Unlimited Internet making inroads, but for how long?

In the year since big Internet providers like Rogers Communications Inc. and BCE Inc. reintroduced unlimited-bandwidth Internet plans, customer demand has kept them in place. Whether that means bandwidth caps are on their way out or whether reports of their death have been greatly exaggerated remains to be seen. Bell launched a $10 unlimited Internet add-on option for customers that bundle at least three of its other services in January 2013, while Rogers put out a matching offer that February. A similar offer is available from Quebecor Inc.’s Videotron subsidiary, and smaller ISPs like TekSavvy Solutions Inc. also offer unlimited Internet plans. Bell spokeswoman Jacqueline Michelis said in an email that its unlimited option has “proven very popular.” “With about 80 per cent of new Fibe TV customers opting for a TV-Internet-home phone bundle, a significant proportion are also choosing unlimited Internet,” Michelis said, noting the company does not disclose the specific numbers of subscribers who choose that option. Tina Furlan, director of marketing at TekSavvy, said in an email last month that there has been an increase in customers signing up to its unlimited plans over the last six months. “There certainly is the demand out there for unlimited-use plans,” Dan Deeth, Internet trends manager at network technologies company Sandvine Inc., said in a phone interview. “There certainly is consumer demand, and there certainly was a great deal of interest from subscribers … when Bell and Rogers… made those plans available.” Jean-Pierre Gosselin, vice-president of marketing at small ISP Distributel Communications Inc., said in a phone interview that the company got rid of its capped plans because it felt they were “a big unknown for our customers as far as how much usage they can expect during a particular month.” He said that Distributel’s “claim to fame” is unlimited Internet, while many of its competitors are focusing on higher speeds. Distributel introduced new unlimited Internet plans in Quebec and reduced overage charges on its other plans following the CRTC’s establishment of a capacity-based, wholesale Internet billing regime. That decision was preceded by a two-year process in which a consumer movement gathered against an earlier “usage-based billing” decision for wholesale Internet that was based on the volume of data transmitted. “We fought so hard against the usage-based billing by the providers because that would have eliminated our ability to offer unlimited plans,” Gosselin said. Gosselin said he thinks “the road will eventually lead to unlimited. How soon that will happen, I’m not sure, because we look at our competitors and … they’re still capped.” “We know that usage is going to keep increasing as people have more devices connected to a home, and applications, videos, and everything else that have a higher demand on the network. So to me it just seems that it’s going to have to happen eventually,” he said. Sandvine’s Deeth said that while increased usage means that Internet caps will have to be revisited, that doesn’t necessarily mean unlimited plans are the way of the future. “You’ll see them evolve over time, so it’s not necessarily the need for unlimited,” he said. “ISPs need to respond to the usage patterns of their customers and their subscribers and change their cap levels based on that usage.” “There will certainly will be a demand always for unlimited, but also not everyone needs unlimited,” he added. Deeth noted that in North America, it’s the top five per cent of Internet users that account for 30 per cent of all network traffic, adding that “people that push the upper levels of caps are always going to want unlimited, but caps make a lot of sense for 70, 80, 90 per cent of subscribers.” According to the CRTC’s 2013 Communications Monitoring Report, about 10 per cent of high-speed residential subscribers had an unlimited plan. Troy Crandall, an analyst at 3Macs, said in a phone interview that it’s too early to say whether unlimited Internet is the future. “I think we can say it’s an option at least now, because it wasn’t before. It wasn’t with some of the bigger players,” he said. The CRTC’s capacity-based decision protected the smaller providers’ ability to provide unlimited Internet plans, “so as a result of that, I think that’s why the big guys decided to offer it as an option as well.” He said that a large number of people likely sign up for unlimited Internet plans as an insurance policy. “It would be kind of interesting to see, of those customers who have unlimited, what the actual average usage is,” he said. “A lot of people are looking at the price point and saying, ‘hey, for 10 bucks, it’s basically insurance,’ ” he said. “If you’ve got a kid that leaves YouTube on or Netflix running … in the background, it’s just one less worry in your life.” He noted that unlimited offers are generally subject to fair usage policies, and that companies generally have an unwritten limit that the majority of customers won’t hit. Crandall said companies are still testing the waters with the unlimited offers. The fact Bell still considers its unlimited Internet as a “promotion,” Crandall said, “to me, that’s an indicator that they’re still testing the waters, and they’re still not sure yet. But at the same time, the fact that it’s been ongoing for a year means that it hasn’t been a failure.” On its website, Videotron says its unlimited offer is a “limited-time offer,” while Rogers refers to its unlimited Internet offer as a “promotion” on its website. Unlimited Internet has its detractors even at the companies that offer it. In July, Robert Bruce, president of communications at Rogers, described unlimited Internet offers as “short-sighted” in a call with analysts. “Monetizing the increased bandwidth usage will rapidly become the future across all our businesses, whether it's wireless or wireline,” he said at the time. Crandall added unlimited plans are also a way for companies to sell their other services. At Bell, Rogers and Videotron, bundled customers pay an extra $10 for unlimited Internet, while unbundled customers pay $30 more. Companies can also get creative with plans and introduce plans based on peak usage, said Distributel’s Gosselin. “We may decide to do a less expensive version based on time of day,” he said. “So different users that are surfing at two in the morning; why should they be paying for caps? They don’t affect peak traffic usage at all.” Deeth also said that companies could offer unlimited Internet only at off-peak times of the day, as some smaller ISPs already do. “Incentivizing heavy users to use some applications that can be offloaded, like file-sharing or backup, to those hours, it can make it easier for those subscribers who want to go above and beyond their cap that they normally have.” “That’s a trend that I also think you might see,” Deeth said. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Unlimited Internet making inroads, but for how long?

News | March 4, 2014

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Unlimited Internet making inroads, but for how long?

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