Over the past few weeks, public interest and concern with Internet
bandwidth caps has hit a fever
pitch as new ISP policies (Shaw and Primus announcing
caps) and the CRTC decision
on usage based billing has taken the issue to the mainstream - CBC's
the National covered it, George Stroumboulopoulos discussed
it, CBC's Spark talked
to several players on the issue, the Globe has highlighted
business concerns with bandwidth caps, and there have been numerous op-eds
and media
articles
on the issue.
The Stop the Meter Internet
petition now has over 200,000 signatories and is growing fast,
which may help explain why UBB has emerged as a political
hot potato. The NDP was the first to raise it as a political issue,
followed yesterday by a response from Industry Minister Tony
Clement (who promised to study the decision carefully 'to ensure
that competition, innovation, and consumers were all fairly
considered') and the Liberals,
who called on the government to reverse the CRTC decision.
Yet despite the obvious anger over the issue, there remains a
considerable amount of misinformation about what has happened and
uncertainty about just what to do about it. This post attempts to
unpack the issue, by discussing two related but not identical concerns
- the recent CRTC UBB decision and the broader use of bandwidth caps by
virtually all large Canadian ISPs.
The CRTC and Usage Based
Billing
Much of the public anger has been pointed toward the CRTC and its
decisions involving usage based billing and wholesale Internet access (interim
approval, approval
for UBB, first review,
second
review). Anyone taking the time to read the CRTC's decisions
will likely arrive at the conclusion that it simply does not know what
to do about the issue. In recent months, it has issued several
decisions on essentially the same question - can (and under what
conditions) Bell impose UBB on the regulated Gateway Access Service
(GAS) that is used by independent ISPs? The Commission has
ping-ponged back and forth with no clear idea of what it is trying to
achieve. Indeed, the recent decisions have been almost completely
devoid of policy analysis or linkages to the frameworks that are
supposed to guide the CRTC, leaving the sense that the Commission is
making it up as it goes along (the latest decision involves no analysis
of why its approach is consistent with the policy direction, only a
flat statement that is).
The use of UBB is not new. The CRTC approved its use by cable providers
over ten years ago. The original reasoning - that cable Internet is
shared by hundreds of people and that measures may be needed to address
network congestion - may have been reasonable in light of the
particular time and technology. However, the current UBB regulatory
fight involves a much different set of circumstances.
First, the regulated GAS is not an Internet service but rather a
connection between end users and the independent ISP. The actual
provision of Internet services comes from the independent ISP, not from
Bell. Independent ISPs need the GAS in order to reach the end users
themselves, since only telco and cable companies have the "last mile"
connection to the customer. Many countries require some form of
open access to this last mile in order to enhance competition among
Internet providers.
Second, while the independent ISPs are independent operators, the
recent regulatory history makes it clear that Bell would like to turn
them into little more than resellers of Bell's residential Internet
services. By imposing UBB at the wholesale level, Bell ensures
that independent ISPs cannot significantly distinguish their services
from Bell's - both will face identical caps, limitations, and deep
packet inspection. This will greatly undermine the competitive
environment among independent ISPs, who already face enormous
challenges competing with companies that can offer deep discounts on
Internet services by bundling a wide range of additional services
(local phone, long distance, TV, and wireless).
Third, while Bell claims
that network congestion is to blame for usage based billing, there is
ample reason for skepticism about these claims. It should be
noted that there is no particular reason for Internet congestion to
occur on the
Bell network due to the independent ISP's customers, since their access
to
the Internet comes after they have been connected to the independent
ISP. While Bell would undoubtedly respond that GAS is an
aggregated service (meaning the independent ISP customers and its own
customers are aggregated over part of the network), there are
mechanisms to address this issue without imposing UBB. For
example, Bell could offer independent ISPs a bulk wholesale service
that would allow them to allocate the bandwidth as they saw fit - same
overall bandwidth usage but without the UBB.
Fourth, arguments in support of UBB are frequently accompanied by the
claim that the approach is like any other service - you pay for what
you use. Yet Bell's UBB plan approved by the CRTC does not function
like this at all. Its plan features a 60 GB cap with an overage
charge for the next 20 GB. After 80 GB, there is no further cap until
the user hits 300 GB. In other words, using 80 GB and 300 GB costs the
same thing. This suggests that the plan has nothing to do with
pay-what-you-use but is rather designed to compete with similar cable
ISP bandwidth caps. In fact, Primus has gone further, stating
'It's an economic disincentive for internet use. 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.'
The right thing would have been for the CRTC to focus primarily on how
it can foster greater competition in the ISP marketplace.
Instead, its decisions will make it very difficult for independent ISPs
to compete using the GAS service. Since establishing a new
connection to end-users is cost-prohibitive at this stage, the
competitive environment is severely harmed by wholesale UBB.
