Industry minister Tony Clement has finally said what angers Ottawa: It’s not UBB, but forcing independent ISPs to adopt it. Read the solution suggested by an industry analyst

Analysis: The future of usage-based billing

When members of the federal telecommunications regulator sit down this morning to plot how they’re going to get out of the usage-based billing controversy, they’ll finally know what has ticked the Harper government off.

After a week of hints and threats and tweets, Industry Minister Tony Clement said Saturday what the Canadian Radio-television and Telecommunications Commission (CRTC) has to do to satisfy the government on the controversial usage-based billing issue: Kill it.

On CBC Radio’s parliamentary review program “The House,” Clement said independent Internet service providers must have the freedom to offer different pricing plans to residential customers.

The CRTC’s recent ruling that a transport carrier can impose the same UBB on ISPs that buy connectivity from it that the carrier has for its own retail customers forces “one size fits all” pricing on the independents, Clement said.

It’s not usage-based billiing but the imposition of it on ISPs that the government won’t tolerate.

The CRTC ruling came on an 2009 application from BCE Inc.’s Bell Canada, which has had a consumer usage-based billing plan since the fall of 2007 for its Sympatico (now Bell Internet) subscribers when it ended monthly unlimited data plans. Bell said UBB – which makes subscribers pay extra fees for downloading more than a limit each month — is one of its Internet traffic management strategies to ensure a minority heavy data users don’t eat up bandwidth the majority pays for.

Extending UBB to ISPs who buy their connectivity from Bell ensures their unlimited rate customers can’t drain bandwidth from the telco, it argued.

But ISPs encouraged hundreds of thousands of people to sign petitions objecting to the ruling, saying in effect Bell’s rates have become their rates.

Clement agreed. “You don’t have a right to force your business structure on others,” Clement said he would tell Bell.

The Montreal-based teleco has had a near monopoly [in Ontario and Quebec, and through controlling Bell Aliant, the Maritimes] for several years, Clement added. But the policy of several governments has been “you can’t use your market force to crush competition.”

This certainly clears things up for CRTC chair Konrad von Finckenstein, who on Thursday told a House of Commons committee the commission on its own has decided to review its decision after facing public protest. He insisted he had no communications with the government on this, the implication being the commission has no idea what the government objects to.

In fact, he argued, the regulator’s policy stems from rigorous logic: “Ordinary Internet users should not be forced to pay for the bandwidth consumed by heavy users.” If Bell customers have to pay for going over caps, so should those who indirectly hook up to Bell’s lines through ISPs.

Until Clement made it clear, it was possible the commission could have studied what it did, read some written submissions and sent back the same conclusion.

No dice, said Clement. “If as a result of [the] review the commission comes back with the same or similar decision that has the impact of forcing the business model of UBB down the throats of independent Internet providers, we will vary that decision.”

The rudeness of having to discern government policy from press clippings – the cabinet has in the past sent very precise objections in writing to the commission when it chose in the past — to led former CRTC commissioner Richard French, now of the University of Ottawa, to agree the regulator has been treated very shabbily.

Setting that aside for the moment, the question is what are the CRTC’s options? French doubts the commission wants to start a new hearing from scratch on Bell’s application. “The commission has already heard all of the arguments,” he pointed out in an interview.

Can someone, as French put it, “square the circle” – that is, create a fair way carriers like Bell, or cable companies, can control and price how much bandwidth ISP customers can pull from its network? Remember, one of the CRTC principles in UBB was fairness – if a carrier had a UBB policy for its retail customers, the same rates had to apply to ISPs buying connectivity.

By the way, that dates back to a 2006 CRTC decision involving cable companies and how they charge for excessive use of capacity by ISPs. The rate had to be the same for the cable companies’ own customers, the commission said.

One industry analyst says there is a way out of this. Mark Goldberg points to the minority decision in the Bell case by CRTC commissioner Candice Molnar.

While she agreed Bell could extend UBB to wholesale buyers of connectivity, she disagreed with the application for penalties to individuals – that is, the ISP has to go after every individual who exceeds their monthly allowed data cap. Why not an aggregated model, she asked?

Molnar didn’t got into detail, but in an interview Goldberg explained it this way: ISPs don’t worry about who is over or under their cap, just the aggregated total monthly capacity used. If all subscribers are under the total cap every month, that gives them room to offer unlimited data plans. In addition, they can also offer lower-priced usage-based billing plans with very low caps to encourage new subscribers. In essence, the aggregated plan allows ISPs to buy “excess capacity” in bulk.

The Canadian Network Operators Consortium (CNOC), a group of ISPs, has suggested this idea before. “Billing on a per user basis puts a lot of power in the hands of the incumbents,” said Matt Stein, vice-president of network services at Primus Telecommunicatiosn Canada, a CNOC member. “By allowing Bell to determine what the cap should be it controlls the cap of competitors.”
 
Aggregation it means is the ISPs are going to have to manage their own customers, he said.
It will be interesting to see if the commission now sees more value in this approach now than it did last year.
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