Disruption

Third, while Bell claims that network congestion is to blame for usage-based billing, there is ample reason for skepticism about these claims. It should be noted that there is no particular reason for Internet congestion to occur on the Bell network due to the independent ISP’s customers, since their access to the Internet comes after they have been connected to the independent ISP. Ottawa Citizen

Michael Geist has written several interesting articles about Usage Based Billing and Bandwidth caps.  The article in the Ottawa Citizen is one example and more can be found here.

Following are two quotes from two different “Bell” companies

“At Verizon, we don’t have bandwidth usage caps,” Kevin Laverty, a spokesman for the U.S. telecom giant says. The company is not experiencing capacity issues, “therefore, usage caps aren’t required at this time.” Financial Post

“It’s network congestion and the need to properly manage traffic,” he says in defence of Bell’s practices. “We needed to tackle the issue through pricing.” Financial Post

Von Finckenstein said the CRTC review will evaluate the original decision to verify it protects consumers, ensures those who use the Internet “heavily” pay for their “excess use,” and enables small ISPs to retain “maximum flexibility and continue to be a key source of innovation in the industry.” Winnipeg Free Press

The industry claims that usage based billing is necessary to manage heavy traffic, reduce network congestion, and maintain quality of service for all subscribers.  If the goal of bandwidth caps and usage based billing is indeed focused on achieving those outcomes, the incumbent operators should propose a voluntary policy for the use of caps and UBB.  

Having decided to review this decision, however, Mr. Clement is embarking on somewhat more than that. He’s beginning a review of independent telecom regulation as a functioning institution in the federal government. (Globe & Mail)

I agree with the above comment.  As I indicated in a previous post, there is a deeper problem here than one unpopular decision by the CRTC.  There is a perception that the current structure of the market is not functioning effectively.

The recent turmoil about usage-based billing and bandwidth caps indicates that all is not well in the competitive model of the telecom industry.  The government is discovering that competition in the Internet market is a hot button issue.  Consumers appear to perceive that the industry is rife with price gouging, anti-competitive tactics, and self-dealing among the incumbent telco and cable system operators.  There is an expectation that government will take action to fix the problem.

The question is, what sort of action will fix the underlying problems with the competitive structure of the broadband market place?

Back in 2008, Google posted a thought provoking article outlining the concept of “customer owned fibre” as a mechanism to deal with some of the competition issues in the broadband market.  The concept is to rethink how the market works for the provision of broadband access and restructure it so that competition is built into its structure from the start.

The Harper government will overrule a recent decision by the Canadian Radio-television and Telecommunications Commission that effectively kills unlimited Internet-pricing packages — unless the telecommunications regulator backs down first, Postmedia News has learned. (see article)

While this decision should be welcomed by opponents of the CRTC  decision, the bigger question is why was the CRTC placed in this position to begin with?

On Tuesday, Michael released an article on UBB and bandwidth caps.

Canada’s major Internet service providers have employed bandwidth caps, data usage fees, and throughput limits to discourage heavy use of their services.  Recently, Netflix expressed concerns about the viability of their movie-on-demand service in Canada if the current caps and usage charges remain in effect (Netflix Doubts Future)

Bandwidth caps and excess usage fees have been employed by major ISP since about 2006.  The rationale for the caps and the usage fees is that they help providers manage the level of traffic on their networks and provides them with a means to limit network congestion (see Internet Usage Caps)

“There’s exploding bandwidth consumption,” Mr. Bibic says. “You need to keep up with that. We do it by traffic management when we have to, during peak periods. And we invest hundreds of millions of dollars in our network. And the third one is pricing. Pricing is the CRTC’s preferred method for us to tackle this issue.”

“The ISPs’ costs to deliver a marginal gigabyte, which is about an hour of viewing, from one of our regional interchange points over their last mile wired network to the consumer is less than a penny, and falling,” he said. “So there is no reason that pay-per-gigabyte...