Canadian Network Operators Want Broader Questions Asked

Blog, Disruption, Les Routledge

As reported at Michael Geist’s blog, The Canadian Network Operators (an association of independent ISP’s) have asked the CRTC to broaden the scope of the proceedings to examine the broad water front of wholesale high speed access services instead of a more limited review of pricing options.

Letter to Robert Morin 20110211 Final (1)

In broad terms, I too agree that the scope of the proceeding should be extended beyond asking a narrow question of how price signals can be used to combat congestion.  As noted in the letter…

“These statements assume the “cause” of Internet congestion is a user with a high bandwidth usage, based on a simple count of bits transferred, with no relation whatever to use or capacity at peak times. They assume that the “fix” for any capacity problems is an economic ITMP, rather than a capacity increase or a technical fix. They assume a billing method that penalizes individuals, rather than encouraging aggregate use shifts. It is bordering on a fettering of the Commission’s jurisdiction and inappropriate.”

A rough analogy for the congestion issue is the situation with road traffic and the use of tolls to limit congestion.  UBB, as it was proposed to be implemented, basically called for a toll to be based on total km driven on the road irregardless of time of day or level of congestion.  If prices are to be used as a demand management technique, perhaps the scope of the proceeding needs to be broadened to ask how time-of-use or congestion-defined rates could be employed as an alternative to a flat rate bit transport fee.  While this analogy is not perfect, it might serve to illustrate a key issue related to UBB.

There may also be merit is broadening the scope of the proceeding to asking why other wholesale services offered by Bell and others cannot be employed as an alternative to imposing UBB and metered price structures on third parties.  For example, Bell offers two types of interconnection for third party ISPs, namely DSL Gateway Access Service (GAS) and DSL High Speed Internet Access Service (HSA).

The DSL GAS connection does employ a shared link (shared private Permanent Virtual Circuit – PVC) that could be subject to congestion from heavy users.  While I could be wrong, I believe that it is this element of the network that the Bell Spokesperson indicated was congested.

What I do not understand is why Bell and the Commission did not ask the question why HSA is not being employed to partition heavy traffic on 3rd party ISP links and keep it away from other shared traffic on the Bell network?  Perhaps there is a simple answer to that question, but I have not been able to find one yet.  Why the rush to impose a metered usage solution when an alternative solution is technically available to partition heavy traffic and contain congestion to within the network operated by the 3rd party ISP?

I could be wrong, but I do believe that 3rd party ISP have tools other than metered data usage charges to deal with congestion within their own network.  For example, my existing satellite service provider throttles down heavy users for an hour at a time when the network is congested.  The rest of the time, full service is available.  For some customers, that “dynamic throttling” option may be a preferable service to one that charges on a per-bit transmitted basis.

Another imperfect analogy may illustrate the above point.  In the electricity market, some commercial or industrial customers agree to reduce or eliminate their draw of electricity from the grid during peak use conditions.  In return for reducing their demand during peak periods, they receive a lower cost of service during off-peak hours.  In the case of Internet UBB, why could that option not be looked at instead of charging the same rate per bit transmitted whether that occurs when the network is congested or it occurs during off-peak hours?

The CNOC letter opens up a much broader issue, namely reviewing wholesale access arrangements across both Cable TV and telco systems.  It even suggest the scope of the review should extend beyond Internet transport to include non-Internet services.  They ask for the Commission to consider regulating those wholesale High Speed Access Services based on cost of provision instead of value models that are determined in reference to retail rates set by the incumbent.  To put it mildly, that is a big request and it is perhaps one that is better directed at the government itself instead of a limited CRTC proceeding.

In dealing with the above types of structural issues, the CRTC’s hands may be somewhat tied by legislation, government directives and past regulatory precedence.  While it is perhaps time to ask “big picture questions” about how competition works across the telco, Internet and Cable TV market segments, it most likely is better to have them dealt with in a broader policy review that also looks at the role of foreign investment, structural separation of facilities (content-versus-carriage, wholesale-versus-retail, etc.), or government/customer provision of fibre-to-the-home networks in stimulating more vigorous competition in Canada.

While the comments made by the Minister on Saturday give some clarity to the government’s perspective on UBB, the process could be improved if the government stepped back from the specifics of the UBB details and asked “why has this controversy emerged in the first place?”

Personally, I think the answer to that question is that the public wants to see more vigorous competition, more choice, more selection, and more flexibility in how they access and consume telecom, media and Internet services.  If that is the underlying problem, then simply tinkering with the pricing policies of a defacto duopoly will not solve the problem.

Perhaps it is time to look beyond the UBB controversy and examine how other countries are approaching the roll out of broadband and fibre network facilities.  While we are fixated on figuring out the cost of transmitting a bit on nearly obsolete copper and coaxial networks, others are getting on with building the fibre network infrastructure of the future.