Remember UBB? This is worse.

Capacity-based billing may leave Canadians in worse shape than the previous pricing scheme

It’s 8 p.m. on a Wednesday in the Joe Blow household. Mom’s in the living room, watching a Netflix movie in HD. Dad’s making a video Skype call in his office. And Joe Jr. is playing World of Warcraft in the basement. The Blows are decent, law-abiding and bandwidth-thrifty folks. Piracy is not tolerated, and all screens are off by 10 p.m. They’ve never exceeded their monthly bandwidth cap.

So how much should they expect to pay for their Internet? According to George Burger, a veteran telecom executive currently advising the independent ISP TekSavvy, mainstream use like that could soon cost upwards of $150 a month.

That’s what’s to come in the post-UBB Canada, says Burger. This may come as a bummer to the 100,000+ Canadians who were active against Usage Based Billing, and who thought they had won. When the CRTC ditched Usage Based Billing for a capacity-based pricing model, it seemed to many onlookers (myself included) that reason had won.

Despite years of claims to the contrary from infrastructure owners like Bell, Videotron and Rogers, there is all but no difference in fixed costs when a user downloads, say, 500 gigabytes instead of five. Charging indie consumers arbitrarily and overage fees on a per gig basis outraged thousands of Canadians–it seemed like a bald ploy to suppress competition and preserve Canada’s overpriced Internet access oligopoly.

The CRTC made the right move in forcing a capacity-based billing model. Capacity is what’s limited—the zeroes and ones are free. During Internet “prime-time” on weeknights, Canadians are most likely to jam the network with data-intensive applications like video streaming. The sudden, simultaneous usage doesn’t cost anything extra to the big ISPs per se, but it slows down speeds overall, necessitating regular upgrades to the infrastructure itself. It’s fair to pass some of that cost along to the third party ISPs who must rent space on the big boys’ networks.

But at what price?

Here’s where the CRTC messed up. It let the big ISPs name their own prices, and has failed to check these figures aganst reality. Ideally, independent engineers would take an objective look at a provider’s technology and investments and come up with a price tag that reflects these costs. Instead, each provider conjured up a different, seemingly arbitrary number for the CRTC. The submission process was sealed, meaning that Bell and Videotron couldn’t see each other’s homework when telling the CRTC what their capacity was worth.

The result is wild variations in capacity costs. For example, Cogeco says their wholesale capacity cost is $26.95 per customer, while MTS Allstream says it costs $2.81 per customer. The CRTC accepted these submissions at face value and issued them as part of the UBB decision.

It gets downright comical: now that the low-ballers have seen what their competitors are getting away with, they are asking to hike-up the original figures they submitted. Today is the deadline for them to make their cases, and each is citing different “technological” reasons for the change. Each ISP tells a different, woeful tale about how they underestimated things and suddenly realize they need to charge much more than initially thought.

When it’s all said and done, Canadians may be in worse shape than they were under UBB. Before, only so-called “bandwidth hogs” had to worry about monstrously huge Internet bills. With capacity-based billing, which might be better described as “take our word for it-based billing,” customers may soon be paying through the nose because they’re using popular, mainstream Internet applications at the wrong time of the day.

According to George Burger, that’s simply not an environment where competition can exist.

Jesse Brown is the host of TVO.org’s Search Engine podcast. He is on Twitter @jessebrown




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Remember UBB? This is worse.

  1. I live in Ontario – prov and fed governments have favoured businesses over free markets for decades. Canadian government is always delighted to help producers while consumers are viewed with suspicion and punished. 

    • Maybe if your bandwidth costs more, you’ll copypasta PJ O’Rourke less.

  2. Yet another example of Canadian consumers having the screws put to them because of our geographical dispersion and the cozy relationship that the large Canadian corporations have with government that leads to even further lack of competition.

