Bell proposes new volume pricing model to push UBB issue ‘over the hill’

GATINEAU, QUE.—For the third time, BCE Inc. has proposed a tariff to the CRTC for wholesale usage-based billing. At a hearing Monday, the company proposed lowering its rates in the hopes of bridging the divide between incumbents and competing reseller Internet service providers (ISPs). Bell’s revised volume pricing proposal came on the first day of rebuttals after parties presented competing models over four days of contentious hearings last week, where much of the criticism centered on Bell’s proposal. Under Bell’s aggregated volume pricing proposal—which Bell devised last winter in response to public outcry over its original wholesale usage-based billing plan—small ISPs could pre-purchase monthly terabytes of data for $200, which comes to 19.5 cents per gigabyte. If a reseller ISP surpassed its pre-purchased amount, it would buy more data at a premium rate of 29.5 cents per gigabyte. Bell stuck with that proposal last week when it presented at the hearings. But the company came with a new proposal Monday after small, competing ISPs and advocacy groups argued in favour of peak pricing models in which reseller ISPs are charged for capacity at a sample rate of their peak usage instead of by volume. Bell’s new aggregated volume pricing model is based on one rate of 17.8 cents per gigabyte, billed after-the-fact and based on actual data usage. There is no pre-purchase and no premium rate for extra capacity. In an interview with The Wire Report, Mirko Bibic, Bell’s senior vice-president for regulatory affairs, said the company simplified its aggregated volume pricing model to avoid debates about forcing ISPs to predict usage in advance. “Our assessment was that it was cost-based rates the commission was circling around,” he said in an interview. “We decided that, if we go cost-based rates but we link it to the same markups that we have for access, we could live with that.” Bibic said the rate isn’t much lower than the $200 per terabyte previously proposed. The markup is the same confidential number that the commission has assigned for the monthly access rate to its networks, he said. “It’s just applying a different markup to the same costs. The markup is reflective of what we’re getting for access,” Bibic said. “We did say that the 29.5 cents was a 50 per cent premium on top of the 19.5 cents simply to force the ISPs to focus on what they really need and to create an incentive for them to manage congestion. Otherwise they would have to pay that.” Bibic said Bell would ideally maintain that incentive for managing congestion but that the company took a step away given the course of the hearings. Last week, several groups accused Bell of forcing reseller ISPs to adopt usage-based billing at the retail level. “It was to make it simpler and hopefully get it over the hill,” Bibic said of the change. Bell’s proposal came at the end of another heated day of hearings Monday, where the central argument continued to be about tariff prices based on a sample rate of 95 per cent of peak usage (advocated by the Canadian Network Operators Consortium, Primus Telecommunications Canada Inc., and MTS Allstream) or volume pricing (supported by Bell and cable carriers Rogers Communications Inc., Cogeco Cable Inc. and Quebecor Media Inc.). Shaw Communications Inc. said it prefers volume pricing but added that it is prepared to compromise with a peak usage model. Telus Corp. also said it prefers volume pricing over peak usage but not a model in which usage pricing is levied in advance “with no recourse or credit for unused capacity.” CNOC argued that once ISPs are paying for 95 per cent of their peak traffic—as it is proposing—they are paying for any lower peaks at other times. “We probably don’t reach our peak 80 per cent of the time, but we are paying as if we reach that peak all of the time,” Bill Sandiford, president of CNOC and small ISP Telnet Communications, told the commission. Sandiford said he is not sure whether a small peak at another time could cause the incumbents congestion, but that he would pay for peak usage when the networks are far under capacity. Bell and the cablecos continued to argue Monday that such a system prevents them from billing for congestion points other than the monthly peak. Bibic said the 95th percentile system would create an incentive for small ISPs to flatten their distribution to the highest point possible because reseller ISPs are only paying for the peak and not for volume. Bibic said ISPs could employ marketing techniques such as “midnight madness sales,” where downloading or other high-usage activities would be free during off-peak hours to maximize what they’re paying for. That would force Bell to augment its network without being compensated for it, Bibic said. Mel Cohen, president of small ISP Distributel Communications Ltd., called the argument “disingenuous.” Although Internet traffic is growing annually by 40 per cent, he said, traffic is flattening, which requires less network investment than higher peaks. He said that, under a volume pricing model, costs will grow as data usage grows, “but because traffic has flattened, the costs of building the network have not grown by 40 per cent ... “The key here is which measure more accurately will track what happens to the underlying costs.” The cable carriers said their usage-based costs come from augmenting capacity at neighbourhood nodes, for which there are thousands with different peaks at different times of day depending on the end users served by each one. The aggregate network peak does not correlate well with the neighbourhood nodes’ peaks, Ken Engelhart, Rogers senior vice-president of regulatory, told the commission. “The peak traffic at the 95th percentile is a good description of the size of a single pipe. It is not a good description of a distributed network with many thousands of pipes each with their own peaks,” Engelhart said in his opening remarks. “It is misleading to suggest, as CNOC does, that by paying for peak traffic measured at the POI they are somehow paying for the full pipe to each end-user they serve. There is no dedicated pipe from the POI to each end-user; there are only shared pipes.” The cable carriers also challenged MTS’ proposal for the wholesale purchase of a monthly amount of peak period capacity on an incumbent’s network—which cannot be exceeded. They said MTS is speaking from the position of both an incumbent seller of access in Manitoba and a buyer elsewhere. “They may well be paying a subsidy as a seller in Winnipeg in order to receive benefits as a buyer in Toronto, Montreal, Vancouver, Edmonton and Calgary, which are all much larger markets,” Dennis Béland, Quebecor’s senior director for regulatory affairs and telecommunications, said. mburgess@thewirereport.ca

Bell proposes new volume pricing model to push UBB issue ‘over the hill’

News | July 19, 2011

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