Canadian ISPs Start Rolling Out Bandwidth Caps, Higher Fees

If you download Linux ISOs, stream movies from Netflix, listen to podcasts, play online games, or are grabbing the latest open source software such as Open Office, Gimp or FireFox, and live in Canada, this next story will probably be of big concern for you. ISPs are starting initiating bandwidth caps and rolling out higher fees and the bills could be coming to a mail slot or inbox near you.

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

Just over three months. That all it took from the moment the CRTC has found out that Primus, a re-seller of Bell, and Rogers are the first to announce these rate hikes. In some instances, they haven’t even waited for the announcement before extra fees made their way to unsuspecting users no doubt blindsided by this. One user even complained of receiving a $100 extra fee.

Primus, apparently isn’t happy about this given that it was effectively Bell that forced them to charge more: “It’s an economic disincentive for internet use,” said Matt Stein, vice-president of network services for Primus. “It’s not meant to recover costs. In fact these charges that Bell has levied are many, many, many times what it costs to actually deliver it.”

Some are likely to point out that the rise in fees for Primus in particular are a very obvious sign that ISP competition in Canada is virtually non-existent. The major ISPs have so much power, that they can dictate price to smaller companies.

Indeed, ISP competition in Canada is quite grim. At most, Canadians have a choice between Rogers/Shaw, Bell and Telus/AT&T. In a number of cases, only two ISPs even exist in the marketplace – and all too often, none of the above are willing to enter the last mile markets, keeping those in smaller communities on dial-up to this day. There have been stories of small cities offering financial incentives to develop broadband in smaller communities, but some ISPs wind up either leaving the table or leaving the table with the incentives and skipping town. I’ve personally known one such instance of this happening myself.

It’s also why Canadian consumers can’t just go on to a competing ISP when prices go way too high. It’s sometimes a case of either one of these ISPs in that comfortable oligopoly, or dial-up. So really, there is no economical way to fight such rate hikes in the first place.

The question for some might be, why now? What prompted this race to roll out bandwidth caps and send subscriber fees in to the stratosphere? Some are pointing to the arrival of Netflix, since some ISPs, like Rogers, have been trying to roll out their own online video streaming services. Critics argue that these rate hikes are a tool to push Netflix back out of the country, thus raising serious questions about competition in markets related to internet services and, more generally, network neutrality.

The next question for some might be, how? Doesn’t Canada have a regulator? Well, indeed, Canada does have a controversial regulator known as the CRTC (Canadian Radio-television Telecommunications Commission – or as some have jokingly referred to it in the past, Can’t Recognize True Canadian) which is suppose to regulate the industry such as internet services. One of the sources of contention is certain board members coming from companies like Bell.

For instance:

LEONARD (LEN) KATZ was appointed Vice-Chairman, Telecommunications, on October 12, 2007. He joined the Commission in 2005 as Executive Director, Telecommunications, before assuming his most recent position of Executive Director, Broadcasting and Telecommunications. Mr. Katz has over 30 years of experience working in the private sector. […] From 1974 to 1985, he acted in increasingly senior capacities at Bell Canada, including as Assistant Director of Policy Development and Regulatory Affairs. Mr. Katz has been involved in numerous industry and not-for-profit initiatives, including Founder and Chairman of the Cellular Telecommunications Industry Association Clearinghouse for wireless carriers.

Effectively, the guy from Rogers and Bell.

Another example:

MICHEL ARPIN was named Vice-Chairman, Broadcasting, on May 5, 2005. Before this appointment, he worked as Senior Regulatory and Governmental Affairs Advisor for the Astral Broadcasting Group. Mr. Arpin has been working in the television and broadcasting industry since 1963. In 1984, he was appointed Vice-President, Planning, and Corporate Secretary for Radiomutuel Inc. In December 1982, he was President of the regional stations of Mutual Broadcasting Canada Ltd. Mr. Arpin joined Civitas Corporation Ltd. as Director of Corporate Development in December 1979. From 1971 to 1979, he held a variety of positions within the CRTC, including Director of Operations (1977) and Director General, Programming (1978). He has also served as Vice-Chair and Chair of the Canadian Association of Broadcasters (CAB), Director and Secretary-Treasurer of the BBM Bureau of Measurement, Director and President of the Association canadienne de la radio et de la télévision de langue française, as well as Director and Corporate Secretary of MusiquePlus.

Note that members of the Canadian Association of Broadcasters include Telus Business Solutions.

RITA CUGINI was appointed as Regional Commissioner for the Ontario Region on April 10, 2005. She has an excellent record as a broadcasting executive with wide experience in regulatory affairs, business development and external relations. Most recently she has served as Vice President, Public and Government Affairs, with Alliance Atlantis. She represented Alliance Atlantis on the Task Force for Cultural Diversity on Television, and developed and implemented the Alliance Atlantis Corporate Diversity Plan. Her expertise in diversity issues goes back to her work with Telelatino as Vice President and Station Manager, and before that with CFMT of Toronto (now OMNI), where she was Director of Diversity Programming. She chaired the CAB Joint Societal Issues Committee

So, another person from CAB.

TIMOTHY DENTON began his term as Commissioner on August 1, 2008. He has broad experience in legal and policy matters in the areas of telecommunications, broadcasting and the Internet. Most recently, Mr. Denton has been involved in the governance of the domain name industry through his work with the Internet Corporation for Assigned Names and Numbers and as a director, from 2002 to 2004, of the Canadian Internet Registration Authority. Between 1996 and 1998, he served as the first solicitor of the Canadian Association of Internet Providers.

So, someone from the Canadian Association of Internet Providers.

CANDICE J. MOLNAR was appointed Regional Commissioner for Manitoba and Saskatchewan, effective January 7, 2008. Having spent over two decades at SaskTel, she brings to the CRTC a wealth of knowledge and experience in telecommunications and broadcast distribution regulatory affairs. In her most recent role as General Manager of Customer Service Operations, she led a team of more than 800 service and technical employees. She also served as General Manager of Regulatory Affairs from 1999 to 2005. During this time, she notably guided SaskTel’s transition from provincial to federal regulation.

And finally, someone who comes from Sasktel.

So, overall, you have someone who worked at Bell and Rogers, two members from the Canadian Association of Broadcasters which has ISPs as members, someone from the Canadian Association of Internet Providers and someone who comes from Sasktel. These people are probably a key component in decision making for a regulator that is suppose to regulate ISPs in the first place. Little wonder why some have cried foul here.

While some would argue that there is next to no competition in Canada and some are even arguing that the regulator of the ISPs are basically run by the ISPs, anger about what has transpired over bandwidth caps and higher fees is not likely going to go away any time soon. What we do know is this, trying to innovate on the internet in Canada will likely get a whole lot more difficult. Perhaps, at this point, one might go so far as to say that internet innovation will be best suited for people in countries like China where ISP competition is much more real. After all, it’ll eventually be ridiculous to say that Canadians won’t have a handicap in the market.

[hatip: /.]

Drew Wilson on Twitter: @icecube85 and Google+.

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