  3. This is getting a bit wild. Are these guys really not making any money selling Internet? Why change anything?

  4. So what can we do to stop this? We live in a first world nation, yet we have to constantly worry about such simple things. unbelievable. 

  5. Post-UBB Canada? The overwhelming majority of Canadians are on a UBB plan and have been for years. What the CRTC tossed was wholesale UBB. Retail UBB was never prohibited.

  6. Hmmm all this time I thought the pain in my ass was tax pain, but it’s actually just the government screwing me again. 

  7. And look what is happening in the good old USA.  I remember reading about a year or so ago, how the US carriers were looking longingly at the profits Canadian carriers were making with a cap system – guess they are going to copy us. 
     
    “Users Rip AT&T Data Curbs
     
    Wireless carriers are getting increasingly forceful in their efforts to pitch mobile bandwidth as a scarce, valuable commodity—setting up a battle with consumer groups that support open-Internet rules and longtime customers who treasure their unlimited data plans.
     
    Among U.S. carriers, AT&T Inc. is leading the charge. Its latest scuffle came on Friday, a day after the country’s second-largest wireless company said its 17 million customers who subscribed to unlimited-data plans will see much slower speeds if they exceed a new monthly usage cap.”
     
    http://online.wsj.com/article/SB10001424052970203753704577257473813219022.html?mod=WSJ_hp_LEFTWhatsNewsCollection  

    • Wireless carries need help to continue subsidizing Apple. 

      Wall St Journal ~ iPhone’s Crutch Of Subsidies:

      For Google Inc., Europe’s economic turmoil has had a silver lining: Smartphones that use the Internet giant’s software are crushing the iPhone in countries hard hit by the continent’s debt crisis.

      The results point to a rare weak spot for Apple—its heavy reliance on subsidies from wireless carriers to make its iPhones affordable to a wider range of consumers. The practice has proved to be a big advantage for Apple, which posted a 73% jump in revenue in its latest quarter, at the expense of carriers such as Sprint Nextel Corp., which started carrying the iPhone last fall but doesn’t expect to make a profit on the device until 2015.

      In countries like the U.S. and the U.K., carrier subsidies helped the iPhone win more than 20% of the smartphone market last year. But its performance in parts of southern Europe where most consumers don’t sign contracts and have to pay full freight for phones suggests Apple’s position could suffer if carriers tire of underwriting most of the cost of the devices, as some are in countries such as Denmark and Spain.

      • Hey – should we be buying RIM stock?

  8. Nationalize the whole deal.  Let’s face it, capacity is a natural monopoly–to have real competition, you need complete duplicate sets of wires, which is massively wasteful.  If one company owns the wires, they will always find ways to hose anyone else subletting use of the wires from them.  And as a monopoly, their motivation will be to jack up prices and underinvest in capacity.  So rather than keeping on trying to create pseudo-competition between the real company that owns the wires and a bunch of little quasi-parasite companies who are “competing” (to, what, operate switching software and perform billing?) the government should just take it over and operate that one set of wires in the public interest.

  9. I’d post a photo, but I don’t have the bandwidth.

  10. Its time to let the Americans into our market.

  11. The CRTC is in an impossible position. They do not independently investigate applications. The CRTC accepts submissions from interested parties, shares those submissions so everyone gets fair comment, and makes rulings that are in lay terms, adverse to consumer requirements. The last UBB was rejected by the government because it was blatantly wrong.

    The backbone for all your smart devices, telephones, televisions, banking, even tax submissions, is controlled by a monopoly. The CRTC is like a kitten swatting at a wolf pack. It may think it has an idea of what it is taking on but doesn’t stand a chance.

  12. …and people are actually surprised by this?  Too bad Harper was voted in, there isn’t a hope in hell the government will come to the rescue and represent the people.. all hail capitalism!

  13. Sigh.

    So let me get this straight – what the CRTC is allows the big ISPs to do, do they need some sort of government approval? Or is it, in fact, something they can do, and is already a done deal?

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