CRTC’s wholesale Internet policy was ‘all good’ before UBB decision, Clement says

OTTAWA—Regulations governing third-party Internet service providers’ (ISPs) access to the incumbents’ networks was “all good” before the CRTC stepped in and introduced usage-based billing for small ISPs, Industry Minister Tony Clement said Tuesday. Clement said he wants to see evidence that small, reseller ISPs are causing network congestion and that a usage-based billing policy will improve network traffic flows. “Before this decision, the independent ISPs could offer the all-you-can-eat buffet, where there is a flat fee and you can use as much Internet as you want. To me, that is a choice they’ve made to offer a service to their customers. That offers choice in the marketplace and competition, so that’s all good,” Clement told The Wire Report following an appearance before the House Standing Committee on Industry, Science and Technology Tuesday. At the committee meeting, he defended his decision to ask the CRTC to review its decision on usage-based billing for wholesale ISPs. (CRTC chairman Konrad von Finckenstein says its review was self-initiated.) The commission ruled in January that small, reseller ISPs will be obligated to pay 85 per cent of incumbent’s retail prices on a usage-based basis. Prior to that decision, the resellers, which control six per cent of the Internet services market in Canada, paid set fees to access the incumbents’ networks and could offer unlimited usage plans to customers. The CRTC decision sparked industry fears that competition from small Internet service providers could be significantly diminished. CRTC chair Konrad von Finkenstein told the Commons industry committee in February that the commission supports the principle that Internet users should pay for what they use and that light users should not subsidize heavy users. Following the committee meeting Tuesday, Clement said that principle is predicated on the concern that network congestion is a problem fueled by reseller ISPs. “Prove to me that the congestion is caused by the independent ISPs offering their services to the wholesale part of the market … No one has shown that the policies being suggested, that the usage-based billing , actually helps control congestion. “If you’re downloading Netflix at 3 a.m. and you go over your cap, there is no congestion at 3 a.m. So why are you paying more at 3 a.m. because you’ve gone over your cap?” Clement told reporters he sees inconsistencies in the practices of incumbent telcos that say they are concerned about congestion but spend billions on advertising. “The same people that are saying they are concerned about congestion, the incumbent ISPs, are the ones advertising with billions of dollars for people to use the Internet more,” he said. When The Wire Report asked whether regulations should be implemented to establish minimum bandwidth caps or whether paying $2 per gigabyte in overage fees is too high, Clement said details about bandwidth caps and overage fees should not be administered by the government. “It’s really the consumers who, if they don’t like two dollars a gig , they can say to their service provider, ‘I don’t like two dollars a gig. I don’t like your pricing model. I’m going somewhere else.’ Maybe then the provider will rethink its pricing structure if too many people do that,” he said. The incumbents’ monthly bandwidth caps range from 25 GB to 60 GB, depending on the province of service. Some carriers charge overage fees of about two dollars per gigabyte. The industry minister added that his department is “mulling” the idea of increasing competition through more relaxed foreign investment rules for the telecom sector. “We have not rejected that as a potential solution. But we haven’t announced anything either,” Clement said. He said he has no timetable for any announcements about the foreign investment rules but competition and choice are his “guiding principles” on all policy decisions. During the committee meeting Tuesday, Clement said the CRTC’s usage-based billing decision has the potential to stifle innovation, adding that access to the Internet is a critical part of Canada’s social and economic fabric. “The CRTC’s decision on usage-based billing for wholesale ISPs is simply the wrong way to proceed and is inconsistent with good public policy,” he said. Clement said that, if he does not find the CRTC’s review decision adequate, he plans to follow through with his pledge to override the commission. “If the CRTC’s decision does not adequately address the needs of Canadian consumers, small businesses, innovators and creators, the government has powers through the Telecommunications Act to intervene,” he said. When asked if he could outline what he would like to see the commission present following its hearing, Clement said the commission is equipped to make its own decision and that it would not be fair for the government to draw one up prematurely. But if they come back with the same decision, “that will be a problem,” he said. Clement told the committee he respects the CRTC and that, although he has overturned some of its decisions, he stands by what it does the majority of the time. “Of 2,200 CRTC telecom decisions , we reviewed 13 and referred three back, so I really think this is the exception, not the rule,” he said. “We have a job to do based on good public policy and if we think that their decision is at variance with the public policy we’ve dictated, not only do we have a right to vary it, we have an obligation to vary it.” In 2006, the Conservative government issued a cabinet direction to the CRTC that said it should rely on market forces to the greatest extent feasible--a signal that the commission should only intervene with regulation where there is market failure. Clement said Tuesday that the CRTC should be “light-handed” and that competition should determine prices, not regulations. “The best way to generate real consumer choice and an alternative to is to ensure that there is vigorous competition,” Clement said. Independent ISP Teksavvy Solutions Inc. said in a release Wednesday that it is encouraged by Clement's statements. He said that limiting competition in the wireless marketplace does not fit with his department’s upcoming digital economy strategy, which he said will be announced this spring before a policy is released for the 700 MHz auction. “Information communication technology represents only about five per cent of our country’s GDP, but it is the fuel that drives the other 95 per cent,” he said. Clement praised the incumbent telcos' investments in infrastructure, saying they have made a significant contribution to the “world class services across Canada.” The minister said he believes increased competition encourages development and that policies allowing market forces to prevail will lead to a stronger digital economy. asmith@thewirereport.ca

CRTC’s wholesale Internet policy was ‘all good’ before UBB decision, Clement says

News | March 2, 2011

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