructure to handle such an amount? Canadian ISPs simply had no real answer to this. This prompted farm more skepticism towards the so-called plight of Canadian ISPs, so the ISPs simply focused on trying to convince regulators to go along with their plan anyway.

At some point, the CRTC requested the data to back up the suggestion that networks were, in fact, congested. Really, it was a simple request, and, if ISPs were telling the truth this whole time, then there wouldn’t really be a problem sharing this data in the first place. Naturally, ISPs were very hesitant, trying to throw every rule in the book at the CRTC to avoid revealing such data. While there was citations of competition reasons, the real reasons were to be revealed – that the crises was, in fact, a manufactured one.

We here at ZeroPaid, were also more than just a little interested in what was revealed. What was revealed was that ISPs were not really that congested after all. In fact, Bell Canada revealed at the time that they were at a mere 33% capacity at peak hours. To put it briefly, everything blew up in their faces. Two months later, Bell Canada was still trying to salvage the situation on the PR font by insisting that 8% congestion in two cases were sufficient data to point to a crises, but few really bought in to the argument at that stage. The whole network congestion argument simply unraveled from there. While throttling happened anyway in Canada, the greatest weapon to push for ending net neutrality became a dud.

Today

Now, here we are, three years later and a network neutrality issue is before Canadians. It almost seems strange in a way that Canada is still having this discussion. The reason why it might seem strange is because the Canadian government decided back in February that the CRTC was wrong in allowing metered bandwidth. Ultimately, the government reversed the CRTC decision and blocked metered bandwidth. So, even though the government made a decision, the CRTC did go ahead on holding hearings on this issue.

Michael Geist is following the hearings and has made notes on what was discussed. At issue was the reason why exactly was metered bandwidth even needed in the first place. It seems that it’s not a question of congestion, but rather, competition. Geist noted that once questioning began, the link between congestion and usage based billing unraveled:

CRTC Chair Konrad von Finckenstein asked why – if Bell was facing network congestion – sister company Bell Aliant has not implemented UBB. Bell argued that Bell Aliant “supported” UBB, but acknowledged that competitive forces and marketplace conditions in Atlantic Canada were such that UBB is currently not needed. Of course, von Finckenstein didn’t need to look at Bell Aliant as his example – Bell itself employs different caps in Ontario and Quebec given the different competition from Videotron and Rogers. Their approach isn’t a function of congestion, but rather competition. In fact, when Bell was asked whether it planned to keep data caps for its retail customers, it responded that it did, subject to “competitive dynamics.” The effects of competition was further confirmed when Telus appeared as it noted that it doesn’t use UBB, it isn’t a pressing issue, and that competition with Shaw has led to far more generous plans than those found in other parts of the country.

Discussion on the lack of a link between congestion and UBB continued as Commissioners Molnar and Denton asked why Bell was promoting a plan that involves aggregate usage rather than peak usage. Molnar noted that aggregate usage is not linked to congestion and that it appeared to simply create incentives to reduce Internet use more generally. Bell agreed, leaving Molnar to respond that this was a problem since it reduced Internet use with no benefit to addressing congestion. Denton continued on the same theme, asking why the CRTC would want to try to reduce Internet use other than in an effort to address congestion.

Add Bell’s acknowledgement that its pricing is not a function of actual costs but rather the market and the conclusion is that all elements of UBB – use of caps, pricing, and size of caps – are a function of the regional marketplace dynamics, not congestion concerns. Moreover, the Commissioners seemed to understand why this issue is so troubling, with Molnar emphasizing the dangers of a policy that discourages Internet use and Denton linking UBB to cloud computing and the fears that caps would harm that emerging industry.

There is the question about where small ISPs stand in all of this. It appears that they are very much against this. The Toronto Star reported that the smaller ISPs feel that this push for usage based billing is little more than attempt to drive the competition out of business:

The smaller ISPs have argued they would be driven out of business if they have to use the same pricing model employed by the large players, who charge extra if the retail customers exceed monthly usage limits.

CRTC chairman Konrad von Finckenstein told the hearing Monday that the commission is only looking at the wholesale prices that independent Internet providers pay for network use and not retail rates that are charged to their consumers.

Bell withdrew its usage-based billing tariff earlier this year and is proposing wholesale pricing for ISPs that reflects a flat-rate access fee on speed and charges 29 cents per gigabyte for any extra gigabytes needed to accommodate overall usage in a month.

Bell also said that its recently launched Internet-Protocol television service doesn’t contribute to its network congestion because it operates over a separate network.

Personally, I think the best part in all of this is that somehow, the services by the large ISPs being sold to consumers in no way shape or form contribute to network congestion, but somehow, these smaller ISPs do. This would most certainly support the idea that usage based billing is merely a competition maneuver, and not really a solution for any alleged congestion.

Drew Wilson on Twitter: @icecube85 and Google+.



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