CRTC’s usage-based billing decision fails to address peak-hour congestion: Distributel

The CRTC’s usage-based billing decision fails to address the real problem with bandwidth usage—which is a lack of capacity during peak hours, says Melvin Cohen, president of Distributel Communications Ltd., a third party Internet service provider (ISP). The rules implemented in the CRTC’s decision last week are based on monthly data usage, but many customers may be heavy users during off-peak hours when bandwidth capacity is not an issue. Cohen said in an interview that the commission should instead implement a system where small ISPs pay a wholesale rate based on how much bandwidth they use during peak Internet periods—usually from the late afternoon to the late evening. It costs next to nothing to provide bandwidth outside of the peak usage periods, and a wholesale tariff should reflect that, he said. “The whole idea of putting toll gates on the modems of our end users is fundamentally wrong because it captures usage that doesn’t cost any money, yet charges for it,” Cohen said. But in a decision last week, the CRTC said Bell Canada and Bell Aliant can charge usage-based billing to their wholesale customers like Distributel, Primus Telecommunications Canada Inc. and TekSavvy Solutions Inc. If Bell proceeds to charge its wholesale customers on a usage-based model, the move will effectively cause the third-party ISPs to also implement usage-based billing for their retail customers. An earlier decision on usage based-billing said Bell could charge its wholesale customers for their bandwidth usage only after the company moved all of its retail customers onto a usage-based model. Following Bell’s request to review and vary that decision, the CRTC last week gave the company the green light to go ahead with usage-based billing, with less onerous exception: retail customers who have had the same services with a third-party ISP since Feb. 1, 2007 will be “grandfathered” and exempt from usage-based billing. But all new customers since Feb. 1, 2007 can face the new billing system. Tom Copeland, chair of the Canadian Association of Internet Providers (CAIP) and president of ISP Eagle.ca, said in an interview that the CRTC’s decision to change its original, usage-based billing decision is a bad sign. “The whole regulatory system is broken if in May we can have a decision that sets very definite parameters about how, when and where UBB will come into force, only to be virtually turned on its ear four months later,” Copeland said. In an email to The Wire Report, Jacqueline Michelis, a spokeswoman for Bell Canada, said the company is pleased with the commission’s new decision because it allows the company to proceed immediately with usage-based billing for wholesale customers—a move that it sees as key to its traffic management practices. But Copeland said traffic management practices shouldn’t mean data charges apply in off-peak hours. “If it is truly a traffic management practice, as the commission has allowed for, then we should be able to assume that when the problem goes away, when there’s no longer congestion on the network, then UBB shouldn’t pertain.” Matt Stein, vice-president of network services with Primus and a spokesman for the Canadian Network Operators Consortium (CNOC), a new industry group representing third-party ISPs, said in an interview that Bell’s usage-based billing system, as approved by the CRTC, will hurt their business case. “It’s been a tough go in a very difficult market, and now they’re just making it more and more difficult, which I suppose is their goal,” Stein said. Stein said that, as a result of the decision, companies like Primus will have trouble recouping costs if they are charged the same usage-based billing rates as Bell’s retail customers. He said the usage-based billing decision will effectively close the door on customers’ use of high-bandwidth services, such as streaming movie service Netflix, because smaller ISPs, cannot recover costs associated with high usage. “A major component of the cost is connecting the customer to , and there’s no opportunity to recover that cost because Bell charges the exact same that they do in retail to the wholesale partners,” Stein said. The commission has opened a new proceeding on what usage-based rates Bell can charge wholesale customers. Parties can submit comments, by the deadline of Nov. 29. 2010, on whether rates for usage-based billing for wholesale, third-party Internet access should be lower than retail usage-based billing rates, “and, if so, to what extent.” The final deadline to reply to those comments is Dec. 9, 2010. The CRTC said in its decision that charging Bell’s wholesale customers on a usage-based system will treat them equivalently to cable providers. According to a commission regulatory decision in 2006, the incumbent cable companies must treat their retail and wholesale Internet customers equivalently. “We are very pleased the CRTC is now starting to recognize that symmetry ought to be paramount in regulatory decision-making, given the competitive battleground/marketplace. We hope symmetry continues to be applied in the future as a key tenet in CRTC decisions,” Michelis wrote. Michelis added that Bell is disappointed that the CRTC will now undergo another proceeding to determine how much the company should charge wholesale customers for usage-based billing. “We do not believe this is appropriate and feel that any such decision would undermine the effectiveness of this traffic management practice,” she wrote by email. Cohen said the decision may also present administrative challenges for third-party ISPs to distinguish between grandfathered customers and non-grandfathered customers. “The effort they’re going to put into figuring out who is grandfathered, and who is not—they would be far better off to introduce something that was based on peak period usage," Cohen said. Copeland said the decision raises competitive questions because Bell’s IPTV service will not be subject to usage-based billing. “If I’m a Bell customer who has chosen to subscribe to Netflix, instead of Bell TV, all of a sudden I’m subject to UBB, and yet conceivably I’m not using any more network resources than had I subscribed to Bell TV,” Copeland said. If smaller ISPs want to offer their own IPTV services, they would need to install a second line to customers’ homes. Otherwise, any bandwidth used by IPTV services would be subject to usage-based billing charges. Copeland said he would not be surprised if online content providers like Netflix eventually enter the debate. The CRTC’s usage-based billing decision only affects Bell’s wholesale customers, but Stein said it could serve as a precedent that other incumbent phone carriers, such as Telus Corp. could follow suite. jmigneault@thewirereport.ca

CRTC’s usage-based billing decision fails to address peak-hour congestion: Distributel

News | November 1, 2010

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