Bandwidth Caps in Canada
While the CRTC's UBB decision provides the immediate impetus for public
concern, the reality is that the bandwidth cap issue in Canada is far
bigger than just this decision. The large Canadian ISPs control
96% of the market, meaning the independent ISPs are tiny players in the
market. Even if the CRTC denied Bell's application for wholesale
UBB, it would still only constitute a tiny segment of the overall
Canadian Internet market.
As virtually every Canadian Internet user knows, the Canadian market is
almost uniformly subject to bandwidth caps - the OECD reports
that Canada stands virtually alone with near universal use of caps. The
scale of the Canadian caps are particularly noteworthy - while Comcast
in the U.S. imposes
a 250 GB cap, Canadian ISPs offer a fraction of that number:
- Videotron
starts at 3 GB for Basic Internet, 40 GB for its next plan and tops at
200 GB for very fast speeds at $149/month - Rogers
Lite service caps at 15 GB, it fastest service stops at 175 GB - Bell's
Essential Plus service offers a 2 GB per month cap, climbing to 75
GB for its fastest service
The caps are already having a consumer impact as Bell admits
that about 10% of its subscribers exceed their monthly cap (a figure
that is sure to increase over time). Moreover, the effect extends
far beyond consumers paying more for Internet access. As many others
have pointed
out, there is a real negative effect on the Canadian digital
economy, harming
innovation and keeping new
business models out of the country. Simply put, Canada is not
competitive when compared to most other countries and the strict
bandwidth caps make us less attractive for new businesses and stifle
innovative services.
Addressing the bandwidth cap concern involves far more than reversing
the CRTC's poorly reasoned UBB decision, however. Independent ISPs have
functioned without UBB for years, yet have struggled to make a serious
dent in the overall Canadian Internet services marketplace.
Moreover, the CRTC has indicated its strong preference for "economic
measures" to address bandwidth congestion. In other words, it actively
encouraged ISPs to use bandwidth caps and similar pricing measures,
rather than using technology to throttle Internet traffic.
While it could reverse its approach, the widespread use of bandwidth
caps in Canada is a function of a highly concentrated market where a
handful of ISPs (literally - Bell, Rogers, Shaw, Telus, and Videotron)
control so much of the market that they can impose wildly unpopular
measures without much fear of losing customers. Simply put, there
are no viable alternatives for most Canadians. Given that losing
Internet access is also not an alternative, bandwidth caps will remain
in the market for as long as the market remains uncompetitive.
So what should be done?
There are many steps that could be taken, but it all boils down to two
main strategies - taking concrete steps to increase competition so that
bandwidth capped service becomes one of several models available to
consumers and preventing the current dominant ISPs from abusing their
position.
Steps to foster greater competition could include:
- nurturing the development of a viable independent ISP market
through mandated "open access" without wholesale usage based billing
and with mandated speed matching. In other words, try to level
the playing field between the dominant providers and the independents
by rescinding the UBB decision - open the Canadian market to greater competition by removing
foreign investment barriers, particularly for wireless broadband
services that play a key part of the forthcoming spectrum auction - work with provinces and municipalities to develop community-based
broadband networks that are not reliant on the dominant ISPs - work with Canarie, Canada's research and education high speed
network, to link local communities and provide alternatives to the
dominant providers (I am a Canarie board member) - impose open access requirements in new spectrum allocation and
build open access requirements into new residential developments,
municipal construction, and other initiatives
New competition is essential, but it will realistically take several
years before new competitors can make their mark on the market.
In the meantime, it is also crucial to addressing the potential for
abuse:
- The Canadian Competition Bureau has not been active on this file,
despite the potential for serious anti-competitive behaviour as the
dominant ISPs could use their position to favour their own content
(when vertically integrated) or create economic incentives that favour
services such as their own video-on-demand over Internet based
alternatives (by, for example, counting bandwidth for Internet
alternatives against the cap but not the same content offered by
VOD). The Bureau should aggressively investigate abusive
behaviour as well as questionable marketing tactics.
- Where UBB is used, there should be measures to ensure that they
are not used for anti-competitive purposes. For example, there
are fears that Bell's wholesale UBB will be applied to IPTV usage by
independent ISPs, but will not be similarly applied to Bell
customers. - The Internet traffic management practices issues come into play
here as well. The CRTC has been active on the disclosure side,
but without active audits of ISP practices, it is virtually impossible
to know whether current throttling practices are needed or deployed
largely to harm competitors. - There is also a privacy dimension that may warrant investigation
by the Privacy Commissioner of Canada, given the need for monitoring
usage in order to levy UBB. This raises privacy questions about
possible collection of personal information of independent ISP
customers who have no direct relationship with Bell.
While there is great anger with the CRTC and the dominant ISPs, we
should recognize that the current market is a product of years of
regulatory neglect and policy choices that created one of the most
converged communications markets in the world. As Canada's global
rankings slide down, we are now paying the price for those choices and
it will take a concerted policy effort by governments and regulators to
put us back on course.
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